Critcal Path Network

Help your hospital with CMS' 'inpatient only' list

Surgery in the wrong setting can cost revenue

As a hospital-based case manager, you're in a position to help your hospital avoid possible revenue loss by ensuring that Medicare patients who receive surgery at your facility are scheduled as inpatients if the procedure is on the "inpatient-only" list developed by the Centers for Medicare & Medicaid Services (CMS).

In issuing its final rule for 2007 for the Out-patient Prospective Payment System, CMS reaffirmed its policy to pay for procedures on the "inpatient-only" list only when the patient was an inpatient at the time the procedure was performed.

There has been speculation over the years that CMS will eliminate the inpatient-only list, but every year, CMS has stated its commitment to keep the list for the safety of Medicare patients, says Deborah Hale, CCS, president of Administrative Consultant Services in Shawnee, OK.

Case managers should stay abreast of the CMS changes to the inpatient-only rule because of its implications for payment, Hale adds.

Although physicians make the decision about whether surgery will be performed on an inpatient or outpatient basis, they get their fee even if the procedure is not provided in the inpatient setting. This means that hospitals have a responsibility to educate physicians about the inpatient-only rule and to ensure that surgery on Medicare patients is done in the proper setting, she adds.

"CMS holds the hospital responsible for making sure that services are provided in the most appropriate level of care," she says.

Hospitals should have admissions policies that address the "inpatient-only" list and a system that ensures that surgery on Medicare patients is performed in the proper setting, says Marianne Lundgren, RHIA CCS, hospital payment monitoring program specialist with TMF Health Quality Institute in Austin, TX.

"Hospitals need to have an internal process set up so that whoever takes the orders for surgery can identify the procedures on the inpatient-only list and make sure that Medicare patients receiving procedures on the list are admitted as inpatients," Lundgren says.

There should be an up-to-date list of procedures on the inpatient-only list that people who are taking the orders for surgery can use to make sure that patients are scheduled for surgery in the proper setting, she says.

"Case managers should be familiar with what is on the 'inpatient-only' list and intervene with physicians to provide the procedures in the appropriate site of services," Hale says.

For case managers to be effective at making sure the surgery is performed in the right setting, they need to review the level of care order at the time the procedure is scheduled, Hale says.

"If the order for an inpatient admission is not written or verbalized until the inpatient-only procedure has been performed, the hospital is not entitled for payment for the procedure," she says.

Hospitals will get paid for follow-up care if patients are admitted after a procedures on the inpatient-only list is performed as an outpatient procedure. However, in those cases, the hospital will not be paid for the surgical procedure, Lundgren points out.

Here is an example from Lundgren of how the inpatient-only rule can affect reimbursement:

A patient receives a vaginal hysterectomy for uterine fibroids as an inpatient procedure. The principal diagnosis would be uterine fibroids, and the vaginal hysterectomy would be included in the grouping. These group to DRG 359 (uterine and adnexa procedure for non-malignancy without complication/comorbidity). The procedure has a weight of 00.8052.

On the other hand, if a patient was an outpatient when the vaginal hysterectomy for fibroids was performed and is then admitted as an inpatient for surgical after care, the principal diagnosis would be uterine fibroids, but the hysterectomy would not be included in the DRG grouping since the patient was not an inpatient at the time the procedure was performed. This groups to DRG 369, menstrual and other female reproductive system disorders with a weight of 00.6577, which would result in a lower payment.

"The hospital payment is determined by multiplying the hospital's payment rate per case by the weight of the DRG. The money lost because the hospital does not receive payment for the procedure can result in a significant loss of money for a hospital over time," Lundgren says.

The inpatient-only rule was instituted in 1998 to regulate the setting in which Medicare patients undergo surgery. Procedures that may be appropriate as outpatient surgery for younger people may need to be performed on an inpatient basis for Medicare patients to ensure their safety and the best outcome, Hale adds.

"One important thing for hospital staff to remember is that just because a procedure has an APC payment code, it doesn't necessarily have to be done on an outpatient basis. If the procedure is on the inpatient-only list and the patient is a Medicare beneficiary, the hospital must perform the procedure in the inpatient setting in order to be paid," she says.

CMS determines that a procedure is on the inpatient-only list for three reasons, Lundgren says:

* the nature of the procedure;

* the need for at least 24 hours of post-operative recovery time or monitoring before the patient can be safely discharged;

* the underlying physical condition of the patient undergoing surgery.

In the 1998 proposed rules initiating the inpatient only list, CMS acknowledged that some procedures classified in outpatient APC groups may seem closely related to procedures excluded from the OPPS on the basis of their status as inpatient procedures.

"We expect that when the former are performed in the outpatient setting, they will be only the simplest and least intense cases. The fact that a service is included in an APC group under the hospital OPPS should not be construed to mean that the procedures may only be performed in the outpatient setting. In every case, we expect the hospital to assess the risk to the individual patient and to act in the patient's best interest," according to the CMS document.

[For more information, contact Deborah Hale, CCS, Administrative Consultant Services, e-mail:, Marianne Lundgren, RHIA CCS, hospital payment monitoring program specialist with TMF Health Quality Institute, e-mail:]