Revenue Cycle

CAH perspective: CMS' proposal to redefine inpatient

Medicare Update for CAHs, September 19, 2012

Editor’s note: On August 23, HCPro released an article that outlines a request that CMS made for comments in the 2013 proposed rule that would define inpatient at a specific period of time. This proposal would have an immediate and profound impact on providers, patients, and review contractors. The following is an adaptation of this article by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc. specifically for critical access hospitals (CAH).

In the 2013 OPPS proposed rule, CMS states:

Some in the hospital community have indicated that it may be help­ful for the agency to establish more specific criteria for patient status in terms of how many hours the beneficiary is in the hospital, or to provide a limit on how long a beneficiary receives observation services as an outpatient. We are inviting public comments regarding whether there would be more clarity regarding patient status under such alter­native approaches to defining inpatient status.

This is a very interesting proposal that would have a positive effect when it comes to determining whether someone is an inpatient. It could benefit providers because denials surrounding medical necessity should decrease with a more bright line rule. In addition, it would reduce the need for utili­zation review after the first 24 hours, allowing staff resources to be focused on this critical time period.

Impact on medical necessity and auditors

Denials of inpatient cases are a major source of income and a highly targeted area for Recovery Auditors, for both PPS hospitals and CAHs.

Even though CAHs are limited to 48 hours of covered observation care, there continues to be an increase in observation services that extends beyond this time frame. While the hours beyond the 48 would not be reimbursed by the MAC/FI, CAHs may see this as an option to avoid an audit and denial of the inpatient short stay and their cost-based payment. CAHs have long been on the radar for their high utilization of one- and two-day inpatient stays in comparison to other providers so a more definitive designation of inpatient status may provide relief in this target area.

While some medical necessity denial issues will still remain if, for example, a 24-hour bright-line rule for inpatient status is enacted; the overall impact of such a rule will be quite beneficial for most providers. First, the rule would give providers some degree of comfort with inpatient status determinations for cases that go beyond 24 hours. This would shift the focus to the medical necessity of the care rather than the setting it is being provided in (i.e., sorting out the patients that need continued inpatient care and those that are merely receiving custodial care at 24 hours).

And while a bright-line rule is very provider friendly, defining an inpa­tient after a set amount of time may also have a major impact on recovery audits. Recovery Auditors will have much less to audit when it comes to inpatient cases because only cases for patient stays less than the specified time frame (e.g., 24 hours) will be in question.

Effect on admission review procedures

This rule could potentially change the way admissions review staff operate with their focus on the first 24 hours. In that sense, the proposed rule could actually increase the need for seven-day-a-week staffing in order to adjust to making more immedi­ate inpatient determinations.

This is a staffing area that has always been difficult for CAHs. It is not uncommon for case management or utilization review nursing staff to be limited “after hours” or on the weekends and holidays, leaving the regular nursing staff to step in and review admissions in addition to their patient care duties. Although a clear definition or bright-line rule would benefit CAHs in the long run, staffing and procedural adjustments would need to be made on the front end to ensure compliance in this area. This is an easier adjustment to make by larger hospitals and CAHs should be looking ahead to consider how this option may be implemented if CMS adopts a more clear definition.

Hospitals given an opportunity to comment

Upon first impression, the idea of defining inpatient by a specific time frame may sound great and may help to end the lengthy discussions and costly denials over inpatient status. However, there will still be issues that will require attention because determinations will still need to be made for some cases prior to the 24-hour mark.

Hospitals were encouraged to offer their comments to CMS by September 4 on the impact a specific timeframe would have on their operations and their patients, as well as a time frame that might be appropriate (e.g. 12 hours, 24 hours, etc.). Those comments and CMS’ responses will be published in the final rule and it will be interesting to see what the stakeholders had to say to CMS.

Often CAHs are left wondering if CMS guidance applies to their operations or not and many times it is not very clear. Since the current definitions of inpatient status and observation services apply equally across PPS and CAH providers, I would hope that CMS includes the CAH community in their discussion and final ruling so that we are all operating under the same guidance.

To listen to an audio spotlight of Ralph Wuebker, MD, MBA, vice president of audit, compliance, and education for Executive Health Resources, and Kimberly Anderwood Hoy, JD, CPC, director of Medicare and compliance at HCPro talking about this proposal, click here. Additionally, this topic and others, including observation services, inpatient-only procedures, out-patients in a bed, and condition code 44, will be covered in depth at HCPro’s annual Medicare Compliance Forum in Orlando October 18 and 19. For more information on this conference, please click here.

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