By Toni Cesta, PhD, RN, FAAN


In recent years, compliance has become a greater area of focus for case managers and case management leaders. Historically, case management compliance related most closely to the Centers for Medicare & Medicaid Services (CMS) Conditions of Participation (CoPs). More specifically, two of the conditions apply specifically to the practice of case management. These are the CoPs for utilization review and discharge planning. These CoPs were rarely audited by CMS — and hospitals did not pay close attention to them.

Like many things in healthcare, times have changed for CoPs and other standards of compliance established over the last several years. These include elements such as the Two-Midnight Rule under the Inpatient Prospective Payment System (IPPS), and the Important Message from Medicare. CMS, The Joint Commission (TJC), and other certifying bodies have begun to audit and evaluate case management compliance in hospitals. This month, we will review the areas of compliance in the CoPs that directly relate to the roles of the case manager and the social worker to ensure compliance.

What Is Compliance?

Compliance is defined as “cooperation or obedience.” Compliance with the law is expected of everyone. Compliance with laws related to healthcare are expected of all healthcare organizations and providers.

Healthcare compliance is more than just rules and regulations. The following are three broad categories of compliance to consider:

• clinical compliance;

• standards;

• evidence-based guidelines.

Examples of clinical compliance areas include value-based purchasing measures, readmission penalties, hospital never events, and hospital-acquired conditions. Standards such as Condition Code 44 are enacted by TJC, CMS, and others. Evidence-based guidelines usually are written by the hospital or purchased by the hospital for internal use. These guidelines provide the expected processes for care of specific types of patients.

Conditions of Participation for Hospitals

The Conditions of Participation are rules from CMS by which Medicare- and Medicaid-enrolled hospitals must abide as a condition of participation in these federal healthcare programs. They are a set of stringent health measures designed to regulate how hospitals and other medical establishments use Medicare dollars. Every healthcare facility that receives reimbursement for Medicare-related costs must adhere to the guidelines specified by CMS. These rules are published in the Federal Register, and regular inspections by CMS ensure that all healthcare facilities consistently follow guidelines. These rules also ensure that all patients receive a minimum standard of care, which is considered a right of every Medicare beneficiary.

In general, the CoPs are the final rules in terms of adherence. In some instances, one state’s rules may supersede the federal CoP. This may happen if your state has a more restrictive regulation than that of the CoP, but in general the CoP is the law of the land for hospitals and other levels of care.

• Part A includes general provisions for the delivery of care.

• Part B covers administrative requirements as well as patient rights.

• Part C includes the following areas, including those that pertain to case management, utilization review, and discharge planning: nursing services; medical record services; pharmaceutical services; radiological services; laboratory services; food and dietetic services; physical environment; infection control; discharge planning; organ, tissue, and eye procurement.

• Part D, titled Optional Hospital Services, contains rules for additional departments that a specific hospital may or may not have. All others are considered mandatory. Part D includes the following: surgical services; anesthesia services; nuclear medicine services; outpatient services; emergency services; rehabilitation services; respiratory care services.

The CoP contains rules for virtually every department and discipline in the acute care setting.

Conditions of Participation for Utilization Review

Utilization review was the first role assumed by hospital case managers. It was a stand-alone role and was performed as a requirement under the Medicare program. As the case management models evolved, utilization review was subsumed as one of many roles performed by hospital case managers. Whether your case management model applies utilization review as a stand-alone role, or whether it is part of an integrated approach, your hospital is bound by the components of the CoP for utilization review. It is critical that case managers are aware of what these requirements are and that they also are included in the hospital’s utilization review plan.

The section on utilization review begins with the basic requirements of utilization review: “The hospital must have in effect a utilization review (UR) plan that provides for review of services furnished by the institution and by members of the medical staff to patients entitled to benefits under the Medicare and Medicaid programs.” (For more information, visit:

The hospital’s utilization review plan should include the following:

• a delineation of the responsibilities and authority for those involved in the performance of UR activities;

• procedures for the review of the medical necessity of admissions;

• the appropriateness of the setting;

• the medical necessity of extended stays;

• the medical necessity of professional services.

The Utilization Review Committee

The utilization review committee must include two or more practitioners who carry out the utilization review functions. At least two members of the committee must be doctors of medicine or osteopathy. The other members can be any type of practitioner.

The UR committee must act as one of the following:

• a staff committee of the institution that has delegated to the UR committee the authority and responsibility to carry out the UR functions;

• a group outside the institution established by the local medical society and some or all of the hospitals in the locality, or established in a manner approved by CMS.

If your hospital is too small to practically establish a functioning UR committee, then a committee must be established as per above.

The committee’s reviews cannot be conducted by any individuals who have any of the following:

• a direct financial interest in the hospital (i.e., an ownership interest); or

• past professional involvement in the care of the patient whose case is being reviewed.

Section 482.30(c) Standard outlines the requirements for the scope and frequency of reviews. It discusses the manner in which clinical reviews must be conducted. The following information must also be included in the utilization review plan:

• The UR plan must provide for review for Medicare and Medicaid patients with respect to the medical necessity of admissions to the institution, direction of stays, and professional services furnished, including drugs and biologicals.

• Review of admissions may be performed before, at, or after admission to the hospital.

• Reviews may be conducted on a sample basis.

• Hospitals that are paid for inpatient hospital services under the prospective payment system must conduct review of duration of stays and review of professional services. For duration of stays, these hospitals are only required to review cases that they reasonably assume to be outlier cases based on extended length of stay. For professional services, these hospitals need only review cases that they reasonably assume to be outlier cases based on extraordinarily high costs.

Implementing Review Frequency

While the CoP states that reviews may be conducted on a sample basis except for extended stays, most contemporary case management departments review all admissions to the hospital. Due to the changes in Medicare payments including the Two-Midnight Rule, reductions in payment for readmissions, and so forth, it has become necessary to look at all admissions at the start of the stay and daily thereafter. In the case of extended stays, less frequent reviews may be appropriate.

The UR plan should include the hospital’s expectations concerning reviews for medical necessity with respect to admission, duration of stay, and the professional services furnished. If your hospital is not paid under the prospective payment system, these rules are not applicable.

Section 482.30(d) includes the Standard: Determination regarding admissions or continued stays. The CoP tells us that the determination that an admission or continued stay is not medically necessary:

• may be made by one member of the UR committee if the practitioner or practitioners responsible for the care of the patient concur with the determination or fail to present their views when afforded the opportunity;

• must be made by at least two members of the UR committee in all other cases.

Before making a determination that an admission or continued stay is not medically necessary, the UR committee must consult the practitioner or practitioners responsible for the care of the patient, and afford the practitioners the opportunity to present their views.

• If the committee decides that admission to, or continued stay in, the hospital is not medically necessary, written notification must be given. This notification must be given no later than two days after the determination, and must be given to the hospital, the patient, and the practitioners responsible for the care of the patient.

Applying the Rules for Admission and Continued Stay Reviews

When someone other than a physician makes an initial finding that an admission or continued stay does not meet criteria, the CoP gives specific instructions as to how the process should be conducted. Generally, it is the case manager who is making these initial determinations and the case manager usually is a registered nurse. However, the CoP requires that, if the criteria are not met, the case be referred to the utilization review committee subgroup of the UR committee. This subgroup must include at least one physician. In most hospitals, this would be the physician advisor.

The committee or physician advisor then is required to review the case. If the physician advisor agrees that the case does not meet the hospital’s criteria for admission or continued stay, then the attending physician must be notified. The attending physician must be given an opportunity to present his or her views and any additional information relating to the patient’s needs for admission or extended stay.

Incorporating Utilization Review Into Daily Practice

As a case manager responsible for utilization management, you must know the rules and regulations for utilization review. Let’s start with the three types of clinical reviews that are the basis of utilization management: prospective, concurrent, and retrospective reviews.

Prospective reviews occur before services are rendered. For example, if the health plan requires the provider to request preauthorization for hospital admission, the request would trigger prospective utilization review. Another example might be that the preadmission case manager reviewing scheduled surgical cases will review the appropriate level of care prior to the admission, or may review a request for preoperative days that do not meet medical necessity. The case manager in this role must be sure that, as per the National Coverage Determinations (NCD), all documentation must be in the record to demonstrate the appropriateness of the specific procedures included in the NCD.

Concurrent reviews occur while services are rendered. For example, a provider’s request for hospital days beyond those approved would trigger a concurrent review.

Medicare’s expectation is that we manage the medical necessity of its beneficiaries throughout their hospital stay. There should be no exception related to admissions that do not need to be reviewed concurrently. Cases paid under a DRG, bundled payment method, or underfunded or unfunded patients should be reviewed. Cases should be reviewed proactively. There may be a situation in which you receive a concurrent denial. When this happens, an additional review should be performed.

Retrospective reviews occur after services have been rendered. These reviews should be performed on short stays that were admitted and discharged before the medical necessity review was completed. Retrospective reviews also should be performed when a denial is received after the patient has been discharged. If reviews are performed daily and kept in a case management software application, the need to perform these retrospective reviews becomes unnecessary as they can be accessed and reviewed during the appeal process. This approach is more efficient and the reviews will be more accurate, as they were performed while the patient was still in the hospital.

Functions of the UR Committee

The utilization committee plays an important role in ensuring that hospital staff, including physicians, nurses, and administrators, are kept informed as to issues related to utilization, denials, length of stay, cost, outlier cases, etc. Below are examples of topics that might be included in a UR committee agenda. Not every topic must be discussed every month. Rather, topics should be included that have seen a change, positive or negative. Some reports can be presented quarterly while others probably should be reported at each and every meeting. For example, length of stay should be reported at each meeting while outlier cases might be reported less frequently. Ultimately, the frequency is up to the committee chair. Utilization review committees have a bad reputation as not being relevant to attendees; however, in today’s healthcare environment where quality, cost, and reimbursement are interrelated, it has never been more important to discuss these topics.

The same information that is presented to the UR committee also should be presented to the case management department staff. The RN case managers, social workers, and support staff must see the outcomes of their work, as well as where there are areas of success or needed improvement.

• ALOS: Medicare, Medicaid, self-pay, HMO, PPO, adult, and pediatrics;

• outlier cases;

• Medicare spending per beneficiary (from the Medicare.Gov Hospital Compare site);

• variable cost per case;

• readmission rates;

• medical necessity audit results;

• PEPPER reports;

• Two-Midnight Rule dashboard;

• QIO audit results;

• Two-Midnight Rule self-denial reports;

• denial rates;

• actual denials;

• overturns;

• denial reasons;

• annual review of UR plan;

• annual review of discharge planning policy.

Compliance With Documentation

As case managers, we must be thoughtful about what is documented in the medical record. What should be kept in the medical record vs. what does not belong in the medical record can be included in a departmental policy. The following are some basic tenets of documentation:

• Documentation belongs in your case management software if it relates to payer issues, avoidable delays, or denials. These should not be part of the patient’s medical record, but in a discreet part of the case management software.

• Do not copy and paste the electronic record and send to payer for a clinical review. Only send the information needed to support your case for a continued stay or discharge.

• Use critical thinking skills when providing clinical medical necessity information to payer. Sending too much information can be just as damaging as not sending enough, so be thoughtful as you compile what you need for your review.

• Keep documentation current. It should tell the patient’s story — not yours. Avoid documenting tasks you have performed; instead, document the relationship between the tasks and the patient’s status.

• Document any time there is an update regarding the patient.

• The department should have a policy for the minimum frequency of documentation — know the requirement for your department.

• Use software to remind you of the next review date so you do not cause a denial due to a lack of a review.

• Utilization information is not a part of the medical record (non-discoverable).

• This information should be in the case management software.


This month, we began our review of compliance issues relevant to the field of case management. We will continue next month with more issues related to utilization management and the move on the Conditions of Participation for Discharge Planning.