Report on Medicare Compliance: Reviewing Admissions Too Soon Creates Risk, Some PAs Say

Volume 26, Number 24 • July 3, 2017

Weekly News and Compliance Strategies on CMS/OIG Regulations, Enforcement Actions and Audits

Published by the Health Care Compliance Association, Minneapolis, MN • 888.580.8373 •


Report on Medicare Compliance

Reviewing Admissions Too Soon Creates Risk, Some PAs Say

The way certain physician advisers see it, reviewing admissions of traditional Medicare patients on the first day is not only a waste of time, it can create risk. That flies in the face of conventional wisdom under the two-midnight rule, which is why hospitals may have trouble letting go of first-day reviews.

Partly it’s because many hospitals are still wedded to admission screening criteria, such as InterQual and MCG, which have limited use with fee-for-service Medicare patients under the time-based two-midnight rule, says Tom McCarter, M.D., executive vice president and chief medical officer of Versalus Health in Newtown Square, Pa.

Suppose a patient presents to the hospital and the physician writes an inpatient order because there’s an expectation of a two-midnight stay. The case manager applies admission screening criteria, which supports observation, and asks the physician to change the status to observation. The patient is informed and receives a Medicare Out-patient Observation Notice (MOON) with the use of condition code 44. All seems right with the world.

But when the second midnight rolls around and the patient is still in the hospital, the case manager returns to the physician to change the order back to inpatient, confusing the physician and the patient. “It’s bad to have the utilization review process look like it’s run by the Keystone Cops. It undermines confidence in the process,” says Joseph Zebrowitz, M.D., co-chief executive officer of Versalus Health. “The first principle of utilization review should be the same as medicine: first do no harm.”

There would be less chaos if the hospital skipped a beat before reviewing, he says. “Consider reviews on day two instead of day one to determine correct patient status,” McCarter says. “You may have better visibility after one midnight has passed. ” The continued use of admission-screening tools with fee-for-service Medicare patients also is a concern. When Medicare shifted to a time-based standard under the two-midnight rule—CMS said Part A payments generally would be made for medically necessary hospital stays that crossed two midnights—it made level-of-care reviews and the screening-admission tools irrelevant, some physician advisers say. (InterQual and MCG are useful for admission decisions with Medicare Advantage and commercial insurers, which generally don’t abide by the two-midnight rule.)

CMS hasn’t been coy about this. In the 2014 inpatient prospective payment system regulation that created the two-midnight rule, CMS said “It is not necessary for a beneficiary to meet an inpatient ‘level of care,’ as may be defined by a commercial screening tool, in order for Part A payment to be appropriate.”

Only Some Cases Require Pre-Billing Review

There’s reluctance, however, to adopt new methods to review admissions, Zebrowitz  says. “The two-midnight rule was a complete sea change for hospitals, but most hospitals are still looking at all cases the same way,” he says. Instead of treating all cases the same, the review process should use the right approach at the right time and ask the right questions, Zebrowitz  and McCarter say.

As the HHS Office of Inspector General emphasized in a December 2016 report on the two-midnight rule (OEI-02-15-00020), hospitals still have too many short inpatient stays and long observation stays, even though reducing them was the goal of the two-midnight rule. It’s more effective, they say, to break down dis-charges into two categories—cases that require real-time utilization review/physician review and cases that are best managed through retrospective analytics and auditing—and customize patient-status reviews accordingly:

(1) Inpatient admissions lasting less than two mid-nights and observation stays that are not discharged after the first midnight. Zebrowitz says it’s more effective to manage these cases through a real-time utilization re-view process. “We know these cases are prone to error. In the case of the long-stay observation patients, consideration of a change to inpatient should occur while the patient is still in the hospital. For short inpatient stays, review pre-billing is most appropriate,” he says.

(2) Inpatient admissions lasting longer than two mid-nights and observation stays lasting less than two mid-nights. Although these cases are less prone to error, they should still be evaluated by the utilization management committee using analytics and sampling methodology approved in the hospital’s conditions of participation. “In general, spending time reviewing these cases during the hospitalization is not helpful at best and creates more risk at worst. Reviewing using analytics and sampling after the fact allows for more complete review because you generally have more complete information,” he says.

With Gaming, Look for Patterns

For example, in the low-risk population, hospitals are supposed to monitor for gaming, Zebrowitz says. Gaming refers to keeping patients in the hospital for two midnights to get the Part A payment, even though the patient is safe for discharge. That happens here and there for various reasons—including physicians who don’t understand the two-midnight rule or try to accommodate patients and their families—but a pattern of medically unnecessary two-midnight stays to increase the bottom line is gaming, Zebrowitz says. “You’re not going to be able to tell that if you do a transactional review of one case,” he says.

A better approach: case managers would work with data analysts to determine physician- and diagnosis-based outliers needing more investigation, he says. For example, hospitals could look at physicians who have a greater-than-expected number of two-midnight stays considering their case mix or resource utilization. “This may be easier said than done, but allows you to identify the doctors whose practice patterns may suggest gaming,” Zebrowitz says. But data are merely breadcrumbs; hospitals have to audit charts to confirm or dismiss the variance and allow the utilization review department to decide a plan of action. It’s not something that should be overlooked, however. CMS said in the 2016 outpatient prospective payment system regulation that gaming represents a considerable risk to Medicare, and that it’s being monitored by the comprehensive error rate testing (CERT) contractor and First-Look Analysis Tool for Hospital Outlier Monitoring (FATHOM), a program under the CMS Division of Data Analysis.

The other thing that isn’t helping hospitals with two-midnight rule compliance is the use of physician adviser letters, McCarter and Zebrowitz say. Physician advisers (internal or external) may prepare a summary of the case to support the inpatient or outpatient opinion of the treating physician. “This documentation is often different from the documentation in the medical record provided by the treating physician, which CMS refers to as the ‘certifying physician’” in the Medicare Benefits Policy Manual, he says. If there isn’t documentation from the treating physician of his or her expectation of a medically necessary two-midnight stay, a physician adviser letter can’t compensate for it and may be perceived by CMS as an attempt at gaming, McCarter and Zebrowitz say.

This article, published in Report on Medicare Compliance , appears here with permission from the Health Care Compliance Association. Call HCCA at 888-580-8373 with reprint requests or email us at

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