Regulatory Bulletins

Bulletin 01 – Inpatient Order Requirements

Versalus Health’s Comments on CMS’ Elimination of Burdensome Inpatient Order Requirements

In the FY 2019 IPPS Final Rule (CMS-1694-F), which is scheduled to be printed in the Federal Register on 8/17/18, CMS finalized its proposal to remove the requirement that a physician inpatient admission order must be present in the chart as a condition for payment for inpatient services. Specifically, CMS stated:

“…we are finalizing our proposal to revise the inpatient admission order policy to no longer require a written inpatient admission order to be present in the medical record as a specific condition of Medicare Part A payment. Specifically, we are finalizing our proposal to revise the regulation at 42 CFR 412.3(a) to remove the language stating that a physician order must be present in the medical record and be supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A.”

To better understand why CMS has made this decision, it is important to first understand the regulatory history of the requirement for an inpatient admission order. The requirement for a physician inpatient admission order to be on the chart dates back to the two midnight payment policy (the “Two-midnight rule”) established in the FY 2014 IPPS Final Rule (CMS-1599-F), enacted in October 2013, in which CMS stated:

“we [CMS] codified through regulations at 42 CFR 412.3 the longstanding policy that a beneficiary becomes a hospital inpatient if formally admitted policy that a beneficiary becomes a hospital inpatient if formally admitted pursuant to the order of a physician (or other qualified practitioner as provided in the regulations) in accordance with the hospital conditions of participation (CoPs). In addition, [CMS] required that a written inpatient admission order be present in the medical record as a specific condition of Medicare Part A payment.”

Prior to FY 2014, guidance regarding the physician inpatient admission order was of a more general nature and provided per the Medicare Conditions of Participation at 42 CFR 482.24 and its subparts, stating that:

“the medical record must contain information to justify admission and continued hospitalization, support the diagnosis, and describe the patient’s progress and response to medications and services” and “all orders, including verbal orders, must be dated, timed, and authenticated promptly by the ordering practitioner or by another practitioner who is responsible for the care of the patient only if such a practitioner is acting in accordance with State law, including scope-of-practice laws, hospital policies, and medical staff bylaws, rules, and regulations.”

In follow up to the FY 2014 IPPS Final Rule changes, CMS provided very tactically detailed sub-regulatory guidance regarding the inpatient admission order in the January 2014 document entitled, “Hospital Inpatient Admission Order and Certification.” Then, in the Medicare Benefit Policy Manual (MBPM), Chapter 1, Section 10.2, CMS gave guidance to auditors regarding how to evaluate the inpatient admission order. Specifically, CMS stated in the MBPM that when:

“the order to admit may be missing or defective…yet the intent, decision, and recommendation of the ordering practitioner to admit the beneficiary as an inpatient can clearly be derived from the medical record…contractors have been provided with discretion to determine that this information provides acceptable evidence to support the hospital inpatient admission.”

CMS’ current rationale for undoing its now five-year-old rule regarding the physician inpatient admission order was based upon its “experience” with its medical review auditors’ approach to interpreting the physician inpatient order guidance. Specifically, CMS stated in its FY 2019 IPPS Final Rule:

“despite the discretion granted to medical reviewers to determine that admission order information…is present in the medical record, some medically necessary inpatient admissions [were] being denied payment due to technical discrepancies with the documentation of inpatient admission orders. Particularly during the case review process, these discrepancies have occasionally been the primary reason for denying Medicare payment of an individual claim. We [CMS] note that when we finalized the admission order documentation [CMS] note that when we finalized the admission order documentation requirements in past rulemaking and guidance, it was not our intent that admission order documentation requirements should, by themselves, lead to the denial of payment for medically reasonable and necessary inpatient stay, even if such denials occur infrequently. It is our intention that this revised policy will properly adjust the focus of the medical review process towards determining whether an inpatient stay was medically reasonable and necessary and intended by the admitting physician rather than towards occasional inadvertent signature or documentation issues unrelated to the medical necessity of the inpatient stay or the intent of the physician.”

CMS has also made it very clear that this rule:

“does not change the requirement that, for purposes of Part A payment, an individual becomes an inpatient when formally admitted as an inpatient under an order for inpatient admission (nor that the documentation must still otherwise meet medical necessity and coverage criteria); only that the documentation requirement for inpatient orders to be present in the medical record will no longer be a specific condition of Part A payment.” In addition, CMS further stated that this “does not change the fact that hospitals are required to operate in accordance with appropriate CoPs.”

Practically and tactically, there are several reasons why hospitals should continue the practice of ensuring a clear physician inpatient admission order:


  • Clarity: If a patient is placed in observation and later becomes eligible to be billed under Part A, the hospital will be in the best position to defend the final billing status.
  • Timing: The inpatient order continues to be the “marker” for the formal start of an admission. Other rules such as the qualified stay SNF requirement and the 72 hour Part A billing guidance depend on the inpatient admission order to “set the clock.” For instance, a policy of eliminating the inpatient order would make it impossible to determine the presence of a qualified stay necessary for SNF services to be a covered Medicare benefit.
  • Compliance Audit Exposure: An oft-forgotten component of the two-midnight payment policy is the protection afforded under the two-midnight “Presumption.” CMS has directed its auditors to not audit claims in which there exist two midnights after an inpatient order has been written in the absence of evidence of systematic gaming or abuse, as such claims are “presumed” to be appropriate for payment under Part A. However, claims that meet the two-midnight “Benchmark,” in which two midnights of total care was provided but there may only be one or zero midnights after the inpatient admission order, are eligible for audit. By eliminating a physician inpatient order requirement, it would be impossible to differentiate between Presumption and Benchmark cases, resulting in 100% of claims now being eligible for audit.

It appears clear, and the FY 2019 IPPS Final Rule commentaries support that this rule will provide relief from many of the admission order administrative burdens imposed on providers (especially as it relates to the burden of the January 2014 sub-regulatory guidance). Verbal orders and resident physician orders, for example, should now clearly “start the inpatient clock” in cases where the requirement for inpatient care is supported by the entirety of the chart. Additionally, technical denials by auditors related to inpatient admission orders not being authenticated or cosigned until after discharge should become a non-issue moving forward. Finally, while this rule may renew the discussion of the “Admit to Case Management” protocol, it is important to recall that, well before 2014, CMS indicated they it did not approve of such protocols.

In conclusion, this rule change does not usher in a “new era” of UM practice. It does not create any changes to the two-midnight payment policy. It does not change the Part A requirements for an inpatient order. Nor does it change providers’ responsibilities under the Medicare Conditions of Participation. Rather, it returns us to the reasonable inpatient admission order guidance that existed before 2014, where a claim’s appropriateness for inpatient reimbursement under Part A was based upon the entirety of the chart and not solely on the basis of a technically deficient, unauthenticated, or missing physician inpatient admission order. Practically, hospitals should continue to do what they’re doing in their efforts to ensure compliant Medicare billing processes per two-midnight payment policy and all other regulatory requirements.



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