OBSERVATION SERVICESWill WE EVER MASTER

THE CONCEPT?????Ronald H Kilmer, RN, Ret.

"Medicare won't pay if we charge them for observing you, because it's not a medical

necessity.."

BACKGROUND1984-Implementation of Medicare DRG

reimbursement methodologyEarly 1990’s non-gov’t payers

pediatric admissionsAmbulatory surgery

NYS DRG methodology

The key to any successful observation program

Case Management

Patient Financial Services

Health Informatio

n Manageme

nt

Physicians

INTERNAL PROCESS 2 KEY PARTS FOR SUCCESS

Communicationa process by which information is exchanged

between individuals through a common system of symbols, signs, or behavior

Coordinationthe harmonious functioning of parts for

effective results(Merriam-Webster Dictionary)

Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries

OEI-02-12-00040, (July 2013)(OIG)

“ The reasons for short inpatient stays and for outpatient observation stays were often the same. They further noted that the relative use of short inpatient stays versus outpatient observation stays varied widely between hospitals, consistent with medical review findings that identical beneficiaries may receive identical services as either inpatients or outpatients in different hospitals.”

WHO, WHY, and HOWWho has a observation program?Is the program effective?Why do you think you are receiving IP

denials?How do you classify (denial or not) a case

when concurrently the status is changed?

DEPARTMENT OF HEALTH AND HUMAN SERVICESCenters for Medicare & Medicaid Services

42 CFR Parts 412, 413, 414, 419, 424, 482, 485, and 489[CMS-1599-F] [CMS-1455-F]

RINs 0938-AR53 and 0938-AR73Medicare Program; Hospital Inpatient Prospective Payment Systems

for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2014 Rates; Quality

Reporting Requirements for Specific Providers;Hospital Conditions of Participation; Payment Policies Related to

Patient StatusAGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.

ACTION: Final rules.

Medicare Part B Inpatient Billing

The inpatient admission was determined not reasonable and necessary

If a hospital determines under 42 CFR 482.30(d) via UR Plan

After a beneficiary is discharged that his or her inpatient admission was not reasonable and necessary

CRITERIA FOR INPATIENTThe physician or other practitioner responsible for a

patient's care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient.

Physicians should use a 24-hour period (encompassed by 2 midnights) as a benchmark, i.e., they should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis.

The decision to admit a patient is a complex medical judgment which can be made only after the physician has considered a number of factors.

COMPLEX MEDICAL JUDGMENTThe severity of the signs and symptoms exhibited by

the patient; The medical predictability of something adverse �

happening to the patient; The need for diagnostic studies that appropriately are �

outpatient services (i.e., their performance does not ordinarily require the patient to remain at the hospital for 24 hours or more) to assist in assessing whether the patient should be admitted; and

� The availability of diagnostic procedures at the time when and at the location where the patient presents.

INTERNAL PROCESSES INCLUDEDeterminationCodingBillingDenialReviewAppeal/revision

STATUS DETERMINATION

Case ManagementUR Plan

The hospital is responsible to ensure that all the UR activities, including the review of medical necessity of hospital admissions and continued stay are fulfilled as described in 42 CFR 482.30

Condition Code 44 hospitals should have case management and other staff available at all times

to assist the physician in making the appropriate initial admission decision (p.1676, final rule, CMS 1599-F1)

Internal processHow are determinations made?How are changes reflected in the “system”?

Payer process differencesTraditional gov’t programs – not concurrentAll others, concurrent

PATIENT NOTIFICATION

Payor requirementsWhenHowBy whom

Requirements for Physician Orders Beneficiary becomes a hospital inpatient if formally

admitted as such pursuant to a “physician order “ for hospital inpatient admission.

The order for inpatient admission must specify admission “to or as an inpatient.”

Physician order must be present in the medical record and be supported by the physician admission and progress notes.

“The physician order must be furnished at or before the time of the inpatient admission”(new paragraph (d) of § 412.3) (unlike the rest of the certification which may be completed prior to discharge, except for the outlier extended stays (§ 424.13(e) through (g)).

Admission and Medical Review Criteria for Hospital Inpatient Services under Medicare Part

A

Statutory Requirement for Certification of Hospital Inpatient Services: The certification requirement for inpatient services

which provides that Medicare Part A payment will only be made for such services “which are furnished over a period of time, [if] a physician certifies that such services are required to be given on an inpatient basis.”

Medicare Part A payment will only be made for inpatient hospital services if a physician certifies or recertifies “the need for continued hospitalization of the patient for medical treatment or medically required inpatient diagnostic study.”

For all hospital inpatient admissions, the certification must be completed, signed, and documented in the medical record prior to discharge.

Content of Certification and Recertification

Certification begins with the order for inpatient admissionReason for either:

Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or

Special or unusual services for cost outlier cases The estimated time the patient will need to remain in the

hospital.The plans for posthospital care, if appropriate.Timing of certification. For all hospital inpatient

admissions, the certification must be completed, signed, and documented in the medical record prior to discharge

Certification of need for hospitalization when a SNF bed is not available

Content of Certification and Recertificationcon’t

Day outlier cases: certification is required no later than 1 day after the hospital reasonably assumes that the case meets the outlier criteria or no later than 20 days into the hospital stay, whichever is earlier. The first and subsequent recertifications are required at intervals established by the UR committee (on a case-by-case basis if it so chooses) but not less frequently than every 30 days.

Cost outlier cases: certification is required no later than the date on which the hospital requests cost outlier payment or 20 days into the hospital stay, whichever is earlier. If possible, certification must be made before the hospital incurs costs for which it will seek cost outlier payment. In cost outlier cases, the first and subsequent recertifications are required at intervals established by the UR committee (on a case-by case basis if it so chooses).

Documentation of Medical Necessity

Complex medical factors such as history and comorbidities

Severity of signs and symptomsCurrent medical needsThe risk of an adverse eventWhy the expectation of the need for care

spanning at least 2 midnights is appropriate in the context of that beneficiary’s acute condition

CERT Review

In 2012, the CERT contractor found that Medicare Part A inpatient hospital admissions for 1-day stays or less had an improper payment rate of 36.1 percent

2-day or 3-day stays, which had improper payment rates of 13.2 percent and 13.1 percent, respectively.

2-midnight presumption and

2-midnight benchmark

2-midnight presumption

Patient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed generally appropriate.

2-midnight benchmark If the physician admits the beneficiary as an

inpatient but the beneficiary is in the hospital for less than 2 midnights after the admission begins, CMS and the Medicare review contractors will not presume that the inpatient hospital admission was reasonable and necessary for payment purposes, but will apply the 2-midnight benchmark in conducting medical review.

What If? When it is difficult to make a reasonable

prediction that the beneficiary will require a hospital stay greater than 2 midnights, the physician should not admit the beneficiary but should place the beneficiary in observation as an outpatient. As new information becomes available, the physician must then reassess the beneficiary to determine if discharge is possible or if it is evident that an inpatient stay is required.

THE GOVERNMENT AUDITOR

Medicare review contractors will:Evaluate the physician order for inpatient

admission to the hospital, along with the other required elements of the physician certification,

The medical documentation supporting the expectation that care would span at least 2 midnights, and

The medical documentation supporting a decision that it was reasonable and necessary to keep the patient at the hospital to receive such care, in order to determine whether payment under Part A is appropriate.

Impacts of Changes in Admission and Medical Review Criteria In the FY 2014

Reduce the standardized amount by 0.2 percent

Recommendations:1. Read the new rules and definitions of inpatient; 2. Participate in any Open Forum calls provided by CMS; 3. Review and update your utilization review and billing

policies; 4. Review and update order sets; 5. Develop tracking tools if not already in place;6. Educate staff and providers;7. Consult counsel with any questions related to changes in

Medicare policy

Carolyn St.Charles, RN, MBARegional Chief Clinical Officer HealthTech Management Services

I’m so glad to be retired