Regulatory Bulletins

Bulletin 06 – CMS Waivers to Utilization Review Conditions of Participation

Versalus Health’s Comments on CMS’ Waivers to Utilization Review Conditions of Participation

On March 30, 2020, the Centers for Medicare and Medicaid Services (CMS) published additional blanket waivers in response to the COVID-19 pandemic. There are a number of significant changes affecting hospitals, but the one we received immediate questions about was the elimination of the Utilization Review (UR) Conditions of Participation (CoPs):

“Utilization Review: CMS is waiving certain requirements under 42 CFR §482.1(a)(3) and 42 CFR §482.30 which address the statutory basis for hospitals and includes the requirement that hospitals participating in Medicare and Medicaid must have a utilization review plan that meets specified requirements.”

“CMS is waiving the entire utilization review condition of participation Utilization Review (UR) at §482.30, which requires that a hospital must have a UR plan with a UR committee that provides for a review of services furnished to Medicare and Medicaid beneficiaries to evaluate the medical necessity of the admission, duration of stay, and services provided. These flexibilities may be implemented so long as they are not inconsistent with a state’s emergency preparedness or pandemic plan. Removing these administrative requirements will allow hospitals to focus more resources on providing direct patient care.”

Source: March 30, 2020, Summary of COVID-19 Emergency Declaration Waivers & Flexibilities for Health Care Providers,, retrieved from:

So, what does this mean for UR departments? Does it mean that no more utilization review should occur? Does it mean that the 2-midnight rule is no longer in effect? How about Condition Code 44 – do we need 2 doctors on the UR committee involved in the decision?

In considering the impact of this waiver, it is important to keep in mind one key concept – the temporary waiver of the UR standards under the CoPs is not permission to haphazardly determine admission status and bill incorrectly. It is also not the time to simply status all beneficiaries as inpatients. Such behavior would draw the attention of program integrity contractors, the Office of the Inspector General, and the Department of Justice who have the right at any time to intervene due to concerns of potentially fraudulent billing regardless of any waivers. Moreover, while the temporary waivers reduce the current burdens on hospitals under the emergency declaration, they do not prevent QIOs, MACs, RACs, CERTs, ZPICs, UPICs from evaluating these claims in the future. Importantly, although the UR requirements have been waived, the Medicare guidance regarding payment – the 2-midnight rule – remains in effect. In waiving the UR standards under the CoPs, CMS is giving hospitals latitude in their process for ultimately submitting a correct claim.

Recommended Process

UR departments should determine how to be most efficient in achieving the waiver goal. Versalus Health’s recommendation is to focus UR processes as follows:

  1. Short-stay inpatient cases (those inpatients who are discharged prior to receiving 2 midnights of hospital services after formal inpatient admission supported by a written inpatient order): These cases require regular UR team review because they have a high likelihood of error.
    1. UR teams should assess these encounters, after discharge and within timely filing, to determine whether an exception exists that would make Part A payment appropriate, including:
      1. The case meets the CMS definition of a Benchmark case, when the time spent providing outpatient services prior to the Inpatient order, or at a transferring facility is appropriately considered
      2. The case involves a procedure on the Secretary’s list of “Inpatient Only” procedures
  • The case involves a CMS-identified, national exception to the 2-midnight rule due to the new initiation of mechanical ventilatory support for respiratory failure
  1. The case includes very specific documentation supporting a case-by-case exception
  2. The case involves unforeseen circumstances interrupting a reasonable expectation of a 2 midnight stay documented in the medical record which may include, but are not limited to: death, transfer to another hospital, departure against medical advice, unexpected clinical improvement, and election of hospice in lieu of continued treatment in the hospital.
  1. Of course, with COVID-19, it becomes very important to see if there is documentation of a reasonable expectation of a 2 midnight stay. It is important to get this claim correct to ensure both Medicare compliance and the correct beneficiary financial responsibility.
  1. Observation cases approaching a second midnight: These cases need daily UR team review because they may be appropriate for inpatient status, and the revenue from correctly capturing these cases has never been more important for hospitals. Discharging a beneficiary from the hospital who is inappropriately statused as an outpatient is the worst utilization management error a hospital can make because this is an “irreversible error” which cannot be corrected after discharge.

For the remainder of the cases, (observation cases staying less than 2 midnights and inpatient cases staying 2 or more midnights) which are, in general, at lower risk for error, instead of performing time-consuming daily UR review, consider a program that analytically identifies and audits these cases periodically based upon variables associated with a higher risk for error (e.g., inpatient cases staying 2 midnights that are discharged on a Monday with resource utilization that is significantly lower than what would be expected for the DRG) and corrects errors after discharge. Use of this process will identify and correct errors that will allow your hospital to maintain its protections under the 2-midnight Presumption and preclude Presumption cases from auditor review. It will also allow for the correction of inappropriate inpatient admissions post discharge using the Part B correction process.

Not only is the above UR process in alignment with the intent of the waiver to avoid wasting patient care time on paperwork, but also, in preparation for when the waiver is rescinded, this efficient process is already compliant with the UR standards of the CoPs.

Should we use screening criteria/level of care tools to determine patient status?

We also recommend dispensing with screening criteria or level of care tools or other “risk assessment tools” in determining Medicare admission status and applying the 2-midnight rule as it is written. This is particularly important in COVID-19 cases where a patient may require medically necessary hospital services for greater than 2 midnights and meets inpatient criteria under the 2-midnight rule, even though the intensity of service may not satisfy proprietary UR screening criteria which are not determinative of medical necessity by CMS (e.g., a COVID-19 patient in hospital quarantine or awaiting transfer to a skilled facility).

How about Condition Code 44?

Since requirements for the UR committee to be involved have been temporarily waived by CMS under the emergency declaration waiver, if a case is identified as appropriate for a change from inpatient admission to observation status, ask the treating physician to change the order. The billing for such a case can then be managed through the Condition Code 44 process. But remember, incorrect inpatient status can also be corrected through the Part B correction process after discharge when care is complete and all of the facts of the case are clear.

These recommendations allow the UR process to run efficiently, eliminating about 75-80% of real time UR team reviews, and are consistent with the goals of the waiver, which are to “allow hospitals to focus more resources on providing direct patient care.” Again, we remind you that the waiver of the UR standards does not eliminate your requirement to correctly and compliantly determine and bill admission status.

The current waiver of UR standards is not an excuse for lack of compliance in decision-making. Rather, the waiving of these “process requirements” allows UR leaders the opportunity to optimize the use of resources during this emergency. Happily, this optimization can be achieved in a manner that already meets the UR standards of the CoPs and provides long-term process solutions for UR departments well after the COVID-19 pandemic becomes history.

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