CMS is Serious: Two Midnights for Inpatient Medical Necessity

Full disclosure – I’ve spent the better part of the last few weeks reading and analyzing the latest move on CMS’ part to help control observation services – the invention of the Two Midnight Rule or TMR as I like to call it. For those of you who do not spend all your time analyzing regulations, the TMR is not really a bad idea since CMS is using it to try and reduce unnecessary hours and days in observation. On the surface, they are looking to help reduce the higher beneficiary co-pays, but they are also making their auditor’s lives easier and less costly to the Trust Fund. Getting folks on the right path in the first place is much more cost effective than chasing after them to pay attention later on.

CMS held an open call on September 26, 2013 to reiterate their intent of keeping the two midnight plan. During the call, they also announced their ‘Probe and Educate’ plan, which consists of MACs auditing only cases of less than two midnights between October 1 and December 31, 2013. There will be no RAC or MAC audits of two night stays during this time. However, the OIG, ZPIC, etc., can still review any claims they deem necessary during this period – including two midnight stays.

Rather than take you down the long and winding path of how observation services got out of control, I’ll  focus on what TMR means and suggest a few things you can do to survive and thrive under this new requirement.

Between October 1 and December 31, 2013, CMS presumes that those admissions lasting two midnights are generally considered medically appropriate – as long as there is clinical documentation to support the care. Admissions lasting less than two midnights are not presumed to quality for inpatient status and will be paid under Medicare Part B. CMS auditors will continue their scrutiny of short stays of less than two midnights.

To many this seems a major shift in policy During the September 26 call, CMS reiterated several times they listened to beneficiaries, families, and providers regarding the over use of observation and increased costs. This concern resulted in the two midnight rule, which they admit is not perfect but is a step toward clarification of the somewhat confusing rules.

There are steps you can take to make this work in your behalf:

Track CMS patients just as closely as you follow your commercial patients. It’s important to note that time spent in your facility in the ED, OR, MRI, clinic, observation or any other outpatient diagnostic or therapeutic services does not ‘count’ toward the two midnight time requirement.

As soon as an outpatient study result(s) or condition is known, they must be shared STAT with the physician qualified to write an order to admit if necessary. The sooner the decision is made and the order written, the sooner the clock begins ticking toward the two midnight magical hour.

Educate your staff including clinicians on these changes. Make it a top down priority to focus on Medicare patients. Make sure everyone understand the importance of moving them through your process as quickly as possible.

I know I sound like the proverbial broken record, but pay attention to your CERT and PEPPER reports. These are perfect indicators of where your problems lie. Do not relegate these important tools only to your compliance officer. If you don’t already have one, create a team to review each report and make a plan on how to improve your processes around your documented problem areas. The largest third party payer in the world is creating these reports for your benefit – now is the time to use this data to help improve your rate of medically appropriate admissions.

Undoubtedly, there will be cases that are admitted with the expectation of needing at least two midnights of inpatient care that subsequently do not meet that benchmark. Expect an audit in these instances. Make every effort to document the reasonable expectation of the patient’s need for the expected care. Be sure to completely document all unforeseen circumstances that resulted in a shorter stay. Consider working with your Clinical Documentation Improvement (CDI) team on what constitutes appropriate support. If you use an EHR, ask the vendor to work with your CDI professionals to be sure their requirements are met and can be added to the record template.

Since clinical documentation is more essential than ever to protect inpatient revenue, involve your Utilization Review nurses and compliance officer in addition to CDI. Create a training event for your clinical staff. Focus on expanded documentation requirements – especially in instances of patient transfers, discharges AMA or any other unforeseen events that result in a shorter than anticipated stay.

For more see the CMS Fact Sheet.

Carol Levine, Director of the Families and Health Care Project of the United Hospital Fund, has an excellent article on the history of observation for the United Hospital Fund.

Barbara Aubry is a Regulatory Analyst for 3M Health Information Systems.

Further Clarification

I have received a question and want to add additional information to clarify the following statement:

“It’s important to note that time spent in your facility in the ED, OR, MRI, clinic, observation or any other outpatient diagnostic or therapeutic services does not ‘count’ toward the two midnight time requirement” for Part A billing purposes.

Even if the time spent in OBS contributes to the two midnight minimum for audit purposes, it is still billed as Part B. This also applies to the time spent in the ED or outpatient surgery. You may be able to create a stay that consists of two midnights, one in OBS/ED/surgery and the other as an inpatient following the written order to admit, but only one midnight can be billed to Part A. The remaining time and services will be considered outpatient and must be billed to Part B. This requires collection of appropriate co-pays.

2 responses to “CMS is Serious: Two Midnights for Inpatient Medical Necessity

  1. Pingback: [Repost] Feds Refuse To Shut Down Controversial ‘Two-Midnight’ Rule For Hospitals « Health and Medical News and Resources

  2. Pingback: Medical Necessity: 2013 Year-in-Review | 3M Health Information Systems

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