HFMA Garden State Focus Magazine

Fall 2017

Institute Speaker

Two-Midnight Hospital Policy Creates Compliance and Revenue Integrity Risk for Hospitals

by Joseph Zebrowicz, MD

 In its FY 2016 Mid-Year Update and FY 2017 Work Plans, the OIG stated that the two-midnight hospital policy, “represents a change to the criteria that hospital physicians are expected to use when deciding whether to admit beneficiaries as inpatients or treat them as outpatients.” The OIG also stated that, “We will determine how hospitals’ use of outpatient and inpatient stays changed under Medicare’s Two-Midnight Rule by comparing claims for hospital stays in the year prior to and the year following the effective date of that rule. We will also determine the extent to which the use of outpatient and inpatient stays varied among hospitals.” In its commentary, the OIG acknowledged two seismic issues:

1. There has been a “change to the criteria” used to evaluate Medicare inpatient and outpatient billing status; and
2. Comparisons will be made across providers and over time regarding adherence to two-midnight hospital policy requirements

Regardingissue#2, on December19,2016, the OIG published its first findings of hospital billing patterns since the Two-Midnight Rule change. As the title of the report implies, the OIG has discovered that, “Vulnerabilities Rema in Under Medicare’s Two-Midnight Hospital Policy.”¹

Many hospitals continue to manage their Medicare billing status compliance through the legacy approach of having their case or utilization managers apply an inpatient level of care screening tool followed by physician review and medical necessity review of billing status for cases that fail to meet inpatient screening tool criteria.  Although this process worked well prior to the two-midnight hospital policy criteria, today, it results in errors consistent with the rates of variance seen in the December 2016 OIG Report.

 In summary, the OIG determined that providers are, on average, variant from expected volumes on both short stay inpatient and long stay observation cases. What was not made clear in the OIG report is the reason why it believes such variances exist? The answer to this question likely rests within the details of issue #1 and how hospitals have adjusted (or not adjusted) to the use and application of “new criteria” in their daily and ongoing Medicare billing compliance processes.

Many hospitals continue to manage their Medicare billing status compliance through the legacy approach of having their case or utilization managers apply an inpatient level of care screening tool followed by physician review and medical necessity review of billing status for cases that fail to meet inpatient screening tool criteria. Although this process worked well prior to the two-midnight hospital policy criteria, today, it results in errors consistent with the rates of variance seen in the December 2016 OIG Report.

This legacy process is no longer applicable in the post two-midnight policy world for several reasons:

1. According to CMS guidanceas provided in Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013², “It is not necessary for a beneficiary to meet an inpatient ‘level of care,’ as may be de-fined by a commercial screening tool, in order for Part A payment to be appropriate. In addition, meeting an inpatient ‘level of care,’ as may be defined by a commercial screening tool, does not make Part A payment appropriate in the absence of an expected length of stay of two or more midnights.”
2. According to CMS guidanceas provided in Reviewing Short Stay Hospital Claims for Patient Status: Admissions OnorAfterJanuary1, 2016, “Physicians need not include a separate attestation of the expected length of stay; rather, this information may be inferred from the physician’s standard medical documentation, such as his or her plan of care, treatment orders, and physician’s notes.”
3. In the FY 2016 OPPS, Section XV, “One commenter ex-pressed concern that the proposed policy could create an opportunity for gaming by creating a market for independent parties to create and sell exception letters to hospitals that could be used to inappropriately document case-by-case exceptions to the Two-Midnight Rule.” In response, CMS commented, “We would expect such circumstances to be supported in the medical documentation, which would be subject to medical review.”
4. According to CMS 1599-F, the treating physician “is in a unique position to incorporate complete medical evidence in a beneficiary’s medical records, and has ample opportunity to explain in detail why the expectation of the need for care spanning at least two midnights was appropriate in the  context of that beneficiary’s acute condition.”

Thus, the old process of criteria screen for level of care followed by a non-treating physician review of medical necessity based upon risk of an adverse outcome is no longer applicable. Rather, the two-midnight process requires that the treating  physician’s order and documentation reflect the need for hospital services across two midnights, based upon reasonable standards of clinical care, in order for Medicare inpatient billing status to be considered appropriate. In addition, compliance efforts should be focused upon ensuring that treating physicians understand the two-midnight policy requirements and document appropriately in the chart to support the level of billing status requested by physician order. The compliance process should be internally self-audited on a regular and recurring basis and the process should not be focused solely on the transition of cases from observation to short stay in-patient status.  Rather, all high-risk areas, as identified by CMS and the OIG, should be continually evaluated through a compliant process.  Criteria screens and physician advisor reviews are tactics that alone do not beget compliance or revenue integrity –in fact, they often create non-compliance. Rather, case managers and physician advisors are but two components within a compliance and revenue integrity program that includes analysis of performance against key benchmarks, implementation of tactics focused on reducing non-compliant variance, and ongoing physician education, process remediation and iterative audit.

Thus, the OIG findings and the new regulatory guidance un-der the two-midnight hospital policy requires that hospitals pursue a top-to-bottom reassessment and redesign of their approach to Medicare billing compliance if that approach has not been assessed and modified post the two-midnight policy and/or continues to include the legacy pre-two-midnight policy tactics.

About the Author Dr. Joseph D. Zebrowitz is Founder and Co-Chief Executive Officer of Versalus Health and has led the team in the development of an innovative approach to 2-Midnight rule compliance.

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Footnotes

¹Office of Inspector General (OIG), Vulnerabilities Remain Under Medicare’s 2-Midnight Hospital Policy, OEI-02-15-00020, December 2016.

²CMS, “Reviewing Hospital Claims for Patient Status: Ad-missions On or After October 1, 2013” (03/12/14)