Health Information Management

CMS releases 2014 IPPS Final Rule

HIM-HIPAA Insider, August 12, 2013

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by Jaclyn Fitzgerald, online editor 

The August 2 release of the 2014 Inpatient Prospective Payment System (IPPS) Final Rule changes the guidelines for inpatient admissions and Medicare Part A to Part B rebilling.

CMS redefined the criteria for inpatient admission by implementing the “two-midnights” rule. For an inpatient admission to be deemed medically necessary under the final rule, physicians must document why a patient’s say is expended to be a minimum of two midnights. In the past, inpatient admissions were held to a 24-hour rule. An observation stay that crosses one midnight can now count towards the two midnights needed for a qualifying inpatient stay. However, the observation stay will not count towards the three inpatient nights needed to qualify a patient for care in a skilled nursing facility after discharge.

A written order by a physician and medical record documentation of the reason for the stay are required for inpatient services to be properly paid under Part A. Upon inpatient admission, physicians are still expected to use their clinical judgment to predict the level of care and services necessary for a patient and the location where services will be provided.

Medicare review contractors have the right to overturn the decision made by the physician if the documentation is not strong enough. CMS recommends that physicians opt to keep patients in an outpatient status if they are unable to approximate the length of stay or produce sufficient documentation.

The final rule addressed the March 13 ruling on hospital rebilling of Part A services as Part B for claims that were deemed medically unnecessary. A timely filing requirement will be imposed as of October 1, 2013, and hospitals will be allowed one calendar year after the date of service to rebill. This means that the hospitals likely won’t be as concerned with using condition code 44 to switch someone from inpatient back to outpatient status prior to discharge when the patient didn’t meet inpatient criteria. Instead, they can wait up to a year to rebill for the treatment that counts as part of the observation services.

CMS welcomes people to email questions about the “two-midnights” rule to In addition, CMS plans to hold at least one special Open Door Forum call devoted to the two-midnights rule, but has not announced a date.

Read more about the final rule on the HCPro website.

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