Health Information Management

News: Government focus on observation versus inpatient admission governance continues

CDI Strategies, September 12, 2013

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CMS issued new guidance last week aimed at clarifying the so-called “two-midnight rule” finalized in the 2014 IPPS. The rule essentially states that physicians should order an inpatient admission if he/she expects the care requires hospital services lasting over two midnights.

The recent five-page guidance “Hospital Inpatient Admission Order and Certification” outlines several areas for consideration including timing of the order, requirements for documentation, and considerations for which practitioners can maintain the authority to admit inpatients, among other items.

In August, the Office of the Inspector General (OIG) released a report highlighting concerns regarding lengthy outpatient stays, stating that such stays frequently cost more than inpatient stays and could result in beneficiaries being denied skilled nursing facility (SNF) services after discharge.

Analyzing data from 2012, the OIG identified 1.5 million observation stays. In its conclusion, the OIG suggests the “two-midnight” rule could significantly reduce the number of short inpatient stays but that “the number of observation and long outpatient stays” could remain high unless CMS allows them to be counted in the “two-midnight” calculations.

“Our results further indicate that, under the [two-midnight] policies… some hospitals would likely follow the provisions and continue to bill these as outpatient stays; other hospitals—given strong financial incentive and few barriers—would likely not follow the provisions and would admit beneficiaries as inpatients as soon as possible to meet the two-midnight presumption.”

The OIG indicated that it plans to conduct future studies focused on hospital practices associated with different service types.

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