The 2-Midnight Rule A Game-changer for Case Management
Toni Cesta, PhD, RN, FAAN
A predictable, yet perhaps unwanted, change went into effect on Oct. 1, 2013. Despite protests and a concerted effort on the part of the healthcare industry to keep it away, the Centers for Medicare & Medicaid Services (CMS) enacted this new rule as part of the 2014 Hospital IPPS (Inpatient Prospective Payment System) Final Rules. CMS had been scrutinizing one- and two-day hospital stays for years, but no one saw this rather drastic change coming. It is a game-changer for case management, but also for all hospitals reimbursed under the IPPS. Confusing at first, and mind-boggling to many, it looks as if it is here to stay. It impacts many things including length of stay, the definition of medical necessity and hospital inpatient status, the use of observation status, and physician documentation. It requires that case managers apply due diligence at the hospital's routes of entry, particularly the emergency department.
A Time-based System
Regarding the "Medicare Utilization Day" (MUD), CMS has applied language and logic in a new way as it redefines a 24-hour benchmark process. The 24 hours no longer refers to the amount of time a patient needs hospital care but rather refers to the 24 hours (that begin at midnight) of the first calendar day that a patient is in a bed and continues until the following midnight. While CMS states that this is still a 24-hour benchmark, it goes on to say that "the relevant 24 hours are those encompassed by 2 midnights." This leaves the potential for the MUD to last up to 48 hours when patients are admitted just after the first midnight benchmark.
The rule requires that when a physician expects that a patient's hospital stay will encompass at least two midnights, that the patient be admitted to the hospital as an inpatient. The time that the patient spends in the emergency department receiving treatment, and/or the time that that patient spends in surgery, is counted as part of this time period. Therefore the patient's time of presentation will affect whether or not he or she gets admitted, rather than his or her medical condition in some instances. It also requires that physicians be able to anticipate and project the expected treatment duration, something that can often be quite difficult. The physician must have a reasonable expectation that the patient's stay will cross two midnights and admit the patient based on that expectation.
Outpatient and Observation Status
In addition to delineating what an admission requires, the rule also clarifies what is inappropriate for an inpatient hospital stay. It stipulates that surgical procedures, diagnostic tests and other treatments that require that the patient be in the hospital for a more limited time period, and do not cross two midnights, are generally not appropriate for admission to the inpatient setting.
Our view of observation status, as providers, also changes with this new rule. Observation had been used as a "time-extender," allowing the physician additional time following care in the emergency department, to determine if the patient needed to be admitted to the hospital. Now CMS is directing hospitals to place any patient whose stay will not span two midnights into observation status. It goes on to say that once the physician has additional information, the status may be changed to inpatient or the patient may be discharged.
This distinction between the previous use of observation and the 2014 use of observation warrants further explanation. In the 2014 use of observation status, the physician's selection of inpatient versus observation status is strictly based on his anticipated duration of care and not on the patient's level of illness or needed services. CMS further explains that even a patient requiring care in a critical care bed or telemetry, but whose stay will not span at least two midnights, should be placed in observation status. CMS explains that the majority of patient stays under two midnights will generally not be appropriate for an inpatient admission, with the following exceptions: death, transfer, patients leaving against medical advice, unforeseen recovery, and election of hospice care. Should patients fall under any of these categories, the hospital will be able to bill the stay as an inpatient admission. It is important that your hospital check its policies regarding the use of certain specialty hospital beds, such as critical care beds, to ensure that observation patients placed in these beds are not outside the hospital's own policies about use of these beds.
Under very limited circumstances the physician may admit the patient to the inpatient setting even though the expectation is that that stay will not span at least two midnights. These include: medically necessary procedures on the inpatient-only list, new onset mechanical ventilation (not including intubations expected as part of a surgical procedure), others approved by CMS and outlined in sub-regulatory guidance.
In addition to changes in the use of observation status, there are changes in the final rules as they apply to physician documentation expectations. The new rule requires that every inpatient admission is certified by the physician of record, that is, the physician who is most familiar with the patient's needs and reason for hospitalization. Certification is fulfilled when there is a valid order for admission that is authenticated prior to discharge and is in compliance with the two-midnight rule. In addition, the medical record must also include a history and physical outlining the diagnosis and treatment plans for the patient, and a documented discharge plan at the time of discharge. The physician must also be sure to document other complex medical factors such as comorbidities, the severity of the signs and symptoms, current medical needs, and the risk of adverse events. The physician does not need to include a separate attestation for the expected length of stay. Rather, this information is inferred from the physician's standard medical documentation. Examples of this include the plan of care, treatment orders, and physician's notes.
Case managers must be sure that they discuss the discharge plan with the physician of record and the agreement with the discharge plan is clearly documented in the medical record by the physician of record. CMS does not require that the physician complete a "certification form," although some hospitals have chosen to use a form or template in their electronic medical record. Whether a form is used or the hospital depends solely on the presence of the physician's documentation in the medical record is a choice that each hospital must make.
The Use of Screening Criteria A Change for Case Managers
CMS, in the final rules, explains its take on the use of inpatient level utilization review screening criteria. While the hospital may continue to use existing utilization review criteria, these criteria are not binding on the hospital, CMS or outside review contractors. When a Medicare external review contractor reviews the medical record, it will assess for the following:
- the reasonableness of the physician's expectation of the need for and duration of care based on complex medical factors such as history and comorbidities;
- the severity of the signs and symptoms;
- current medical needs;
- risk of an adverse event.
This is a change from the traditional use of utilization review criteria to determine the medical necessity of admission. In the past, case managers in the emergency department (ED) have used commercial screening criteria to determine whether the patient should be admitted to the hospital. When the patient did not meet these criteria, the case manager would have a conversation with the admitting physician to see if an alternative plan could be created, thereby preventing the admission to the hospital. While CMS does not direct hospitals to stop doing this, clearly the decision to admit will now be based on the expected duration of the stay and not on whether the patient meets the medical necessity criteria for admission. This is a significant change in the approach of utilization review in the emergency department. ED case managers will now need to review the patient's expected length of stay and guide the physician in determining whether the patient should be admitted to the hospital.
Care Following Surgical Procedures
CMS explains how to manage patients who may need additional recovery time following a minor surgical procedure. When the determination is made that the patient needs additional recovery time, the physician should reassess the expected length of stay. Generally speaking, if the expected length of stay is unclear, and/or the physician can determine that the patient's expected length of stay will not span two midnights, then the physician should continue to treat the patient as an outpatient. If additional information is obtained during that time that suggests that the patient's stay will span greater than two midnights, then the physician may admit the patient to the hospital as an inpatient.
Other Roles for the Hospital Case Manager
When the patient is placed in observation status, the patient should be notified in writing of this decision. It is prudent to have the patient sign the written notice and the case manager should place a copy of the signed document in the medical record.
The case manager should explain the differences between inpatient admission and observation status to the patient in a manner the patient can understand. The implications of the increase in out-of-pocket expenses that may be incurred by the patient if he or she remains in observation status throughout the stay should also be explained. These expenses may include a co-pay as well as a deductible. In some instances, the patient may also be billed for medications that are not related to the reason for the period of observation, such as diabetic or anti-hypertensive medications.
Review of Claims
CMS has placed a moratorium on reviews of claims through Sept. 30, 2014. After that time, the contract reviewers will begin auditing medical records. Contractors will include the time the beneficiary spends receiving outpatient care in their review decision. If the total time that the patient is expected to spend receiving medically necessary hospital care (including outpatient care and inpatient care) is within one of the time sets below, the mechanism for review will look like this:
- 0-1 midnight: Review contractor will review to see if the beneficiary was admitted for an inpatient-only procedure or if other circumstances justify inpatient admission per CMS guidelines (such as new onset ventilation)
- 2 or more midnights: Review contractor will generally find Part A payment to be appropriate.
The two-midnight benchmark "clock" starts:
When hospital care begins. Examples of how CMS defines hospital care would include:
- Observation care
- Emergency department, operating room, and other treatment areas
- The start of care after registration and initial triaging activities such as vital signs
- Excessive wait times are excluded.
One point of clarification is important to note. While the total time in the hospital will be taken into consideration when the physician is making an admission decision (expectation of hospital care for two or more midnights), the inpatient admission does not begin until the in-patient order and formal admission occur.
How Will Claims for Review Be Selected?
If a claim shows two or more midnights after formal inpatient admission begins, the review contractor will presume, for claim selection purposes, that the inpatient admission was appropriate. This claim will therefore not be the focus of a medical review. There is one exception to this rule, however. The review contractors will monitor your hospital's claims for patterns that may demonstrate evidence of systematic gaming or abuse. Examples of this might include unnecessary delays in the provision of care used to surpass two midnights.
Hospitals should not consider holding patients in order to meet the two midnights, as this will result in a greater number of records being reviewed and perhaps other penalties as well.
Your billing department may use Occurrence Span Code 72 when filing a claim. This code allows "contiguous outpatient hospital services that preceded the inpatient admission" to be reported on inpatient claims. Hospitals can use Occurrence Span Code 72 to report the number of midnights that the beneficiary spent in the hospital from the start of care until formal inpatient admission.
MACs Will Conduct Probe Reviews
The Medicare Audit Contractors (MACs) are conducting probe reviews on Medicare Part A inpatient hospital claims using the new inpatient regulations we have just discussed and will provide feedback to CMS with the purpose of developing further education and guidance. They are focusing on the probe period, which includes admission between Oct. 1, 2013, and March 31, 2014.
The probes are being conducted on a pre-payment basis. If the auditor determines that the Part A inpatient hospital stay was not medically necessary, a denial will be issued. The hospital will then have the opportunity to rebill for medically reasonable and necessary Part B inpatient services. This process requires a very tight relationship between the case management department and the billing department so that the appropriate level of care can be billed at all times.
Most hospitals will be reviewed on a sample of ten claims in this pre-payment review process. Larger hospitals will have 25 claims reviewed. If no issues are identified, the MAC will issue no further probe reviews unless there is a change in billing patterns as discussed above. The MAC will provide individualized phone calls to hospitals with either moderate to significant or major concerns. During these calls, the MAC will discuss the reasons for the denial, provide pertinent educational and reference materials, and answer questions.
The number of claims reviewed will increase if the hospital is noted to have moderate to major concerns. Sample claims can increase to as many as 100 for regular-sized hospitals and as many as 250 for large hospitals. As mentioned above, CMS will continue to monitor hospitals for billing trends indicative of abuse, gaming or systematic delays. In addition, the MACs will submit periodic reports to CMS for purposes of tracking the frequency and types of error seen during these probe reviews.
As a case manager or case management leader, it is important for you to stay in touch with how CMS continues to roll out the two-midnight rules as well as the manner of auditing on a go-forward basis. It is also important that your department continue to have a close working relationship with the billing department in your hospital to ensure that the hospital remains compliant with this new rule.
Finally, it is also critical that your emergency department and its physicians are kept up to date on the rule and its implications for hospital admissions. Having a case management presence in the emergency department will help to ensure a sound review process at this important route of entry to the hospital.
A working team should be created to review the cases that fall outside of the rule, and these cases should also be presented to the utilization review committee so that the hospital can continue to learn and move forward. Finally, listen to the CMS National Provider Calls (www.cms.gov/NPC) to gain additional and updated information as it becomes available!
For additional information on the two-midnight rule go to www.cms.gov and search for CMS-1599-F