Which is a review of medical necessity for inpatient care prior to the patients admission?

Get patient status correct up front to avoid financial repercussions

Inappropriate status hurts patients as well as the facility

As hospitals experience an increasing number of audits for medical necessity of admission, it's more important than ever to make sure that patients are in the appropriate status and that the medical record contains the documentation to support the status, says Deborah Hale, CCS, president and CEO of Administrative Consultant Services LLC, a health care consulting firm based in Shawnee, OK.

Hale recommends taking a proactive and robust approach to ensuring that the patient status is correct.

"Hospitals are no longer in the position of being able to wait as long as 24 hours after admission to review patients for medical necessity. If hospitals are going to avoid improper payments, they have to look at medical necessity issues up front," she says.

According to the Centers for Medicare & Medicaid Services (CMS), 40% of overpayments ($391 million) found by the Recovery Audit Contractors (RAC) during the pilot project came from denials of medical necessity of admission, which means that the hospital had to pay back the entire DRG payment, Hale says.

Improper coding without complete documentation accounted for 35%, for a total of $331.8 million.

Delaying RAC implementation

CMS has delayed implementation of the RAC audits but still expects to reach its target of expanding the program to all 50 states by 2010. In addition, the agency is rolling out three other auditing initiatives that will examine hospital billing. These include: Medicare Administrative Contractors (MACs), Comprehensive Error Rate Testing (CERT), and Zoned Program Integrity Contractors (ZPICs).

"Hospitals need to take significant steps to avoid having significant recoupment as they experience an increasing number of audits for medical necessity of admission," Hale says.

The Medicare Benefits Policy Manual mandates that patient status must be determined by the physician and documented in the physician order, points out G. Paul Stec, MD, physician director of utilization and care management at Christus St. Vincent Regional Medical Center in Santa Fe, NM.

"At the same time, physicians are not trained in this area, nor does the selection of a status significantly impact the physician's treatment plan, billing, or payment. All hospitals face the challenge of documenting the proper status for the admission of patients, whether it's for an observation stay, an inpatient stay, or outpatient treatment," Stec says.

Medicare doesn't say that case managers can't help a physician decide the status. In fact, CMS expects case managers to be involved in the decisions on patient status, Hale adds.

The RACs focused on one-day stays, but that doesn't mean that hospitals should substitute observation for one-day stays or medically inappropriate admissions, she says. Some short stays should be outpatient without the observation designation, she adds.

"Hospitals should spend the time and effort necessary to ensure that observation status is used appropriately. Don't let your goal be to eliminate all one-day stays. Let the goal be to eradicate medically unnecessary admissions," Hale says.

Can be dangerous not to use observation status

It's dangerous not to use observation status when it is appropriate, because it can raise a red flag for review if hospitals have a high rate of one-day stays, Hale points out.

"It also results in a lower case-mix index, affects the length-of-stay average, and the average cost of care," she adds.

Hospitals should be cautious about overusing observation status since the payment for observation status is not enough to compensate for the care of complex patients.

"If patients don't strictly meet inpatient screening criteria but their medical condition requires more than 24 hours of inpatient care, they may be appropriately admitted to observation and stay in observation status for days if the hospital does not have an effective process for physician advisor determination of inpatient admission necessity. This is not a good situation because of the low reimbursement associated with observation status," Hale says.

Inappropriate use of observation status when inpatient admission is appropriate can have a dire effect on the patient's responsibility for care since it may result in the loss of the three-day qualifying stay for skilled nursing coverage, she adds.

In addition, patients have to pay multiple copay amounts when they are in observation status. If they are in observation status for a long time and have a lot of diagnostic work-ups, it could result in a significant out-of-pocket expense, she points out.

"If you don't get patient status correct from the beginning, you can never entirely fix the problem. You can only manage it," Stec says.

For instance, a patient is placed in observation but is converted to inpatient status after two days in observation, then is discharged two days later. The patient has been receiving hospital services for a total of four days, but since the inpatient length of stay didn't begin until he or she was admitted as an inpatient, as far as Medicare is concerned, the length of stay is two days for a condition with a geometric mean length of stay of four days. If the patient receives post-hospital services, such as home health, inpatient rehabilitation, or inpatient psychiatric care, the hospital receives only the transfer DRG payment, Stec says.

Should skilled nursing care be required, the patient will not qualify as he or she does not have a three-day qualifying stay necessary for Medicare to pay for the skilled nursing facility.

In addition, Medicare's mandate that patients be fully informed of their financial responsibility gets more complicated when the patient status changes.

Using Condition Code 44

If a patient is admitted as an inpatient and the next day the case manager reviews the case and determines that the patient did not meet admission criteria, the case can be converted from inpatient to observation by using Condition Code 44, Stec points out.

"But then the patient has to be informed of his financial responsibility, which is likely to be higher. It's not a great public relations move to go to a patient's room and tell him you're going to charge him more for the same services for a reason he can't understand," he adds.

Changing the status using Condition Code 44 is complicated and time-consuming because Medicare requires that both the admitting physician and the utilization review physician have to agree on the status, Stec says.

Case managers should keep in mind that only a physician can make the judgment that a patient is not appropriate for admission, Hale says.

"The sicker a patient is, the easier it is to determine the admission status. It gets tricky when there is a question of whether the care can be delivered in the outpatient setting or if they need to be in the emergency department a little longer than usual," Stec says.

Admission screening criteria, such as InterQual and Milliman, are date that the nonphysician reviewer can use to approve the admission but it cannot be used to deny an admission, Hale says.

CMS states in the Medicare Benefit Policy Manual that physicians should consider a number of factors before deciding to admit a patient. Those include:

• the severity of signs and symptoms exhibited by the patient;
• the patient's medical history and current medical needs that influence the length of stay;
• the medical predictability of something adverse happening to the patient.

Physicians also should consider the types of facilities available to inpatients and outpatients, the hospital's by-laws and admission policies, and the appropriateness of treatment in each available setting.

This is where case managers can help ensure that the hospital is reimbursed for the admission by making certain that any safety factors that may play into that decision are documented in the record, Hale says.

"Physicians can't take social issues into account unless they affect patient safety. The medical record should have good documentation about the patient's living circumstances and why their care has to be managed in an inpatient and not an outpatient setting," Hale says.

Patients also may be admitted as an inpatient if they need diagnostic studies that are not readily available at the time and place the patients present and it would be unsafe to discharge patients and perform the test later as an outpatient, Hale points out.

Case managers should make sure that the documentation clearly supports the medical necessity for admission, Hale says.

For instance, if the patient lives alone with no available caregivers and treatment in the outpatient setting would jeopardize the patient's safety, make sure that information is included in the documentation.

Case managers also should make sure that the documentation reflects the failure of outpatient management and the relationship between the current and previous admissions.

Past medical history can have a big effect on medical necessity, Hale says.

For instance, a patient with chronic obstructive pulmonary disease (COPD) who presents with wheezing may need steroids and breathing treatment for less than 24 hours and is appropriate for observation or outpatient treatment.

A different patient with the same symptoms who has end-stage COPD and has been on mechanical ventilation recently may be appropriate for an inpatient admission.

Documentation should reflect the difference, Hale says.

"Patients who are admitted to observation should have signs and symptoms that indicate the need for diagnostic testing and a treatment plan," she says.

Many hospitals that are dealing with throughput issues may use a four-hour benchmark when a patient can be treated in the emergency department and when he or she needs to be moved to observation.

"When the hospital staff evaluate patients who are potential for observation, they should determine if the patient needs at least eight additional hours of care once their emergency department care has been completed," Hale suggests.

It is important to have a formal admission order that specifies if a patient is admitted as an inpatient or placed in observation status, she says.

The physician's order for observation status must be written, dated, and timed before the hours for observation service can be counted, Hale says.

"The order for inpatient care must be stated as such, dated and timed by the physician. The time and date of an inpatient admission cannot be backdated," Hale says.

Physicians must have a reasonable expectation that a patient who is placed in observation will require more than 24 hours of care in order to issue the order for inpatient admission, Hale says.

"Even if the patient doesn't stay 24 hours, inpatient admission is appropriate if that's what the physician believed when he or she made the decision," she says.

(For more information, contact Deborah Hale, President and CEO, Administrative Consultant Services LLC, e-mail: [email protected].)

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