Executive Summary

The Centers for Medicare & Medicaid Services (CMS) has proposed that stays shorter than two midnights be reimbursed as inpatient stays if the documentation in the medical record supports it.

• CMS made the proposal in the Outpatient Prospective Payment System proposed rule for 2016 and left the policy unchanged for stays of two midnights or longer.

• CMS also announced that the two Beneficiary and Family Centered Care Quality Improvement Organizations (QIOs), Livanta and KEPRO, will take over the responsibility of Probe and Educate and will review cases for medical necessity when patient stays are one midnight or less, referring hospitals with high denial rates to the Recovery Auditors.

• Case managers should continue to assist physicians in determining patient status and to make sure that the documentation is complete, accurate, and specifies the severity of illness.

 

In a move that surprised many in the healthcare arena, the Centers for Medicare & Medicaid Services (CMS) has proposed loosening up its controversial two-midnight rule and allowing shorter stays to be reimbursed as inpatient stays if the documentation in the medical record supports it.

CMS made the proposal in the Outpatient Prospective Payment System (OPPS) proposed rule for 2016 issued July 1, saying the change was made based on feedback from hospitals and physicians and to emphasize the role of physician judgment. The policy is unchanged for stays of two midnights or longer.

The final OPPS rule will be issued in October and will go into effect January 1, 2016. CMS is essentially going back to pre-2013 rules which were in effect before the two-midnight rule was issued, says Ralph Wuebker, MD, MBA, chief medical officer for Executive Health Resources, a Newtown Square, PA, healthcare consulting firm.

“If the patient meets medical necessity criteria and the physician clearly documents it, the case would be appropriate to be paid as an inpatient stay, even if the patient stays less than two midnights,” Wuebker says.

However, he points out that CMS states that it would be “rare and unusual” for patients to require an inpatient admission for a period of time that is only a few hours and does not span at least one midnight.

In a statement announcing the proposed change, CMS said the proposal was based on “significant input from stakeholders” including hospitals, physicians, the Medicare Payment Advisory Commission (MedPAC) and Congress, and from the Probe and Educate process conducted by the Medicare Administrative Contractors (MACs).

In the proposed rule, CMS did not use the term “hospital level of care” but changed back to using “inpatient” and “outpatient” care, points out Steven Greenspan, JD, LLM, vice president of regulatory affairs for Executive Health Resources. “This indicates that CMS is no longer focusing on patients being in the hospital for a certain amount of time but is basing patient status on the need for a certain level of care,” he adds.

“The proposed rule keeps a good portion of the two-midnight rule, but it says that CMS recognizes that there are stays that are less than two midnights that are appropriate for inpatient status,” Greenspan says.

CMS has been urged to develop a payment methodology for short stays, Greenspan says.

“The MS-DRG system already does this. Payments are averaged based on the geometric mean length of stay, meaning that some short stays within that DRG are less than the designated mean and some are greater. There are approximately 50 DRGs having mean lengths of stay less than two days and under the current system, payment for these short stays are already captured into the DRG payment just as those for stays that are above the mean,” Greenspan points out.

CMS repeated its assertion that it would be “rare and unusual” for inpatient stays to last only a few hours and not span at least one midnight and stated that it would be monitoring stays of less than one midnight and prioritizing them for medical review.

CMS did away with the formal certification requirements for physicians in the 2015 OPPS but the documentation still has to include the justification for the inpatient admission, the expected length of stay, the treatment plan, and the discharge plan. Physicians must sign the record prior to discharge, Wuebker says.

Case managers should continue to use evidence-based criteria sets to ensure that patients meet medical necessity criteria as they assist physicians in determining patient status, he adds.

“The one-midnight proposed rule means that case managers need to make sure that there is complete and accurate documentation that specifies severity of illness. Physician documentation needs to make it clear that patients need not only hospital care, but inpatient care,” Greenspan says.

CMS also announced that the two Beneficiary and Family Centered Care Quality Improvement Organizations (QIOs), Livanta and KEPRO, will take over the responsibility of Probe and Educate and will review cases for medical necessity when patient stays are one midnight or less.

If hospitals have consistently high denial rates, the QIOs will refer them to the Recovery Auditors for patient status reviews.

“The two-midnight rule says that if patients stay over two midnights, the stay is presumed to be appropriate for inpatient status. CMS believes there has been some gaming of this rule and that’s probably where the auditors will focus,” Wuebker says.