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Tip: The impact of CMS change request 3444

Compliance Monitor, October 13, 2004

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A recent addition to CMS policy regarding changing inpatient admissions to observation (outpatient) status could have a significant effect on hospital reimbursement if the requirements are not immediately addressed.

I'm referring to CMS's September 10 transmittal 19, change request 3444.

CMS now requires that you establish the patient's status (inpatient or outpatient) prior to discharge. In addition, when you classify patients as either an "outpatient" or "observation," give them an Advance Beneficiary Notice (ABN) to inform them that they will be liable for payment of non-covered services under Medicare Part B.

This change means it's important for you to do concurrent review and determinations of patient status based on medical necessity criteria and prudent medical judgment.

In CMS transmittal 19, there are four conditions you must meet in order for the hospital to submit an outpatient claim after changing certification from inpatient to observation:

1. The change in patient status from inpatient to outpatient is made prior to discharge or release, while the beneficiary is still a patient of the hospital
2. The hospital has not submitted a claim to Medicare for the inpatient admission
3. A physician concurs with the utilization review committee's decision
4. The physician's concurrence with the utilization review committee's decision is documented in the patient's medical record

Short stays comprise anywhere from 10%-20% of hospital admissions. The new CMS guidelines make it clear that hospitals can no longer retrospectively reclassify patient status in these cases.

Hospitals must hold concurrent review by a nurse trained in clinical guidelines. A physician adviser trained in medical necessity guidelines and experienced as a clinician should be the back up. NOTE: The guidelines require concurrence by "a physician," but not necessarily the attending physician.

Some hospitals have chosen to outsource this service to ensure complete, 24-hour a day coverage and consistent expertise. Whether you choose to outsource or build your own methodology, you must be prepared since the regulations took effect October 12.

This tip was written by Joseph Zebrowitz, MD (jzebrowitz@ehrdocs.com), executive vice president and senior medical director, and Mark Miani, MD (mmiani@ehrdocs.com), senior medical director, Executive Health Resources, Drexel Hill, PA.

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