The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers

Transcription

1 AIS s Management Insight Series The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers Adapted from an AIS webinar presented by Abby Pendleton, Esq. Founding Partner The Health Law Partners, P.C. Jessica L. Gustafson, Esq. Founding Partner The Health Law Partners, P.C. Edited by Frances Fernald, Managing Editor, AIS GC3C04R

2 AIS s Management Insight Series is designed to provide practical solutions to complex business challenges with the help of the industry s most insightful advisors and managers. See a full list of titles in this series at Other Related Publications from AIS Report on Medicare Compliance Report on Patient Privacy Call , or visit the MarketPlace at for a catalog of AIS books, newsletters, Webinars, Web and looseleaf services, and other information products. This publication is designed to provide accurate, comprehensive and authoritative information on the subject matter covered. However, the opinions contained in this publication are those solely of the authors and not the publisher. The publisher does not warrant that information contained herein is complete or accurate. This book is published with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice or other expert assistance is required, the services of a competent person should be sought. ISBN: Copyright 2014 by Atlantic Information Services, Inc. All rights reserved. No part of this publication may be reproduced, stored on a retrieval system or transmitted by any means, electronic or mechanical, including photocopying and transmittal by FAX, without the prior written permission of Atlantic Information Services, Inc. For information regarding individual or bulk purchases, contact Atlantic Information Services, Inc., th Street, NW, Suite 300, Washington, DC ( ; ).

3 Table of Contents Introduction... 1 Structure of This Report... 1 Monitor the CMS Web Page... 2 Part I: The Two-Midnight Rule, Physician Orders and Certifications: The New Requirements for Medical Necessity and Payment... 3 Physician Acknowledgment Statements... 4 Physician Orders and Certifications... 5 Orders... 5 Certifications The Two-Midnight Rule Part II: Expert Questions and Answers Orders and Certifications The Two-Midnight Rule Part III: Articles from AIS s Report on Medicare Compliance on the Two-Midnight Rule RACs to Back Off Longer Stays as Two-Midnight Standard Survives in IPPS Rule Breaking Down the New Two-Midnight Rule Physician Certifications Take Center Stage as Hospitals Plan for Two-Midnight Rule CMS Eases Up on Physician Certifications Under IPPS; Will Its Auditors Follow Suit? Example of Certification for Two-Midnight Stay CMS s Plan to Package Far More Outpatient Services Plays Into the Two-Midnight Rule Two-Midnight Stays May Be Audited Due to the Separation of Part A and Part B Claims Two-Midnight Rule Is Still in Flux; No Magic Words Are Needed in Certification Part IV: CMS Regulations and Guidance C.F.R , , and : Regulatory Language Relating to the Two-Midnight Rule and Physician Orders and Certification C.F.R : Regulatory Language Relating to the Part B Inpatient Billing Preamble, Hospital Inpatient Prospective Payment Systems for Acute Care Hospital, 78 Fed. Reg , (Aug. 19, 2013) CMS: Frequently Asked Questions: 2 Midnight Inpatient Admission Guidance & Patient Status Reviews for Admissions on or after October 1,

4 CMS: Hospital Inpatient Admission Order and Certification CMS: Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, CMS: Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, CMS: MLN Matters MM CMS: MLN Matters SE CMS: Special Open Door Forum Transcript, Aug. 15,

5 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 1 Introduction In an effort to reduce the number of medical necessity denials by Medicare contractors for inpatient admissions and the number of appeals of the denials, the Centers for Medicare and Medicaid Services (CMS) has implemented a set of admission guidelines, known as the two-midnight rule. The agency also set forth new documentation requirements for physicians, which, if not followed, will result in a claim denial for the hospital. These policies were finalized in the 2014 Inpatient Prospective Payment System (IPPS) final rule, published in 78 Fed. Reg (Aug. 19, 2013). According to CMS, its actuaries estimate that the two-midnight rule will increase IPPS expenditures by approximately $220 million. These additional expenditures result from an expected net increase of approximately 400,000 hospital inpatient encounters, due to some encounters spanning more than two midnights moving to the IPPS from the Outpatient Prospective Payment System, and approximately 360,000 encounters of fewer than two midnights moving from the IPPS to the OPPS for a net shift of 40,000 encounters (78 Fed. Reg ). This report is based on a webinar presented on September 26 by AIS titled CMS s New Two-Midnight Rule for Inpatient Admissions: Strategies for Hospital Compliance. The presenters were Abby Pendleton, Esq., and Jessica L. Gustafson, Esq., both founding partners in The Health Law Partners, P.C., based in Southfield, Mich. The narrative and documents included have been updated as CMS releases them. Structure of This Report This report is divided into four parts. Part I discusses the new documentation requirements and the two-midnight rule. Part II presents questions and answers from the September 26, 2013 AIS webinar on the two-midnight rule. Part III reproduces articles from AIS s Report on Medicare Compliance on the two-midnight rule. Part IV contains the full text of the regulatory provisions and the relevant sections from the preamble to the final rule, as well as subregulatory guidance and other primary documents. Throughout the report, pertinent provisions of the regulations are reproduced, and CMS s statements and clarifications in the preamble are quoted. The Federal Register citation identifies the page number where the CMS clarification appears in the 2014 IPPS final rule. Other citations to the final rule appear within the text to identify where the issue is discussed.

6 2 AIS s Management Insight Series Monitor the CMS Web Page The two-midnight rule is still evolving. CMS has scheduled additional open door forums and training sessions on the topic ( and has announced that it will continue to update its Web page on inpatient hospital reviews with additional guidance (

7 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 3 Part I: The Two-Midnight Rule, Physician Orders and Certifications: The New Requirements for Medical Necessity and Payment CMS s two-midnight rule originated in the 2014 Inpatient Prospective Payment System (IPPS) final rule, published on August 19, 2013 (78 Fed. Reg ). The requirements of the rule became effective on October 1, 2013; however, CMS delayed enforcement by both the Medicare administrative contractors (MACs) and the recovery auditors (RACs) first for 90 days, then for 180 days, until March 31, On January 31, 2014, CMS again delayed full enforcement until October 1, 2014 (see com/lojmp4p). The two-midnight rule actually is a set of admission guidelines for hospitals to use to determine whether to admit a patient for inpatient care. The guidelines, as well as the physician order and certification requirements, apply to short-term acute care hospitals and also to critical access care hospitals unless otherwise noted. The guidelines established the policy that if a patient remains, or in the physician s judgment would remain, in the hospital as an outpatient for two midnights, the patient may be admitted as an inpatient, and CMS and its contractors will give deference to the admission as medically necessary. Physicians also will have to follow new requirements if the hospital wants to receive payment under Part A for its inpatients. The rule spells out specific requirements for physician acknowledgments regarding Medicare coverage requirements and inpatient admission orders and certifications of the necessity of the admission, which would attest to the need for the patient remaining for two midnights. The challenge of ensuring that the proper documentation is on file or in the medical record will fall to the hospital if it wants to get paid. So there is a lot riding on understanding and implementing the new requirements. CMS continues to issue guidance on many of the gray areas and has set up a special address for hospitals and providers to submit questions regarding the new admission guidelines and requirements: u ippsadmissions@cms.hhs.gov It also has established a separate Web page for all postings regarding the two-midnight rule: u Medical-Review/InpatientHospitalReviews.html or u

8 4 AIS s Management Insight Series Physician Acknowledgment Statements Medical review requirements. Regulatory Language (a) Physician acknowledgement. (1) Basis. Because payment under the prospective payment system is based in part on each patient s principal and secondary diagnoses and major procedures performed, as evidenced by the physician s entries in the patient s medical record, physicians must complete an acknowledgement statement to this effect. (2) Content of physician acknowledgement statement. When a claim is submitted, the hospital must have on file a signed and dated acknowledgement from the attending physician that the physician has received the following notice: Notice to Physicians: Medicare payment to hospitals is based in part on each patient s principal and secondary diagnoses and the major procedures performed on the patient, as attested to by the patient s attending physician by virtue of his or her signature in the medical record. Anyone who misrepresents, falsifies, or conceals essential information required for payment of Federal funds, may be subject to fine, imprisonment, or civil penalty under applicable Federal laws. (3) Completion of acknowledgement. The acknowledgement must be completed by the physician at the time that the physician is granted admitting privileges at the hospital, or before or at the time the physician admits his or her first patient. Existing acknowledgements signed by physicians already on staff remain in effect as long as the physician has admitting privileges at the hospital. Hospitals, even before the 2014 IPPS final rule, were required to have on file, signed and dated acknowledgment statements from attending physicians that they have received a notice and understand that Medicare payment to hospitals is based in part on the patient s principal and secondary diagnoses and the major procedures performed on the patient. The statements must include a sentence that physicians understand that they cannot misrepresent or falsify information. While the required acknowledgment in (a) is not new, CMS took the time to reiterate it as part of the final rule. Note that the acknowledgment must be signed when the physician is granted admitting privileges and by the time he or she admits his or her first patient. Once signed, the acknowledgments remain effective as long the physician has admitting privileges. It is important that hospitals renew their focus on this requirement, and if they don t already have these acknowledgment statements as part of the medical record or, what is more likely, in the hospital administrative files, they should make efforts to obtain these from all of the physicians with admitting privileges at the hospital. Hospitals should expect auditors to request to see these acknowledgments.

9 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 5 Physician Orders and Certifications For all inpatient hospital admissions, including admissions to an inpatient rehabilitation facility, CMS now requires a physician order to admit ( 412.3(a)) and a certification of the medical necessity of the admission. Without these, the hospital will not receive payment ( (a)) Admissions. Orders Regulatory Language (a) For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and (c), (c), and (a)(4)(iii) of this chapter for a critical access hospital. This 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. In addition to these physician orders, inpatient rehabilitation facilities also must adhere to the admission requirements specified in of this chapter. ****** (c) The physician order also constitutes a required component of physician certification of the medical necessity of hospital inpatient services under subpart B of Part 424 of this chapter. For a patient to be considered an inpatient, he or she must be formally admitted to the facility pursuant to an order for inpatient admission. The physician order is an essential element of the physician certification, and it also triggers the hour count for the two-midnight rule. Whether orders have been a prerequisite to Medicare payment has been a bit controversial. However, as of October 1, 2013, physician orders now are a condition of payment. Preamble, 78 Fed. Reg [O]ur longstanding policy, as reflected in our regulations and other guidance, has been that a physician order is required for all inpatient hospital admissions, regardless of the length of stay... In order to clarify this policy going forward, we are finalizing 412.3(a) to include that the order must be present in the medical record and supported by the physician admission and progress notes.

10 6 AIS s Management Insight Series As a general rule, an admission order must be in the medical record and supported by the physician admission and progress notes to receive payment. However, under rare circumstances, reviewers may pay a claim without an order. Preamble, 78 Fed. Reg In very rare circumstances, the order to admit may be missing or defective (that is, illegible or incomplete), yet the intent, decision, and recommendation of the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient can clearly be derived from the medical record. In these rare situations, we have provided contractors with discretion to determine that this information constructively satisfies the requirement that the hospital inpatient admission order be present in the medical record. However, in order for the documentation to provide acceptable evidence to support the hospital inpatient admission, thus satisfying the requirement for the physician order, there can be no uncertainty regarding the intent, decision, and recommendation by the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient, and no reasonable possibility that the care could have been adequately provided in an outpatient setting. This narrow and limited alternative method of satisfying the requirement for documentation of the inpatient admission order in the medical record should be extremely rare, and may only be applied at the discretion of the medical review contractor. Even in those circumstances, all requirements for the other components of the physician certification must be met. See also Hospital Inpatient Order and Certification, B.5 (Jan. 30, 2014). An order u May be made verbally or in writing; u Must include the word inpatient ; u Must be made at or before the time of the inpatient admission; u Must be made by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is knowledgeable about the patient s hospital course, medical plan of care, and current condition ; u Must identify the qualified ordering physician ; and u Must be in accordance with state law, including scope of practice laws, hospital policies, and medical staff bylaws, rules and regulations. 42 CFR 412.3(b)-(d) If the order is verbal, there still has to be an authentication signed, dated and timed prior to the patient s discharge by either the ordering practitioner or by another practitioner with the qualifications to sign an admitting order.

11 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 7 Hospital Inpatient Order and Certification, B2b (Jan. 30, 2014) Verbal orders At some hospitals, practitioners who lack the authority to admit inpatients under state laws and hospital by-laws (such as a registered nurse) may nonetheless enter the inpatient admission order as a verbal order. In these cases, the ordering practitioner directly communicates the inpatient admission order to staff as a verbal (not standing) order, and the ordering practitioner need not separately record the order to admit. Following discussion with and at the direction of the ordering practitioner, a verbal order for inpatient admission may be documented by an individual who is not qualified to admit patients in his or her own right, as long as that documentation (transcription) of the order for inpatient admission is in accordance with state law including scope-of-practice laws, hospital policies, and medical staff by-laws, rules, and regulations. In this case, the staff receiving the verbal order must document the verbal order in the medical record at the time it is received. The order must identify the qualified admitting practitioner, and must be authenticated (countersigned) by the ordering practitioner promptly and prior to discharge. (Please see (A)(2) for guidance regarding the definition of discharge time). A transcribed and authenticated verbal order for inpatient admission satisfies the order part of the physician certification as long as the ordering practitioner also meets the requirements for a certifying physician... The CMS guidance provides an example of an acceptable inpatient order written by a practitioner without the authority to admit that identifies the ordering practitioner. Hospital Inpatient Order and Certification, B2b (Jan. 30, 2014) Example: Admit to inpatient v.o. (or t.o.) Dr. Smith and Admit to inpatient per Dr. Smith would be considered acceptable methods of identifying the ordering practitioner and would meet the order requirement if they are appropriately authenticated by Dr. Smith. This method is also acceptable for residents and students who are not licensed or do not have privileges to admit inpatients, and may be used by all residents and fellows working within their GME program. If Dr. Smith meets the qualifications for a certifying physician, then the authentication of this order by Dr. Smith also meets the requirement for the order component of the certification. CMS in its guidance makes it clear that a standing order is not a substitute for an inpatient admission order. Hospital Inpatient Order and Certification, B2c (Jan. 30, 2014) Standing orders and protocols- The inpatient admission order cannot be a standing order. While Medicare s rules do not prohibit use of a protocol or algorithm that is part of a protocol, only the ordering practitioner, or a resident or other practitioner

12 8 AIS s Management Insight Series acting on his or her behalf under section (B)(2)(a) can make and take responsibility for the inpatient admission decision. Who Can Order Admissions? Admissions. Regulatory Language (b) The order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is knowledgeable about the patient s hospital course, medical plan of care, and current condition. The practitioner may not delegate the decision (order) to another individual who is not authorized by the State to admit patients, or has not been granted admitting privileges applicable to that patient by the hospital s medical staff. One of the issues that always comes up for orders and for certifications is which physicians are qualified to order and certify. It is important to note that the qualifications and requirements for the order are different from the certification. For the inpatient order, as specified in 412.3(b), the physician must have two qualifications: u The physician must be a qualified and licensed practitioner who has admitting privileges to the hospital as permitted by state law. u The physician must be knowledgeable about the patient s hospital course and medical plan for that particular admission and his/her current condition. The ordering physician does not have to be the one responsible for the patient s care as long as he or she meets the requisite admitting and knowledge requirements. 78 Fed.Reg With respect to which physicians are going to have appropriate knowledge of the patient, the ordering practitioner may be any of the following: u The admitting physician of record; u The attending physician or a physician on-call for him or her; u The primary or covering hospitalist caring for the patient in the hospital; u The beneficiary s primary care practitioner or a physician on-call for the primary care practitioner; or u A surgeon responsible for a major surgical procedure or a physician on-call for that surgeon. u Emergency or clinic practitioners or other practitioners qualified to admit who are caring for the patient at the point of inpatient admission decision.

13 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 9 Hospital Inpatient Order and Certification, B2 (Jan. 30, 2014) The ordering practitioner makes the determination of medical necessity for inpatient care and renders the admission decision. The ordering practitioner is not required to write the order but must sign the order reflecting that he or she has made the decision to admit the patient for inpatient services. CMS s guidance makes clear that without a direct patient care role, a member of the hospital s utilization review committee is not going to meet the qualifications for having the requisite knowledge of the patient to complete an inpatient order, although a physician member of the utilization review committee may be the one that signs off on the certification. Hospital Inpatient Order and Certification, B3 (Jan. 30, 2014) Although a utilization review committee physician may sign the certification on behalf of a non-physician admitting practitioner, a practitioner functioning in that role does not have direct responsibility for the care of the patient and is therefore not considered to be sufficiently knowledgeable to order the inpatient admission. The order must be written by one of the...practitioners directly involved with the care of the beneficiary, and a utilization committee physician may only write the order to admit if he or she is not acting in a utilization review capacity and fulfills one of the direct patient care roles, such as the attending physician. CMS guidance also explains that nonphysician practitioners (e.g., medical residents, physician assistants (PAs), registered nurses (RNs)) may act as a proxy for the ordering physician and write the admitting orders defining the patient s initial inpatient care under certain conditions: u They are authorized by the state and by the hospital policies to admit inpatients; and u The ordering physician approves and accepts the responsibility for the admission decision by countersigning the order prior to discharge. The countersigned order satisfies the order part of the physician certification, as long as the ordering practitioner also meets the requirements for a certifying physician. Hospital Inpatient Order and Certification, B (Jan. 30, 2014) This process may also be used for physicians (such as emergency department physicians) who do not have admitting privileges but are authorized by the hospital to issue temporary or bridge inpatient admission orders.

14 10 AIS s Management Insight Series Content of Order The order to admit must contain the instruction that the patient should be formally admitted for hospital inpatient care. According to the preamble to the final rule, the order must specify inpatient or inpatient services. Preamble, 78 Fed. Reg [W]e are providing that, for payment of hospital inpatient services under Medicare Part A, the order must specify the admitting practitioner s recommendation to admit to inpatient, as an inpatient, for inpatient services, or similar language specifying his or her recommendation for inpatient care. Within the commentary to the final rule, CMS seemed to take the position that presence of the word inpatient was going to be a requisite element of the order. However, the CMS guidance seems to provide more flexibility. It states that the term inpatient is not necessarily required as long as an interpretation that an order to inpatient status is consistent with the remainder of the medical record. Hospital Inpatient Order and Certification, B5 (Jan. 30, 2014) The preamble of the FY 2014 IPPS Final Rule at 78 FR specifies that, the order must specify the admitting practitioner s recommendation to admit to inpatient, as an inpatient, for inpatient services, or similar language specifying his or her recommendation for inpatient care. While we are not requiring specific language to be used on the inpatient admission order, we believe that it is the interest of the hospital that the admitting practitioner use language that clearly expresses intent to admit the patient as inpatient that will be commonly understood by any individual that could potentially review documentation of the inpatient stay. We do not recommend using language that may have specific meaning individuals that work in the hospital (e.g. admit to 7W ) that will not be commonly understood by others. Treatment of such admission orders as properly inpatient is consistent with CMS historical interpretation of inpatient admission orders and hospitals historical standards of practice. However, if the usage of the order to specify inpatient or outpatient status is ambiguous, the hospital is encouraged to obtain and document clarification from the physician before initial Medicare billing (ideally before the beneficiary is discharged). Under this policy, CMS will continue to treat orders that specify a typically outpatient or other limited service (e.g., admit to ER, to Observation, to Recovery, to Outpatient Surgery, to Day Surgery, or to Short Stay Surgery ) as defining a non-inpatient service, and such orders will not be treated as meeting the inpatient admission requirements. As stated in the CMS guidance, language indicating a service that is typically provided on an inpatient basis will be considered a specified admission to inpatient status, provided the interpretation is consistent with the remainder of the medical record.

15 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 11 If the order is at all ambiguous, the hospital should obtain clarification from the physician before submitting a claim. Despite CMS s guidance, it is highly advisable that orders for inpatient status include the word inpatient. There is no reason to have a situation where the hospital is going to be arguing cases with the RAC in front of an administrative law judge (ALJ) to discuss this issue when the hospital can avoid it by ensuring the presence of one word. Timing of the Order Admissions. Regulatory Language (d) The physician order must be furnished at or before the time of the inpatient admission. The timing of the order is the critical factor in determining when a patient becomes an inpatient, and as such, impacts how a claim is reviewed under the two-midnight standard. As is the case with who can sign the order, when the order must be completed is different than for certifications. Under 412.3(d), which was added by the final rule, the order must be furnished at or before the time the patient is admitted. Preamble, 78 Fed. Reg [T]he physician order reflects affirmation by the ordering practitioner that hospital inpatient services are medically necessary. However, the order serves the unique purpose of initiating the inpatient admission and documenting the physician s (or other qualified practitioner as provided in the regulations) intent to admit the patient, which impacts its required timing. Hospital Inpatient Order and Certification, B4 (Jan. 30, 2014) Timing: The order must be furnished at or before the time of the inpatient admission. The order can be written in advance of the formal admission (e.g., for a pre-scheduled surgery), but the inpatient admission does not occur until formal admission by the hospital. Conversely, in the unusual case in which a patient is formally admitted as an inpatient prior to an order to admit and there is no documented verbal order, the inpatient stay should not be considered to commence until the inpatient admission order is documented. Medicare does not permit retroactive orders or the inference of orders. Authentication of the order is required prior to discharge and may be performed and documented as part of the physician certification.

16 12 AIS s Management Insight Series Inpatient Rehabilitation Facilities, Orders and Certifications Inpatient rehabilitation facilities (IRFs) are paid under their own prospective payment system and have their own admission requirements and admission criteria that must be in the medical record. One of the requirements is that at the time a Medicare patient is admitted to an IRF, a physician must generate an admission order for the patient s care. Therefore, the requirements in mandating a physician order in the medical record to receive payment apply to IRFs. Preamble, 78 Fed. Reg [A]lthough the required physician orders... apply to all inpatient hospital admissions, including inpatient admissions to an IRF, they do not determine the timing of an IRF admission, nor are they used to determine whether the IRF admission was reasonable and necessary. These determinations are governed by the requirements in (a)(3), (4), and (5) of the regulations... However, due to the... inherent differences in the operation of and beneficiary admission to IRFs, such providers are excluded from the 2-midnight admission guidelines and medical review instruction... The Physician Admission Decision Preamble, 78 Fed. Reg We proposed that both the decision to keep the patient at the hospital and the expectation of needed duration of the stay would be based on such factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. In this final rule, we now are clarifying that risk (or probability) of an adverse event relates to occurrences during the time period for which hospitalization is considered. CMS emphasizes in the preamble to the final rule the factors the physician takes into account when making the decision to admit, as well as those considered by medical review. Preamble, 78 Fed. Reg Both the decision to keep the beneficiary at the hospital and the expectation of needed duration of the stay are based on such complex medical factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk (probability) of an adverse event occurring during the time period for which hospitalization is considered. In other words, if it was reasonable for the physician to expect the beneficiary to require a stay lasting 2 midnights, and that expectation is documented in the medical record, inpatient admission is generally appropriate, and payment may be made under Medicare Part A; this is regardless of whether the anticipated length of stay did not transpire due

17 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 13 to unforeseen circumstances such as beneficiary death or transfer (so long as the physician s order and certification requirements also are met). It also assures providers that the decision to admit is based on the information available at the time of admission. Preamble, 78 Fed. Reg We intend to ensure that our instructions to providers and reviewers alike emphasize that the decision to admit should be based on and evaluated in respect to the information available to the admitting practitioner at the time of the admission. CMS clarifies that a physician should assess risk with regard to the patient and the admission. Preamble, 78 Fed. Reg [D]ue to the nature of the Medicare population, coexisting or concurrent medical conditions are a frequent occurrence. As a result, admission decisions centered on risk must relate to current disease processes or presenting symptoms, and not merely be part of the beneficiary s benign or latent past medical history. We note that risk in common usage describes an unacceptable probability of an adverse outcome, as in risky behavior. We reiterate our stance that the decision to hospitalize a beneficiary is a complex medical decision made by the physician in consideration of various risk factors, including the beneficiary s age, disease processes, comorbidities, and the potential impact of sending the beneficiary home. It is up to the physician to make the complex medical decision of whether the beneficiary s risk of morbidity or mortality dictates the need to remain at the hospital because the risk of an adverse event would otherwise be unacceptable under reasonable standards of care, or when the beneficiary may be discharged home. Other factors mentioned are the procedures that will be performed, the beneficiary s age, disease processes, comorbidities, the services or level of nursing care (for example, low-level, monitored, or one-on-one) the beneficiary will require, the area of the hospital most appropriate for care and the potential impact of sending the beneficiary home (78 Fed. Reg , 50947, 50948). However, admission is not appropriate for what CMS calls social admissions and admissions to avoid inconvenience, which are statutorily prohibited under 1862(a)(1)(A) of the Social Security Act (78 Fed. Reg ). Preamble, 78 Fed. Reg For those hospital stays in which the physician cannot reliably predict the beneficiary to require a hospital stay greater than 2 midnights, the physician should continue to treat the beneficiary as an outpatient and then admit as an inpatient if and when

18 14 AIS s Management Insight Series additional information suggests a longer stay or the passing of the second midnight is anticipated. The factors that lead a physician to admit a particular beneficiary based on the physician s clinical expectation are significant clinical considerations and must be clearly and completely documented in the medical record (78 Fed. Reg ). But CMS emphasizes that the level of care is not part of the admission guidelines, and in fact, specifically declined to exclude patients in the intensive care unit from the twomidnight rule (78 Fed. Reg ). If ICU patients do not stay for two midnights, they will be considered outpatients. Physicians (and medical reviewers) also may take into account evidence-based guidelines or commercial utilization tools (78 Fed. Reg ). However, as CMS pointed out during the Special Open Door Forum on August 15, 2013, InterQual and Milliman are just tools, they are not Medicare policy; the RACs and MACs [Medicare Administrative Contractors] and CERT [Comprehensive Error Rate Testing] use them, but they are not definitive; Medicare rules and regulations and coverage decisions are what is definitive, not the InterQual or Milliman. Therefore, even if these external guidelines conflict with the physician s assessment of the need for the patient to remain for two midnights, the admission should stand if the services the patient required were necessary. See also Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, E. (Jan. 31, 2014). Again, it is critical for the physicians to document precisely the reason for the decision to admit and to support the decision with details throughout the progress notes. Before discharge, physicians will have to certify to the medical necessity of the admission to receive Medicare Part A payment. Frequently Asked Questions Q4.1: What documentation will Medicare review contractors expect physicians to provide to support that an expectation of a hospital stay spanning 2 or more midnights was reasonable? A4.1: Review contactors expectations for sufficient documentation will be rooted in good medical practice. Expected length of stay and the determination of the underlying need for medical or surgical care at the hospital must be supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event, which Medicare review contractors will expect to be documented in the physician assessment and plan of care. CMS does not anticipate that physicians will include a separate attestation of the expected length of stay, but rather that 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.

19 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 15 Certifications Section is the regulatory provision addressing certifications. While the final rule presents the entire section, suggesting that there were major revisions to the language, in actuality the provision, which has been in place since 1988, is little changed except for the addition of a new (b), Timing of Certification. Under the final rule, physicians must complete certifications of the medical necessity of inpatient admissions for all inpatient admissions, not just for longer hospital stays and outlier cases, as commenters had argued (see 78 Fed. Reg ). (Outliers are Medicare payments to Medicare-participating hospitals in addition to the basic prospective payments for cases incurring extraordinarily high costs.) If the certification is not present in the medical record, the hospital will not be paid for its Part A services. The certification, which includes the physician order, must be completed, signed and documented in the medical record prior to the patient s discharge. Critical access hospitals are subject to the same requirements as acute care facilities; outlier cases and inpatient psychiatric facilities have some variations in the timing of the certification. Content of Certification Regulatory Language Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (a) Content of certification and recertification. Certification begins with the order for inpatient admission. Medicare Part A pays for inpatient hospital services (other than inpatient psychiatric facility services) only if a physician certifies and recertifies the following: (1) That the services were provided in accordance with of this chapter. (2) The reasons for either (i) Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or (ii) Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F of Part 412 of this chapter). (3) The estimated time the patient will need to remain in the hospital. (4) The plans for posthospital care, if appropriate. The CMS guidance elaborates on the regulatory provision. Hospital Inpatient Order and Certification, A (Jan. 30, 2014) A. Physician Certification. For physician certification of inpatient services of hospitals other than inpatient psychiatric facilities:

20 16 AIS s Management Insight Series 1. Content: The physician certification includes the following information: a. Authentication of the practitioner order: The physician certifies that the inpatient services were ordered in accordance with the Medicare regulations governing the order. This includes certification that hospital inpatient services are reasonable and necessary and in the case of services not specified as inpatient-only under 42 CFR (n), that they are appropriately provided as inpatient services in accordance with the 2-midnight benchmark. The requirement to authenticate the practitioner order may be met by the signature or countersignature of the inpatient admission order by the certifying physician. b. Reason for inpatient services: The physician certifies the reasons for either (i) Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or (ii) Special or unusual services for outlier cases under the applicable prospective payment system for inpatient services. For example, documentation of an admitting diagnosis could fulfill this part of the certification requirement. c. The estimated (or actual) time the beneficiary requires or required in the hospital: The physician certifies the estimated time in the hospital the beneficiary requires (if the certification is completed prior to discharge) or the actual time in the hospital (if the certification is completed at discharge). Estimated or actual length of stay is most commonly reflected in the progress notes where the practitioner discusses the assessment and plan. For the purposes of meeting the requirement for certification, expected or actual length of stay may be documented in the order or a separate certification or recertification form, but it is also acceptable if discussed in the progress notes assessment and plan or as part of routine discharge planning. If the reason an inpatient is still in the hospital is that they are waiting for availability of a skilled nursing facility (SNF) bed, 42 CFR (c) and (e) provide that a beneficiary who is already appropriately an inpatient can be kept in the hospital as an inpatient if the only reason they remain in the hospital is they are waiting for a post-acute SNF bed. The physician may certify the need for continued inpatient admission on this basis. d. The plans for posthospital care, if appropriate, and as provided in 42 CFR Thus, the required elements of the certification are the following: u Authentication of order to inpatient status that meets the two-midnight benchmark criteria; u The reasons for either the hospitalization (i.e., the diagnosis) or special or unusual services for cost outlier cases; u The estimated or actual time the patient will need to remain or remained in the hospital; and u Plans for post-hospital care. The signature or countersignature of the certifying physician on the inpatient admission order serves as the authentication (See Hospital Inpatient Order and Certification, A.1.a (Jan. 30, 2014)). (Note that the certifying physician is not necessarily the physician who signed the admit order when it was issued.)

21 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 17 If the certification is completed prior to discharge, the physician certifies the estimated time; if completed at discharge, he or she certifies the actual time. A physician also may certify the need for continued inpatient admission if the patient is waiting for a bed in a skilled nursing facility. Hospital Inpatient Order and Certification, A1c (Jan. 30, 2014) Estimated or actual length of stay is most commonly reflected in the progress notes where the practitioner discusses the assessment and plan. For the purposes of meeting the requirement for certification, expected or actual length of stay may be documented in the order or a separate certification or recertification form, but it is also acceptable if discussed in the progress notes assessment and plan or as part of routine discharge planning. If the reason an inpatient is still in the hospital is that they are waiting for availability of a skilled nursing facility (SNF) bed, 42 CFR (c) and (e) provide that a beneficiary who is already appropriately an inpatient can be kept in the hospital as an inpatient if the only reason they remain in the hospital is they are waiting for a post-acute SNF bed. The physician may certify the need for continued inpatient admission on this basis. Critical access hospitals (CAHs) have additional requirements. Because CAHs must maintain an annual average length of stay of 96 hours or less for their acute care patients, the 96-hour expectation requirement can be met by physician notes or actual discharge within 96 hours. CMS in a November 14, 2013, hospital open door forum provided the following clarification regard the CAH certification: CAHs may satisfy the certification requirement by including a physician certification form or statement in the medical record. If physician certification forms or statements are not included in the medical record, CMS guidance also specifies that this condition of payment may be met by either physician notes or by actual discharge within 96 hours. Hospital Inpatient Order and Certification, A1e (Jan. 30, 2014) Time as an outpatient at the CAH does not count towards the 96 hours requirement. The clock for the 96 hours only begins once the individual is admitted to the CAH as an inpatient. Time in a CAH swing-bed also does not count towards the 96 hour inpatient limit. If a physician certifies in good faith that an individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH and something unforeseen occurs that causes the individual to stay longer at the CAH, there would not be a problem with regards to the CAH designation as long as that individual s stay does not cause the CAH to exceed its 96-hour annual average condition of participation requirement. However, if a physician cannot in good faith

22 18 AIS s Management Insight Series certify that an individual may reasonably be expected to be discharged or transferred within 96 hours after admission to the CAH, the CAH will not receive Medicare reimbursement for any portion of that individual s inpatient stay. Regulatory Language Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (c) Certification of need for hospitalization when a SNF bed is not available. (1) The physician may certify or recertify need for continued hospitalization if he or she finds that the patient could receive proper treatment in a SNF but no bed is available in a participating SNF. (2) If this is the basis for the physician s certification or recertification, the required statement must so indicate; and the certifying physician is expected to continue efforts to place the patient in a participating SNF as soon as a bed becomes available. Timing of Certification Regulatory Language Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (b) Timing of certification. For all hospital inpatient admissions, the certification must be completed, signed, and documented in the medical record prior to discharge. For outlier cases under subpart F of Part 412 of this chapter that are not subject to the PPS, the certification must be signed and documented in the medical record and as specified in paragraphs (e) through (h) of this section. The certification begins with the order for inpatient admission. For inpatient acute care hospitals (including long-term care hospitals) and CAHs, the certification needs to be completed before a patient s discharge, unless the case is an outlier (see (e) and (f)). Prior to the 2014 IPPS final rule, CAHs were required to certify no later than one day before the date on which the claim for payment for the inpatient CAH services was submitted ( (b) (2012). Hospital Inpatient Order and Certification, A2 (Jan. 30, 2014) With regard to the time of discharge, a Medicare beneficiary is considered a patient of the hospital until the effectuation of activities typically specified by the physician as having to occur prior to discharge (e.g., discharge after supper or discharge after voids ). So discharge itself can but does not always coincide exactly with the time that the discharge order is written, rather it occurs when the physician s order for discharge is effectuated.

23 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 19 Outlier cases must certify according to the following schedule: Timing of Certifications and Recertifications for Outlier Cases, (e), (f) and (g) Outlier cases... Certification Recertification Not subject to PPS (e), (g) Subject to PPS (f)(1) Day outliers (g) Subject to PPS (f)(2) Cost outliers No later than day 12 of hospitalization The earlier of 1 day after hospital decides case will meet outlier criteria or 20 days into stay The earlier of the day the hospital requests outlier payment or 20 days into hospital stay If possible, certification should be made before hospital incurs outlier costs No later than day 18 of hospitalization No less frequently than every 30 days At intervals established by the UR committee Subsequent recertifications No less frequently than every 30 days, or if performed by UR [utilization review], no later than 7 days after recertification deadline No less frequently than every 30 days or if performed by UR, no later than 7 days after recertification deadline At intervals established by the UR committee Regulatory Language Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (g) Recertification requirement fulfilled by utilization review. (1) At the hospital s option, extended stay review by its UR committee may take the place of the second and subsequent recertifications required for outlier cases not subject to PPS and for PPS day-outlier cases. (2) A utilization review that is used to fulfill the recertification requirement is considered timely if performed no later than the seventh day after the day the recertification would have been required. The next recertification would need to be made no later than the 30th day following such review; if review by the UR committee took the place of this recertification, the review could be performed as late as the seventh day following the 30th day. As set out in (g), hospitals may elect to have the extended stay review by the utilization review committee substitute for the second and subsequent recertifications for outliers cases not subject to PPS and day-outlier cases. In this case, the review is timely if it is performed no later than seven days after the recertification would have been required. Regulatory Language Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (h) Description of procedures. The hospital must have available on file a written description that specifies the time schedule for certifications and recertifications,

24 20 AIS s Management Insight Series and indicates whether utilization review of long-stay cases fulfills the requirement for second and subsequent recertifications of all outlier cases not subject to PPS and of PPS day outlier cases. Hospitals also need to have a written schedule for certifications and recertifications and a statement as to whether utilization review will satisfy the second and subsequent recertifications, as applicable General procedures. (d) Timeliness. Regulatory Language (5) For all inpatient hospital or critical access hospital inpatient services, including inpatient psychiatric facility services, a delayed certification may not extend past discharge. Delayed certifications in acute care and critical care hospitals may not extend beyond discharge. Preamble, 78 Fed. Reg [F]or hospital or CAH hospital inpatient services, a delayed certification may not extend past discharge. The existing delayed certification provisions in existing (d)(3) and (d)(4) will continue to apply, but only for certification of the outlier extended stay cases described in (e) through (g). Who May Certify Regulatory Language Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (d) Signatures. (1) Basic rule. Except as specified in paragraph (d)(2) [related to admission for dental procedures] of this section, certifications and recertifications must be signed by the physician responsible for the case, or by another physician who has knowledge of the case and who is authorized to do so by the responsible physician or by the hospital s medical staff. The certification or recertification may be signed only by the physician responsible for the case or by another physician who has knowledge of the case and who is authorized to do so by the responsible physician or by the hospital s medical staff. Here (as compared to the order signature), a utilization review committee member may be able to meet these requirements.

25 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 21 However, according to the CMS guidance, Medicare does not require the certifying physician to have inpatient admission privileges at the hospital. Hospital Inpatient Order and Certification, A3 (Jan. 30, 2014) Medicare considers only the following physicians, podiatrists or dentists to have sufficient knowledge of the case to serve as the certifying physician: u The admitting physician of record ( attending ) or a physician on call for him or her; u A surgeon responsible for a major surgical procedure on the beneficiary or a surgeon on call for him or her; u A dentist functioning as the admitting physician of record or as the surgeon responsible for a major dental procedure; and, u In the specific case of a non-physician non-dentist admitting practitioner who is licensed by the State and has been granted privileges by the facility, a physician member of the hospital staff (such as a physician member of the utilization review committee) who has reviewed the case and who also enters into the record a complete certification statement that specifically contains all of the content elements discussed above. The admitting physician of record may be an emergency department physician or hospitalist. Medicare does not require the certifying physician to have inpatient admission privileges at the hospital. Format for Certification CMS is very clear that a special form is not required, but some experts recommend a form to avoid scattering pieces of the certification throughout the record and opening the door to the RAC review of the chart. Each certification or recertification must be signed, and if the hospital is pulling pieces of information from other portions of the chart that don t happen to be signed or dated by the physician, this may open the door for the auditors to find noncompliance and give a reason for denial. In the preamble, CMS again emphasizes that the order and the diagnosis should be in the medical record. Preamble, 78 Fed. Reg The provider may adopt any method that permits verification. The certification and recertification statements may be entered on forms, notes, or records that the appropriate individual signs, or on a special separate form. Except as provided for delayed certifications, there must be a separate signed statement for each certification or recertification. We note that the particular elements of the certification, for example, the order for inpatient services and documentation of the reason for continued hospitalization (diagnosis) should be documented within the medical record.

26 22 AIS s Management Insight Series Hospital Inpatient Order and Certification, A4 (Jan. 30, 2014) If all the required information is included in progress notes, the physician s statement could indicate that the individual s medical record contains the information required and that hospital inpatient services are or continue to be medically necessary. If hospitals use this methodology, experts recommend they prepare a certification statement that explains where all of the requisite information is located in the record and ensure that each item is signed and dated by the appropriate physician. Inpatient Psychiatric Facilities As the regulatory language explains, certification for inpatients in psychiatric facilities is different from other inpatient hospitals because of the nature of the care. Under the 2014 IPPS rule, physicians now must include in their certification that the services were provided in accordance with the admission guidelines in , which means the physician must order the inpatient admission under the guidelines. The certification must be completed prior to discharge. Recertification occurs on day 12 of the hospital stay; subsequent recertifications must occur no later than every 30 days. Regulatory Language Requirements for inpatient services of inpatient psychiatric facilities. (a) Requirements for certification and recertification: General considerations. Certification begins with the order for inpatient admission. The content requirements differ from those for other hospitals because the care furnished in inpatient psychiatric facilities is often purely custodial and thus not covered under Medicare. The purpose of the statements, therefore, is to help ensure that Medicare pays only for services of the type appropriate for Medicare coverage. Accordingly, Medicare Part A pays for inpatient services in an inpatient psychiatric facility only if a physician certifies and recertifies the need for services consistent with the requirements of this section, as appropriate. (b) Content of certification. The physician must certify (1) That inpatient psychiatric services were required for treatment that could reasonably be expected to improve the patient s condition, or for diagnostic study. (2) That the inpatient psychiatric services were provided in accordance with of this chapter. (c) Content of recertification. (1) Inpatient services furnished since the previous certification or recertification were, and continue to be, required (i) For treatment that could reasonably be expected to improve the patient s condition; or (ii) For diagnostic study; and (2) The hospital records show that the services furnished were (i) Intensive treatment services;

27 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 23 (ii) Admission and related services necessary for diagnostic study; or (iii) Equivalent services. (3) The patient continues to need, on a daily basis, active treatment furnished directly by or requiring the supervision of inpatient psychiatric facility personnel. (d) Timing of certification and recertification. (1) Certification is required at the time of admission or as soon thereafter as is reasonable and practicable, and must be completed and documented in the medical record prior to discharge. (2) The first recertification is required as of the 12th day of hospitalization. Subsequent recertifications are required at intervals established by the UR committee (on a case-by-case basis if it so chooses), but no less frequently than every 30 days. (e) Other requirements. Inpatient psychiatric facilities must also meet the requirements set forth in (c), (d), (g), and (h). As (e) states, inpatient psych facilities also must: explain the need for continued hospitalization because no SNF bed is available ( (c)); obtain signatures from physicians qualified to sign the certification (( (d)); at their option use UR for the second and subsequent recertifications ( (g)); and have available a written schedule for recertifications that states, if applicable, that UR will perform the second and subsequent recertifications ( (h)). The Impact of the Order and Certification on a Determination of Medical Necessity Section (b) was added by the final rule. Its purpose is to make clear what weight is given to the physician order and certification for the purpose of determining medical necessity, and its language is similar to that in HCFA Ruling Medical review requirements. Regulatory Language (b) Physician s order and certification regarding medical necessity. No presumptive weight shall be assigned to the physician s order under or the physician s certification under Subpart B of Part 424 of the chapter in determining the medical necessity of inpatient hospital services under section 1862(a)(1) of the Act. A physician s order or certification will be evaluated in the context of the evidence in the medical record. The new regulatory provision indicates that CMS will not give any presumptive weight to physician orders and certifications for purposes of medical necessity of the services provided although they are required elements of the medical record as conditions of payment. In other words, if the services provided were not medically necessary, regardless of the order and certification, the admission will not stand. The order and certification support only the inpatient admission.

28 24 AIS s Management Insight Series The Two-Midnight Rule Admissions. Regulatory Language (e)(1) Except as specified in paragraph (e)(2) of this section, when a patient enters a hospital for a surgical procedure not specified by Medicare as inpatient only under (n) of this chapter, a diagnostic test, or any other treatment, and the physician expects to keep the patient in the hospital for only a limited period of time that does not cross 2 midnights, the services are generally inappropriate for inpatient admission and inpatient payment under Medicare Part A, regardless of the hour that the patient came to the hospital or whether the patient used a bed. Surgical procedures, diagnostic tests, and other treatment are generally appropriate for inpatient admission and inpatient hospital payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights. The expectation of the physician should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration. (2) If an unforeseen circumstance, such as a beneficiary s death or transfer, results in a shorter beneficiary stay than the physician s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and hospital inpatient payment may be made under Medicare Part A. In the FY 2014 IPPS final rule, CMS set out an inpatient admission policy the two-midnight rule with two purposes: (1) to guide physicians decision making as to whether to admit a patient in order to avoid the numerous denials hospitals have experienced for lack of medical necessity of the inpatient admission; and (2) to provide reviewers a guideline when selecting claims for review. However, the policy has raised so many questions and concerns, CMS has delayed enforcement until October 1, 2014, while hospitals figure out how to implement its provisions. Under the two-midnight rule, as long as the care is medically necessary, the presumption is that the admission of a patient who remains an inpatient for two midnights is appropriate; if the length of stay is less than two midnights, the admission is presumed not appropriate, subject to certain exceptions. The two-midnight rule, CMS emphasizes, is a time-based standard, not a level-ofcare standard. Preamble, 78 Fed. Reg [T]he beneficiary s required level of care is not part of the guidance regarding hospital inpatient admission decisions. Rather, we provide physicians with a 2-midnight admission framework to effectuate appropriate inpatient hospital

29 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 25 admission decisions. More specifically, we have stipulated that factors such as the procedures being performed and the beneficiary s condition and comorbidities apply when the physician formulates his or her expectation regarding the need for hospital care, while the decision of whether to admit a beneficiary as an inpatient or keep as an outpatient is based upon the physician s expectation of the beneficiary s required length of stay. As 412.3(e) of the regulations indicates, surgical procedures, diagnostic tests, and other treatments are generally appropriate for inpatient admission and inpatient hospital payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least two midnights. Conversely, when a beneficiary enters a hospital for a surgical procedure not specified by Medicare on its inpatient-only list (42 CFR (n)), a diagnostic test or any other treatment, and the physician expects to keep the beneficiary in the hospital for only a limited period of time that does not cross two midnights, the services generally would be inappropriate for payment under Medicare Part A, regardless of the hour that the beneficiary came to the hospital or whether the beneficiary used a bed (78 Fed. Reg ). The rule, in 412.3(e)(2), lists two explicit exceptions: (1) the death or transfer of a beneficiary and (2) the OPPS s inpatient-only procedures ( (n)) because those can only be paid as inpatient. However, the regulatory language leaves some flexibility for other unforeseen circumstances. Preamble, 78 Fed. Reg [We] believe the rule, as finalized, provides for sufficient flexibility because of its basis in the physician s expectation of a 2-midnight stay. Such would include situations in which the beneficiary improves more rapidly than the physician s reasonable, documented expectation. Such unexpected improvement may be provided and billed as inpatient care, as the regulation is framed upon a reasonable and supportable expectation, not the actual length of care, in defining when hospital care is appropriate for inpatient payment. In addition to the two specific exceptions, CMS acknowledges that if a patient leaves against medical advice (AMA), this may be reasonably viewed as an unforeseen circumstance, and if the documentation supports the conclusion, the admission may meet the two-midnight rule criteria (see also 78 Fed. Reg ). Preamble, 78 Fed. Reg [W]hile we did not specify the situation in which a beneficiary leaves AMA as an exception under the proposed rule, we acknowledge that an AMA departure is usually an unexpected event and that an inpatient admission could still be appropriate provided that the medical record demonstrates a reasonable expectation of a 2-midnight stay when the admission order is written.

30 26 AIS s Management Insight Series CMS already has clarified and added exceptions to the rule clinical improvement where the physician admitted the patient expecting two midnights, but the patient clinically improved sufficiently to be released before the second midnight; mechanical ventilation initiated during present visit; election of hospice care in lieu of continued treatment in the hospital; and transfer to another hospital. (See Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. D.2 (Jan. 31, 2014); Frequently Asked Questions, Q1.3, Q4.7). Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. D.2 (1) (Jan. 31, 2014) While CMS believes a physician will generally expect beneficiaries with newly initiated mechanical ventilation to require 2 or more midnights of hospital care, if the physician expects that the beneficiary will only require one midnight of hospital care, inpatient admission and Part A payment is nonetheless generally appropriate. See also Frequently Asked Questions, Q4.3. The agency also says that it will work with the hospital industry and MACs to determine if there are any other categories of patients that should be added to the list. Two categories that will not be considered are telemetry and ICU patients. (See Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. D.2 (Jan. 31, 2014)). The Two-Midnight Components The two-midnight rule has two distinct components a presumption and a benchmark. Preamble, 78 Fed. Reg The 2-midnight benchmark represents guidance to admitting practitioners and reviewers to identify when an inpatient admission is generally appropriate for Medicare coverage and payment, while the 2-midnight presumption directs medical reviewers to select claims for review under a presumption that the occurrence of 2 midnights after admission appropriately signifies an inpatient status for a medically necessary claim. In short, the benchmark provides admission guidance to physicians and to medical reviewers for short-stay claims, while the presumption provides guidance to reviewers when they select inpatient claims for review. The Two-Midnight Presumption Under the two-midnight presumption, inpatient claims with a length of stay greater than two midnights after formal admission following the physician s order will be presumed appropriate for inpatient status for a medically necessary claim. These will

31 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 27 not be the focus of medical review efforts, absent evidence of systemic gaming, abuse or delays in the provision of care in an attempt to qualify for the two-midnight presumption. However, they may be reviewed for other reasons (see Medical Review and the Two-Midnight Rule). Preamble, 78 Fed. Reg [I]t was not our intent to suggest that a 2-midnight stay was presumptive evidence that the stay at the hospital was necessary; rather, only that if the stay was necessary, it was appropriately provided as an inpatient stay [S]ome medical review is always necessary. It is important to recognize that the presumption kicks in only after the patient has been formally admitted by a physician order that states admit as inpatient and remains across two midnights. If the patient does not cross two midnights after the physician order, then the claim will be reviewed under the two-midnight benchmark. The Two-Midnight Benchmark The two-midnight benchmark is the time that may be counted by the physician when he or she determines whether an inpatient order should be written. It clarifies that a beneficiary is generally appropriate for inpatient admission if the physician expects the patient to require care in the hospital crossing at least two midnights. If the physician does not expect the patient to stay over two midnights, the patient should remain an outpatient. Preamble, 78 Fed. Reg While the complex medical decision is based upon an assessment of the need for continuing treatment at the hospital, the 2-midnight benchmark clarifies when beneficiaries determined to need such continuing treatment are generally appropriate for inpatient admission or outpatient care in the hospital. When Time Starts For purposes of the benchmark, time begins with the first outpatient service rendered at the hospital. The initiation of diagnostic or therapeutic services responsive to the beneficiary s condition is what MACs will consider to start the clock for purposes of the two-midnight benchmark. (See Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. G.2 (Jan. 31, 2014)). The physician may count the outpatient time, such as that spent in the emergency room or in observation, in determining whether the patient will remain for two midnights; however, time spent waiting for services, for example, while triage is going on, does not count towards the time. CMS also will exclude extensive delays in the provi-

32 28 AIS s Management Insight Series sion of medical care from the time calculation. (See Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. H (Jan. 31, 2014); Frequently Asked Questions, Sec. II, Q2.1.) Preamble, 78 Fed. Reg The starting point for the 2-midnight benchmark will be when the beneficiary begins receiving hospital care on either an inpatient basis or outpatient basis. That is, for purposes of determining whether the 2-midnight benchmark will be met and, therefore, whether inpatient admission is generally appropriate, the physician ordering the admission should account for time the beneficiary spent receiving outpatient services such as observation services, treatments in the emergency department, and procedures provided in the operating room or other treatment area... Preamble, 78 Fed. Reg [W]e expect that the decision to admit the beneficiary should be based on the cumulative time spent at the hospital beginning with the initial outpatient service. In other words, if the physician makes the decision to admit after the beneficiary arrived at the hospital and began receiving services, he or she should consider the time already spent receiving those services in estimating the beneficiary s total expected length of stay. For example, if the beneficiary has already passed 1 midnight as an outpatient observation patient or in routine recovery following outpatient surgery, the physician should consider the 2-midnight benchmark met if he or she expects the beneficiary to require an additional midnight in the hospital. This means that the decision to admit becomes easier as the time approaches the second midnight, and beneficiaries in medically necessary hospitalizations should not pass a second midnight prior to the admission order being written. For patients who are not admitted through the emergency room and receive inpatient services directly, such as for an elective surgery or a transfer from another hospital where the admission order was written well in advance of the admission, the starting point for medical review purposes will be when the beneficiary starts receiving services following arrival at the hospital (78 Fed. Reg ). (See also Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. G.2 (Jan. 31, 2014)). Because the beneficiary does not become an inpatient until the physician writes a formal order to admit, the services provided prior to admission remain outpatient services, even though the time spent may be counted in the two-midnight calculation. This means that the method of counting hours in the hospital for the two-midnight rule does not affect any other time calculations in Medicare coverage policy, such as the rule that a beneficiary must be in a hospital for three days before being transferred to a skilled nursing facility in order to receive coverage.

33 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 29 The outpatient/inpatient time dilemma also poses a problem when claims are selected for review because they do not show a two-midnight length of stay. The burden will be on the hospital to demonstrate through the record that the patient was in the hospital for two midnights, but admitted after the first midnight. Hospitals, however, now have a way to alert reviewers to the fact that the patient s time in the facility, for purposes of the two-midnight standard, started as an outpatient. As of December 1, 2013, hospitals report occurrence code 72 to denote the date span of contiguous outpatient hospital services that preceded the inpatient admission. See Trans. 1334; MLN 8586 (Jan. 24, 2014). The National Uniform Billing Committee revised the definition of occurrence code 72 to read as follows: 72, First/Last Visit Dates. The from/through dates of outpatient services. For use on outpatient bills where the entire billing record is not represented by the actual From/Through service dates of Form Locator 06 (Statement Covers Period). AND On inpatient bills to denote contiguous outpatient hospital services that preceded the inpatient admission. Medical Review and the Two-Midnight Rule Full enforcement of the two-midnight rule has been delayed until October 1, 2014 (see Between October 1, 2013, and September 30, 2014, absent systemic gaming or abuse, neither the Medicare administrative contractors (MACs) or recovery auditors (RACs) will conduct post-payment patient status reviews for claims with dates of admission beginning October 1, 2013 through September 30, However, MACs will review a probe sample of inpatient claims with 0-1 midnights to check a facility s compliance and provide feedback to CMS on areas that need guidance and education. Critical access hospital claims will not be reviewed at all during this time period, and inpatient rehabilitation facilities are specifically excluded from the two-midnight rule. RACs will not conduct pre-payment or post payment reviews of inpatient admissions of 0 to 1 midnights or two or more midnights. Likewise, contractors (MACs) will not review the claims with two or more midnights to determine whether the admission was medically necessary. Claims still may be reviewed by both MACs and RACs for issues unrelated to the inpatient admission, such as medical necessity of the services themselves or coding and documentation. In fact, the final rule makes it clear that, in addition to suspected gaming or abuse, two-midnight claims will be reviewed for the following: u To ensure the services provided were medically necessary; u To ensure that the stay at the hospital was medically necessary;

34 30 AIS s Management Insight Series u To validate provider coding and documentation as reflective of the medical evidence; u When the CERT contractor is directed to do so; or u If directed by CMS or other governmental entity. 78 Fed. Reg Probe and Educate Reviews During the first year the two-midnight rule is in effect (October 1, September 30, 2014), the only reviews of these claims will be the Probe and Education patient status reviews conducted by the MACs. MACs will conduct a prepayment review of a hospital s compliance with the following: u The admission order requirements u The certification requirements u The two-midnight benchmark Initially MACs will select 10 claims with 0-1 midnights from all hospitals except large ones; large facilities will need to provide 25 claims. If the MAC does not identify any issues, it will not review additional claims of the hospital until after September 30, CMS explains the criteria the MACs will apply to review to these admissions. Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. E (Jan. 31, 2014) When conducting patient status reviews for services not on the inpatient-only list, CMS will direct the MAC to evaluate whether, at the time of the admission order, it was reasonable for the admitting practitioner to expect the beneficiary to require medically necessary hospital services (including inpatient and outpatient services) over a period of time spanning at least 2 midnights. We note that absent rare and unusual circumstance..., the medical necessity assessment to be conducted by the review contractor is whether the beneficiary s clinical presentation, prognosis, and expected treatment support the expectation of the need for hospital care spanning 2 or more midnights, as opposed to care outside of a hospital facility, such as a skilled nursing facility or other less intensive services. The beneficiary s severity of illness and intensity of services are complex medical factors that CMS will instruct the MAC to consider when assessing whether the physician was reasonable in forming his or her expectation that a beneficiary required hospital services for 2 or more midnights. Note: 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. In its guidance, CMS makes it very clear a beneficiary does not need to meet an inpatient level of care, as defined 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

35 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 31 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. (See Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. E (Jan. 31, 2014)). MACs, CMS says, will consider complex medical factors that support a reasonable expectation of the needed duration of the stay during the patient status reviews of the two-midnight benchmark beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk (probability) of an adverse event occurring during the time period for which hospitalization is considered. If the reviewer finds, based on the documentation in the medical record, that it was reasonable for the physician to expect the patient to remain over two midnights, Medicare will pay for the admission regardless of whether the anticipated length of stay did not transpire due to unforeseen circumstances. (See Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Sec. F (Jan. 31, 2014)). CMS also elaborates on what MACs will look for in the documentation. Preamble, 78 Fed. Reg In making their determination of whether the inpatient admission is appropriate, Medicare review contractors will evaluate: (a) The physician order for inpatient admission to the hospital, along with the other required elements of the physician certification; (b) the medical documentation supporting that the order was based on an expectation of need for care spanning at least 2 midnights; and (c) the medical documentation supporting a decision that it was reasonable and necessary to keep the patient at the hospital to receive such care. Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Part III, Sec. F (Jan. 31, 2014) MACs will continue to follow longstanding guidance to review the reasonableness of the inpatient admission decision based on the information known to the physician at the time of admission... 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. Expectation of time and the determination of the underlying need for medical care at the hospital are supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event, which CMS will direct the MACs to expect to be documented in the physician assessment and plan of care. The entire medical record may be reviewed to support or refute the reasonableness of the decision, but entries after the point of the admission order are only used in the context of interpreting what the physician knew and expected at the time of admission. If the physician believes the beneficiary represents a rare and unusual exception to the

36 32 AIS s Management Insight Series 2-midnight benchmark, in which the expected length of stay is less than 2 midnights but inpatient admission may be appropriate, the physician must clearly document this rationale and supporting information in the medical record for CMS review. In its guidance, Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, CMS provided these General Rules for review of claims with 0-2 or more midnights. Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Sec. III (Jan. 31, 2014) A. General Rule for Expected 0-1 Midnight Stays When a patient enters a hospital for a surgical procedure not specified by Medicare as inpatient only under 42 C.F.R (n), a diagnostic test, or any other treatment, and the physician expects to keep the patient in the hospital for 0-1 midnights, the services are generally inappropriate for inpatient admission and inpatient payment under Medicare Part A, regardless of the hour that the patient came to the hospital or whether the patient used a bed. Where the medical record indicates that the physician did not or could not reasonably have expected to keep the patient in the hospital for greater than 2 midnights, MACs shall deny these inappropriate admissions unless the circumstances described in Section D apply. B. General Rule for Expected 2 or More Midnight Stays When a patient enters a hospital for a surgical procedure not on the inpatient only list, a diagnostic test, or any other treatment and the physician expects the beneficiary will require medically necessary hospital services for 2 or more midnights (including inpatient and pre-admission outpatient time), the services are generally appropriate for inpatient admission and inpatient payment under Medicare Part A. CMS will direct MACs to approve these cases so long as other requirements are met. C. General Rule for Services on Medicare s Inpatient-Only List Medicare s Inpatient-Only list at 42 C.F.R (n) defines services that support an inpatient admission and Part A payment as appropriate, regardless of the expected length of stay. CMS will direct MACs to approve these cases so long as other requirements are met. MACs will deny noncompliant claims and explain the reasons for the denial in a letter to the hospital. They will categorize their concern about providers as minor, moderate, or major concerns and take action relative to the category. MLN, SE1403 (Jan. 27, 2014) 1. Minor Concern: A provider with a low error rate and no pattern of errors, defined as 0-1 errors out of 10 claims or 0-2 errors out of 25 claims. MACs will educate the provider via the results letter indicating the reasons for denial of the inpatient claim.

37 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers Moderate-Significant Concern: A provider with a moderate error rate, defined as 2-6 errors out of 10 claims or 3-13 errors out of 25 claims. MACs will offer 1:1 telephonic provider education in addition to the written review results letters. MACs will repeat the probe strategy for Dates of Admission January through March [now September] Major Concern: A provider with a high error, defined as 7+ errors out of 10 claims or 14+ errors out of 25 claims. MACs will offer 1:1 telephonic provider education in addition to the written review results letters. MACs will repeat the probe strategy for Dates of Admission January through March [now September] If at the end of the six month review period continuing major concerns are identified, MACs will select 100 claims (for providers with 10 sampled claims) and 250 claims (for providers with 25 sampled claims) for additional review. See also Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, 2013, and Frequently Asked Questions, Q1.3. MACs also will monitor inpatient hospital claims spanning two or more midnights for evidence of systemic gaming, abuse of delays in provision of care to qualify for the two-midnight presumption. Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, Sec. III, I (Jan. 31, 2014) CMS will instruct MACs to identify such trends through probe reviews and through its data sources, such as that provided by the Comprehensive Error Rate Testing (CERT) contractor, First-look Analysis for Hospital Outlier Monitoring (FATHOM) and Program for Evaluating Payment Patterns Electronic Report (PEPPER). Condition Code 44 If a patient, based on the physician s assessment, is admitted with the expectation of a two-midnight stay but improves to the point that he or she will be discharged before the second midnight, do hospitals have to use the condition code 44 process? Preamble, 78 Fed. Reg [P]roviders may continue to change patient status to outpatient during the hospital stay upon meeting the Condition Code 44 requirements. However, we note that Condition Code 44 is not to be used for unexpected events because, as described above, those situations can remain appropriately inpatient. Thus, a beneficiary who experiences an unexpected recovery during a medically necessary stay should not be converted to an outpatient but should remain an inpatient if the 2-midnight expectation was reasonable at the time the inpatient order was written, but unexpectedly the stay did not fully transpire. In contrast, Condition Code 44 is specifically for the situation when the utilization review or management committee determines that the physician has not appropriately admitted a patient

38 34 AIS s Management Insight Series and the physician concurs that the status should be converted to outpatient prior to beneficiary discharge. During the August Special Open Door Forum, CMS explained the relationship of condition code 44 to the admission guidelines as follows: Special Open Door Forum (Aug. 15, 2013) If Code 44 is applicable, you should use Code 44 before discharge. If Code 44 is not applicable, and the expectation [of a two-midnight stay] was a valid expectation supported in the records, you would leave the patient as an inpatient. If you find out after discharge that it really should not have been inpatient, then that is when you would re-bill [as Part B inpatient]. So it is three separate possibilities depending on the individual case. If, after discharge, the utilization review committee determines that the inpatient admission was not appropriate, it does not use condition code 44. Instead, it bills Medicare under the Part B inpatient rules that were finalized in the 2014 IPPS rule ( 414.5). The hospital will need to refund the patient the Part A co-payment and bill the patient for the Part B co-pays and deductibles. CMS is clear that the hospital is not authorized to waive a beneficiary s liability under Part B should the hospital choose to re-bill under Part B or submit a Part B inpatient claim. MAC Actions Following Patient Status Probe Reviews Number of Claims in Sample That Did NOT Comply with Policy (Dates of Admission October March 2014) No or Minor Concerns Moderate to Significant Concerns Major Concerns 10 claim sample 0-1* 2-6* 7 or more* 25 claim sample 0-2* 3-13* 14 or more* Action For each provider with no or minor concerns, CMS will direct the MAC to: 1. Deny non-compliant claims 2. Send summary letter to providers indicating: What claims were denied and the reason for the denials That no more reviews will be conducted under the Probe & Educate process. That the provider will be subjected to the normal data analysis and review process 3. Await further instruction from CMS For each provider with moderate to significant concerns, CMS will direct the MAC to : 1. Deny non-compliant claims 2. Send detailed review results letters explaining each denial 3. Send summary letter that: Offers the provider a 1:1 phone call to discuss Indicates the review contractor will REPEAT Probe & Educate process with 10 or 25 claims 4. Repeat Probe & Educate of 10 or 25 claims with dates of admission January March 2014 For each provider with major concerns, CMS will direct the MAC to : 1. Deny non-compliant claims 2. Send detailed review results letters explaining each denial 3. Send summary letter that: Offers the provider a 1:1 phone call to discuss Indicates the review contractor will REPEAT Probe & Educate process with10 or 25 claims 4. Repeat Probe & Educate of 10 or 25 claims with dates of admission January March If problem continues, Repeat Probe & Educate with increased claim volume of claims *NOTE: If the provider claim submissions do not fulfill the requested sample, the error rate shall be calculated based on percentage of claims with findings. SOURCE: CMS: Selecting Hospital Claims for Patient Status Reviews: Admissions on or After October 1, 2013 (11/4/13)

39 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 35 Part II: Expert Questions and Answers The Q&As that follow are adapted from those asked during the AIS s Two-Midnight webinar on Sept. 26, The questions were answered by Jessica Gustafson and Abby Pendleton of The Health Law Partners. Note that CMS has posted a set of Frequently Asked Questions. These are reprinted on p. 85. Orders and Certifications Question: Regarding the expected length of stay in the order and certification, since no physician really knows what that period of time would be, from a legal perspective, how would a boilerplate statement on the admit order, such as greater than two days, fare? Answer: I m not an advocate of having just a statement that says there s always the expectation of more than two midnights. From a medical review perspective, we often hear reviewers say This chart looks like a template. Of course it looks like a template, but the medical reviewers are just looking for anything that appears fishy. So I would be hesitant to have a blanket statement with only that as an option. I am an advocate for using CMS s language back to CMS. And I am not opposed to a drop-down menu. So if, for example, you think you are going to admit a patient as an inpatient and you expect the hospital care to span two midnights or more, I think one your drop-down choices should be two midnights or more, and there could be a three midnight option. I also think there should be an option for less than two midnights with an area to state that an inpatient admission is still appropriate because the patient has already received observation services and still requires hospital care. I think that that would be appropriate. Inpatient-only procedures, of course, would always be appropriate. Question: Which practitioners can sign an order and when, and which physicians can sign the certifications and when? Answer: Orders have to be signed by a qualified and licensed practitioner, who has admitting privileges at the hospital, but not necessarily an MD or DO. And the practitioner must be knowledgeable about the patient s hospital course, medical care plan and current condition. The CMS Sept. 5 subregulatory guidance outlines who may sign an order pretty clearly: the admitting physician of record; obviously the attending physician or a physician that may be on-call for him or her; the primary care physician or covering hospitalist caring for the patient in the hospital; a surgeon responsible for a surgical procedure on the beneficiary or someone on call for him or her; and emergency or clinical practitioners caring for the beneficiary at the point of admission. Again, these are all qualified to sign the order as long as the hospital s bylaws permit them to admit.

40 36 AIS s Management Insight Series But CMS does say that in the order situation, it does not consider a physician that s in charge of case management or utilization review as qualified to sign. CMS doesn t view that person as someone with knowledge of the patient for purposes of the order. However, that utilization review physician could certainly qualify to sign the certification and be part of the certification process in that particular case. Question: Our bylaws indicate that our attending or ordering physicians no longer co-sign orders for mid-levels who are supervised by the attending physician. Is this okay or would these admit orders need to go back to the physicians for signature? Answer: Are the mid-levels actually doing the admitting? Is the admission decision being delegated to them? Do the mid-levels have authority under state law or is it under their scope to order admissions? If it s delegated, the admitting physicians are going to have to authenticate the order. They re going to need to sign with date and time. They can authenticate at the time of discharge but what they can t do is delegate the decision, the order, to another individual who is not responsible for the patient s care, not authorized by the state to admit patients or who has not been granted admitting privileges by the hospital staff. Question: Can an advanced nurse practitioner or resident sign an order for admitting? Answer: If in your particular state the resident or the advanced practitioner nurse has the authority under state law to order hospital admissions, and it s consistent with the hospital s bylaws, then they count as ordering practitioners for the purpose of the order. And the physician does not have to co-sign the order. Let s say it s a nurse practitioner, and NPs have the authority to admit patients as an inpatient. It s also consistent with the hospital bylaws. Then they can admit. But a physician is still going to have to sign the certification because the certification does require an MD or a DO. With a resident, you might be okay but it depends on the hospital s bylaws and state law. The Two-Midnight Rule Question: When does time, for purposes of the two-midnight rule, start for someone who comes in for elective surgery? Answer: What starts the inpatient stay is the inpatient order. Do you have a preprocedure admission order? Because if you do, the clock starts at the time the patient is formally admitted. According to CMS, the starting point for medical review purposes will be from the time the patient starts receiving any services after arrival at the hospital. If you have a post-procedure admission, the order, which is issued post-procedure, is what s going to start your clock. That s true for the presumption, that s true for the benchmark, but again, under the benchmark if, from the time of your inpatient order to the time of discharge, you don t have a stay crossing two midnights, the admission

41 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 37 will be reviewed against the two-midnight standard counting all services rendered before the order was written. If the entire hospital stay does cross two midnights, that will play into the benchmark. Question: On day one in the facility, the admitting doc thinks the patient will only need to be in for a one-midnight stay so does not sign an order. The patient s condition worsens, and the next day the physician now expects the patient to be there another midnight. Can you now change the certification to order inpatient or will this raise a flag? Answer: No, it s not raising a flag. It s exactly what CMS says in its commentary should happen. If you are approaching a time when there is a determination made that the patient is going to cross a second midnight, then you can order an inpatient admission. Actual inpatient time won t start until the order is signed, so you re not going to meet the presumption if they don t go to the third midnight, but you certainly have a basis for the benchmark if you re reviewed. Question: Are you likely to be reviewed under those circumstances? Answer: Anything that s billed that doesn t fall within the presumption, I think we can expect will be reviewed. At the same time, if the hospital is entitled to bill for the stay as an inpatient, the hospital should bill as an inpatient. And I think where you re seeing the patient decline, that s what reviewers are looking for. We spend a lot of time in the hearing process fighting about why there was no decline. Therefore in this situation, you are in a good position to withstand the medical review, but the claim is likely to be pulled for medical review. CMS doesn t have the manpower to review every claim that is a short stay, but it is going to fit within the pot of services that are likely to be pulled. Question: Now what about a transfer both in and out? How is that treated under the two-midnight rule? Answer: The preamble addresses a physician transfer from the hospital. If the patient comes to the hospital as a patient needing two midnights of care, and for some reason the hospital cannot provide the services the patient needs and the patient is transferred before two midnights, the claim likely will be inpatient. When the patient comes to the hospital, the hospital has to do its own formal admission. So if the individual is transferred as an inpatient, he or she is not an inpatient until formally admitted by an order for inpatient stay. So that s when the clock would start for your particular institution. Would it help if the individual was an inpatient in another facility and transferred over? Certainly having the documentation to help support the reasonableness of being inpatient, but again CMS has not addressed this specific circumstance but says it is one of its top priorities. Question: For purposes of time, is the patient considered discharged when the discharge order is written or when the patient leaves?

42 38 AIS s Management Insight Series Answer: Generally speaking, it is when the patient leaves. I would caution it s not when the order is written because a lot of times you will see a discharge order that says discharged home today after seen by neurology or something like that so it certainly can t be the order. Now, I have also seen discharge orders that say discharge home after lunch, good to go home, discharge after lunch. In those situations you re going to be discussing your reasonable expectation of the need for hospital care. But generally speaking, it s when the patient leaves the hospital. Question: Will we need to use condition 44 anymore? Answer: With respect to condition code 44, you don t have to use it, because you can use the self-audit provisions that are in the final rule where your utilization review committee, after review, can flip a patient s status after discharges. But there are some administrative hassles. When you flip a patient s status after discharge, you first have to submit a no pay bill, receive your decision on that, and then you can submit your Part B inpatient bill. This is different than if you used condition code 44 where you can just submit your Part B claim after the patient goes home because there wasn t really a change. However, there still will be circumstances where condition code 44 is the way to go. Question: Did I understand you to say that if the patient is expected to be in the hospital for 48 hours and has a miraculous recovery, then the patient would be an outpatient unless he or she had been in for an inpatient-only procedure? Answer: First, it s important to note that we are getting away from using 24 and 48 hours and talking about crossing two midnights, which is a different concept. Second, in these circumstances, there should be more documentation even than in the certification form to explain why the physician thought the patient would be in the hospital over two midnights even though the patient got better sooner than expected. A very thorough discharge summary also will support the physician expectation and the early discharge. Question: When we first talked about the two-midnight rules, there seemed to be just two narrow exceptions for transfers or deaths. But there are scenarios where people just leave against medical advice, even though there was an expectation on the front end that the person needed to cross two midnights, and that the services would be medically necessary to continue servicing this patient for that entire period. So the question is what do you do about that? Answer: The preamble to the rule addresses this issue. On p of the Federal Register, CMS says While we did not specify the situation in which a beneficiary leaves against medical advice is an exception under the proposed rule, we acknowledge that an AMA departure is usually an unexpected event and that the inpatient admission could still be appropriate provided that the medical record demonstrates a reasonable expectation of a two-midnight stay when the admission order is written. It all goes back to the physician s expectation of the time at the time of admission and having clear documentation of what that expectation is based on.

43 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 39 I don t think leaving against medical advice is going to be a big compliance risk. Your larger compliance risk area is going to be the patient that miraculously got better. So if the physician has an expectation and this is really asking physicians to have a crystal ball that the patient is going to in the hospital exactly two midnights and the patient goes home at 10, that s your compliance risk area and that s when you re going to be in a hearing arguing with the recovery auditor about the reasonableness of your expectation. Question: What about that rare OB Medicare patient who probably won t be in the hospital for two midnights? Answer: If you don t expect two midnights, then that is outpatient. You have to have the expectation. Question: So if that patient delivers but leaves before the second midnight, it would still be an outpatient? For example, some mothers choose to go home quite quickly after delivery. While the physician may feel that he would like her to stay two midnights, depending on that time of delivery, she might choose to leave before the second midnight. Answer: It all depends on medical necessity. Is it medically necessary to keep the mother in the hospital through the second midnight? If it is medically necessary and the physician documents why it s medically necessary, perhaps. But if the view in this situation is that the mother can leave when she wants, one might say, is it medically necessary? Question: What effect does the two-midnight rule have on the skilled nursing facility s three-day hospital rule? Are you allowed to count your time in observation, as you are for two-midnight? Answer: No. You still have to have the three days. But we ll see if CMS changes its position based on the outcry from the senior community. Question: If the procedures performed are a mix of both inpatient-only procedures and those not on the inpatient-only list, would the encounter still be exempt from the two-midnight rule? Answer: If part of the component is an inpatient-only procedure, then it has to be done inpatient. So, just because you have something else being performed in conjunction that is not inpatient-only, I don t see how that would negate the fact that you have a procedure being performed on the inpatient-only list. Question: If the rule is no longer based on services rendered, would we expect to see a revision of the inpatient-only code list? Answer: Maybe. We ll see if now it is going to be those procedures where you re expected to be there for two midnights, instead of what would usually be based on 24-hours. It will be very interesting to see what CMS does with the list. Question: Would you summarize the letter delaying enforcement?

44 40 AIS s Management Insight Series Answer: The letter is dated Sept. 26, to the president and CEO of the American Hospital Association, and basically responds to a number of inquiries and concerns that the AHA has raised on behalf of the hospital community. The actual response is in the form of questions and answers. While the rule still goes into effect on Oct. 1, for a period of 90 days starting Oct. 1, CMS is not permitting the Recovery auditors s to review inpatient admissions of one midnight or less that begin on or after Oct. 1. However, the Medicare administrative contractors (MACs) will review a sample of inpatient hospital claims spanning less than two midnights after admission to determine for medical necessity of the patient status in accordance with the two-midnight benchmark. CMS will establish a specific probe sample pre-payment of 10 to 25 claims per hospital. The probe reviews will be completed by the MAC on inpatient hospital claims spanning less than two midnights with dates of admission Oct. 1 through Dec. 1. The probe is supposed to determine each hospital s compliance with the new inpatient rule and provide feedback to CMS for purposes of jointly developing further education and guidance for the hospital community. Since the probe review is conducted on a pre-payment basis, hospitals will be able to re-bill denied inpatient hospital admissions in accordance with the Part B inpatient rule. And if the MAC identifies no issues during the probe, the MAC will cease further reviews of that hospital but only from October through December. If the MAC identifies issues, the MAC is supposed to conduct education for the hospital and conduct further follow-up if necessary. Question: So, as of Oct. 1, should hospitals still comply with the requirements of the orders? Answer: Yes, nothing has changed the implementation. Nothing has changed. The only thing that has changed is that you can expect the recovery auditors not to be the one in your business for now.

45 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 41 Part III: Articles from AIS s Report on Medicare Compliance on the Two-Midnight Rule The following articles were reprinted from AIS s Report on Medicare Compliance, the industry s #1 source of timely news and proven strategies on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers. For more information, visit RACs to Back Off Longer Stays as Two-Midnight Standard Survives in IPPS Rule Reprinted from the Aug. 12, 2013, issue of Report on Medicare Compliance. Starting Oct. 1, 2013, recovery audit contractors (RACs) generally won t scrutinize inpatient stays that last two midnights or more. RACs and other Medicare auditors will focus on shorter stays because CMS generally will assume admissions that cross two midnights are medically necessary unless they re delayed on purpose, according to the 2014 final inpatient prospective payment system (IPPS) regulation announced Aug. 2, That shifts the medical-necessity emphasis to time spent in the hospital and puts a premium on documentation and utilization review, experts say. Although the two-midnight clock doesn t start ticking until physicians sign an inpatient order, CMS says hospitals and auditors may count outpatient hours, such as observation, when evaluating the medical necessity of the inpatient admission. And the regulation distinguishes between a two-midnight presumption and benchmark, with the former addressing audits and the latter related to clinical judgment. This new rule changes the landscape of medical reviews. If the patient is in the hospital for two midnights, RACs wouldn t be looking at that issue at all, George Mills, director of the CMS Provider Compliance Group, said at an Aug. 6, 2013, open door forum on the IPPS. That issue has been taken off the table for RACs.In the future, reviews of inpatient claims should be substantially reduced because of this new rule, and they will be moving on to other areas. In an interrelated provision, CMS formalized Part B rebilling for Part A claims denied based on the lack of medical necessity for the setting. The policies were designed to work together to reduce the frequency of extended observation care when it may be inappropriately furnished and provide payment to hospitals for the reasonable and necessary services they provide to inpatients, CMS says.

46 42 AIS s Management Insight Series IPPS Rule Refocuses Audits The two-midnight standard fundamentally changes how we will look at everything, says Jeffrey Farber, M.D., chief medical officer at Mount Sinai Care and associate professor at Mount Sinai Medical Center in New York City. The major change is the new rule eliminates the old, clear distinction between outpatient and inpatient services. That s out the door, and all levels of care on the hospital premises are equivalent. Everything takes a back seat to time and the physician s expectation of time spent in the hospital. In the regulation, CMS said the new policy isn t that radical and provides flexibility. It represents only a change in the inpatient admissions benchmark from an hourly expectation (24 hours) to a daily (2-midnights) expectation and doesn t restrict the physician to a specific pattern of care. When inpatients suddenly improve and can be discharged before two midnights, Medicare reviewers will not presume that the inpatient hospital status was reasonable and necessary for payment purposes, but may instead evaluate the claim pursuant to the 2-midnight benchmark. That includes looking at the physician order; physician certification (e.g., the reason for continued hospitalization, the estimated time the patient will need to be in the hospital and plans for post-discharge care); and documentation that the admission is reasonable and necessary. At the same time, CMS acknowledged the magnitude of the two-midnight rule. We understand this is a pretty significant change in medical review, Jennifer Dupee, a nurse consultant in the CMS Provider Compliance Group, said at the Aug. 6, 2013, open-door forum. CMS says physicians can include time in outpatient services, including observation, emergency room visits and outpatient procedures. The decision to admit the beneficiary should be based on the cumulative time spent at the hospital beginning with the initial outpatient service, the rule notes. But this concession is not unqualified. While the outpatient hours aren t inpatient time, CMS says they may be considered by physicians in determining whether a patient should be admitted as an inpatient, and during the medical review process for the limited purpose of determining whether the 2-midnight benchmark was met and therefore payment is generally appropriate under Part A. The regulation implements two medical-review policies: the two-midnight threshold and two-midnight benchmark. The presumption refers to CMS guaranteeing payment for stays that transcend two midnights after the inpatient order, with Medicare auditors tackling one-day stays. The benchmark is a goal post for physicians making clinical decisions. Farber sees physicians as the buffer between the presumption and the benchmark. The presumption is CMS saying they will not try to audit cases that have two-midnight stays, but benchmarks are used by clinicians, he says. The benchmark is for clinicians making these decisions. Suppose a patient has chronic obstructive pulmonary disease (COPD) exacerbation that requires IV steroids and antibiotics. The physician

47 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 43 believes an admission is prudent and will last two midnights. If the patient winds up not needing both nights, that s still OK. The judgment is documented, and the clinical reasons for two midnights are documented, so that should hold up under scrutiny, Farber says. Auditors may still put the claim under the microscope for MS-DRG coding and complications and comorbidities or major CCs, but that s another story. Ralph Wuebker, M.D., chief medical officer for Executive Health Resources in Newtown Square, Pa., interprets the presumption vs. benchmark in a similar way. The presumption is for auditors looking backward while the benchmark is for physicians to determine patient status looking forward. He also sees this as raising the stakes for documentation. Are you practicing according to the standard of care? That s where I think CMS is going that focus on documentation, Wuebker says. If a patient comes in for chest pain but doesn t get a stress test until the third day, perhaps because of scheduling problems, those should not be situations to keep the patients in the hospital longer. They can get infections or fall or have complications, he says. If you can just improve the efficiency of the case, it will be a big step. Intensity of Service Is Irrelevant In light of the two-midnight presumption and benchmark, hospital utilization review committees will have to figure out an action plan on educating physicians to think differently, Farber says. It s a new world when the medical necessity of an admission doesn t ride on location ICU, a step-down unit or a med-surg floor, Farber says. They are saying the whole range of clinical services and the provision of acuity is sort of irrelevant, he says. What matters in terms of admission is how long a patient is expected to stay in the hospital. While orders can make or break an admission, Medicare auditors won t judge medical necessity on orders alone. No presumptive weight will be accorded physician orders or certifications; they will be assessed in the context of the whole medical record. But in a departure from the proposed IPPS regulation, CMS acknowledges that in some circumstances, the ordering and treating physician may be different people (e.g., emergency room physician, hospitalists and residents). Either way, orders must be signed by qualified, licensed practitioners who have hospital admitting privileges and know about the patient s condition and plan of care. CMS also says that admissions may be appropriate when patients are transferred, leave against medical advice or die before staying for two midnights. The two-midnight rule probably isn t a cost-cutting measure, Farber says. CMS actuaries expect it to cause 400,000 more inpatient admissions while converting 360,000 short stays to observation. But Jeffrey Epstein, senior medical director for quality, case management and resource utilization at Stamford Hospital in Connecticut, is convinced the two-midnight rule is all about the desire to fill Medicare coffers. Why not be honest? It is all about money because whether it is inpatient or outpatient, it is all the same, he says. Some hospitals may be financially devastated. Let s say you have

48 44 AIS s Management Insight Series $200 million per year in Medicare revenue. If they take back 1%, that is $2 million, Epstein says. A hospital may only be making a $2 million profit, so that s it. If they are only making $1 million, they may be in the red. Epstein agrees the old rules about observation and inpatient admission made sense. What s changed is that RACs and MACs apply different rules to Medicare claims. We threw a strike, and they called a ball, he contends. There will be elaboration on the two-midnight rule, with CMS planning one or two more open-door forums. It s also updating Medicare manuals accordingly and developing educational materials. Dupee encourages providers to any questions to ippsadmissions@cms.hhs.gov. Contact Farber at Jeffrey.farber@mssm.edu, Wuebker at rwuebker@ehrdocs.com and Epstein at jepstein1@stamhealth.org. G Breaking Down the New Two-Midnight Rule Reprinted from the Sept. 9, 2013, issue of Report on Medicare Compliance. Hospitals are adapting to Medicare s new standard for medically necessary inpatient admissions. Starting Oct. 1, CMS generally will assume admissions that cross two midnights are medically necessary unless they re delayed on purpose. Auditors will focus their attention on shorter stays except when inpatients are having procedures on the Medicare inpatient-only list. This chart was developed by Wendy Trout, director of corporate compliance at WellSpan Health in York, Pa. Contact her at wtrout@wellspan. org. Key Item Order Certification Expectation Documentation Details An order is still required for inpatients. The order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by state law, and who is knowledgeable about the patient s hospital course, medical plan of care, and current condition. Order must say admit to inpatient, for inpatient services, as an inpatient or something similar. Admit to Tower 3 will not be acceptable. Physician certification is required for ALL inpatient admissions. Begins with the order to admit. Certification statement may be entered on forms, notes, or records that the physician signs, or on a special separate form. Statement must be signed and documented in the medical record prior to hospital discharge. Verbiage: (1) the reason for the inpatient treatment or diagnostic study; (2) special or unusual services the patient will receive; (3) the estimated time the patient will stay in the hospital; and (4) plans for posthospital care. Ordering provider must "expect" that the beneficiary will require care that crosses two midnights. If DON T expect two midnights, then service will be an outpatient or observation. Ordering provider documentation should support the expectation that the beneficiary will require care spanning at least two midnights when the admission order is written. The ordering provider should say, "I believe this patient will require a stay crossing two midnights because... Documentation should provide justification to support the medical necessity of the admission, which is based on many factors such as: risk of adverse event, assessment of services the patient needs, and comorbid conditions.

49 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 45 Key Item Time Consideration Stay < two midnights Stay > two midnights Surgical Patients Diagnostic Tests Treatments Inpatient Only Condition Code 44 IRF Financial Impact Details When providers are considering the "two-midnight" benchmark, they can consider all time in the ED and observation to make the decision. BUT this time does not ultimately count as inpatient time for the 3-day requirement for SNF benefits. So, if patient starts in ED, then is placed in observation, then the physician admits the patient, the inpatient benchmark of "two-midnights" starts when the patient started receiving services in the ED. But the calculation for SNF benefits starts with the admission order. This does allow a physician (when it is difficult to make a reasonable prediction) to start the patient as an observation, and then as they approach the "two-midnight" mark, admit them. In all cases, patients should have an admission order before they cross two midnights. Not even ICU stays are exempt from the two-midnight rule. One interpretation indicates intensity of service no longer seems to be a significant contributor to the decision to admit. Inpatient MAY still be appropriate since it was based on the "expectation" that they would need to stay two midnights. Documentation needs to support the initial expectation. Unexpected events may occur, such as: patient could die, be transferred, leave AMA, or improve more rapidly than expected. A stay of less than two midnights will most likely prompt a review by the MAC. Presumed to meet inpatient unless it appears facility is gaming the system by keeping patients longer than necessary. However, even though it is "presumed" to meet inpatient, the comments to the rule indicate that the MAC may still review longer cases for "medical necessity" and coding issues "irrespective of the inpatient or outpatient status to which the beneficiary was assigned. This will not be their focus though. CMS will focus its review efforts on the inpatient admissions that cross one midnight or less. Says they will "Instruct contractors to review inpatient stays spanning less than two midnights after admission." When a beneficiary enters a hospital for a surgical procedure, a diagnostic test, or any other treatment and the physician expects to keep the beneficiary in the hospital more than two midnights, this should be ordered as an inpatient. Inpatient Only procedures are still billed as inpatient regardless of the two-midnight benchmark. Condition Code 44 is not to be used for unexpected events or cases where the patient doesn't end up staying the "two midnights." This is still for the situation when UR determines that the physician has not appropriately admitted the patient. Does not apply to IRFs. CMS actuaries estimate this change in policy will increase IPPS expenditures $220 million due to an increase in inpatient encounters for patient stays that span more than two midnights and move from OPPS to IPPS. Commenters argued that they did not agree with this assessment. Many argued that more 1-day stays will now be observation cases instead thus decreasing payments. CMS would not budge; therefore they are decreasing IPPS payment amounts by.2 percent. AHA indicates that CMS ignores any of the financial "savings" of medical 0 or 1-day inpatient stays changing to outpatient. AHA Indicates that a hospital can estimate the amount of revenue loss excluded from CMS s neutrality calculation by following these steps: (1) tallying up the medical inpatient stays that were 0 or 1 day over a whole year; (2) exclude the ones that reach the two-midnight benchmark by virtue of outpatient midnights crossed; (3) multiply that number by the difference between your inpt and obs reimbursement for medical stays (probably about 4k for most hospitals). Physician Certifications Take Center Stage as Hospitals Plan for Two-Midnight Rule Reprinted from the Sept. 2, 2013, issue of Report on Medicare Compliance. Physician certifications are about to become decisive documents for Medicare Part A reimbursement. CMS has made a connection between certifications and the medical necessity of admissions, although physicians have until discharge to complete them.

50 46 AIS s Management Insight Series The physician certification requirement is part of the new two-midnight standard for inpatient admissions in the final 2014 inpatient prospective payment system regulation. Starting Oct. 1, 2013, CMS generally will assume admissions that cross two midnights are medically necessary unless they are delayed on purpose. Auditors will focus on shorter stays except when patients are having procedures on Medicare s inpatientonly list. Having certification for all inpatient admissions is a condition of payment, says Jessica Gustafson, with The Health Law Partners in Southfield, Mich. Getting on board with filling out more paperwork will be a struggle, but I think hospitals need to keep in mind it is a requirement for payment and take a proactive approach for compliance rather than anticipate a defense for the appeals process. Inpatient stays must kick off with an admission order, but the rest of the certification is due at discharge. Certifications must spell out (1) the reason for the inpatient treatment or diagnostic study; (2) special or unusual services the patient will receive; (3) the estimated time the patient will stay in the hospital; and (4) plans for post-hospital care, according to the IPPS rule. I am less concerned about the two-midnight rule than I am about how to capture all the required certification documentation, says Laura Ehrlich, compliance auditor at Hanover Hospital in Pennsylvania. The different parts of the certification don t have to be in the same place. As CMS says, they may be on records or notes (e.g., history and physical, progress notes) or a special separate form. Gustafson recommends the use of a combined document, with space for a signed and dated order and the elements of certification. It makes sense to keep that information together, says Gustafson, who also spoke Aug. 23, 2013, at a Finally Fridays webinar sponsored by the Appeal Academy. Physicians can circle back around to the paper or electronic sheet when they are ready to complete another section. But experts advise waiting for CMS guidance on certifications before making radical changes. The certification mandate didn t come totally out of left field. Under 42 CFR Sec , physicians are required to certify and recertify services when hospital stays will cause cost outliers, says Ronald Hirsch, M.D., vice president of the regulations and accreditation group for Accretive Physician Advisory Services. All along it has only been in this context. But in my 20 years of practicing, I never remember asking to sign a certification of an outlier stay. As far as Gustafson is concerned, certification for short hospital stays is just new. The requirements don t resemble the pre-ipps version. Certification Has Its Gray Areas There are unknowns about certification, Hirsch says. For example, he wonders whether it s compliant for physicians to give a range when estimating how long the

51 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 47 inpatient will be hospitalized (e.g., two to five days). Or is a definitive number of days required? Does it matter as long as two midnights are passed? Because of the uncertainty, hospitals want to be ready to act but not jump yet, Hirsch says. That includes working with physicians to improve their documentation. Get them to document why they could not be treated as outpatients, he says. And involve the IT department now so the hospital doesn t spend four months testing changes to computerized physician order entry. In fact, hard stops in electronic health records (EHRs) may help with certification compliance, says Michael Salvatore, M.D., physician adviser at Beebe Medical Center in Lewes, Del. Physicians won t be able to close out the EHR until they answer the two-midnight question. If you have a flexible EHR, you are in good shape, he says. CMS also formalized its requirement for admission orders as a condition of hospital payment, which until the IPPS rule was a condition of participation and mandated in the 2012 Medicare physician fee schedule. But say goodbye to specific orders, such as Admit to tower four or Admit to ICU. To prevent ambiguity about the patient s destination, CMS is requiring physicians to include the word inpatient in their orders. Physicians have to use the magic words Admit to inpatient and I think they will be here for two midnights, Salvatore says. That s a big change in physician behavior. Again, he says, EHR hard stops will be a boon because physicians can t continue their documentation until they have used the magic words. Physician orders and certifications aren t a panacea for Part A claims. It s a little confusing, but the IPPS regulation states that no presumptive weight shall be assigned to the order or certification in determining the medical necessity of inpatient hospital services. Salvatore doesn t think that squares with the fact that how sick you are no longer determines your admission status under the two-midnight rule. He expects CMS to fall back on the Medicare Benefit Policy Manual (Chapter One), which states that the decision to admit a patient is a complex medical judgment which can be made only after the physician has considered a number of factors, including the severity of signs and symptoms and the risk of something bad happening to patients if they are discharged. The two-midnight standard and its certification is a great educational opportunity for hospitals, says Minneapolis attorney David Glaser, with Fredrikson & Byron. The definition of an inpatient is clear and physicians just have to write why they think the patient will be in the hospital for two nights. If they have any doubt, they put patients in observation. There s nothing to lose, Glaser says. When patients are moved from observation to inpatient, the hours count for two-midnight purposes. He thinks they also can be billed separately, citing this language from the regulation: Those services that require an outpatient status that cannot be billed on a 12x claim observation services, outpatient hospital visits, and outpatient DSMT are payable if they were furnished to an outpatient during the 3 day (1-day for non-ipps hospitals) payment window preceding the inpatient admission and are billed on a Part B outpatient (13x) claim.

52 48 AIS s Management Insight Series Because orders and certifications are now explicitly a condition of Part A payment, hospitals may not be able to bill Medicare if something is amiss. Instead, they should consider a self-audit and rebilling under Part B, Gustafson says, although she is not an advocate of RAC-ing yourself especially when all required information can be found in the medical records even if it s not documented in the best manner. It s always better to get it right at the front end, but if necessary, the administrative law judge may approve Part A payment even if part of the certification is missing, says Sharon Easterling, president of Recovery Analytics in Charlotte, N.C. Hospitals should prepare a certification statement that explains where the pieces can be found, Ehrlich says. Medicare is looking for a cohesive piece of information. Vincent Perron, M.D., associate chief medical officer for 1,000-bed Tampa General Hospital, isn t looking forward to telling physicians about the two-midnight rule and its certification requirement. Most physicians can t define the difference between an observation patient and inpatient and it is something we struggle with daily, he says. It s all Greek to them. The hospital s clinical documentation improvement team probably will educate physicians and Perron will meet with key physicians. Tampa General already does random chart reviews, giving physicians feedback on deficiencies. If there s a pattern of poor documentation, a physician is referred to the health information management committee and rounds with the EPIC person to develop H&P and other templates, he says. For the notoriously poor documenters, the hospital may get voice recognition software. Perron notes that great clinicians can be lousy at documentation so there isn t necessarily a correlation. Contact Gustafson at jgustafson@thehlp.com, Hirsch at rhirsch@accretivehealth. com, Glaser at dglaser@fredlaw.com and Salvatore at msalvatore@bbmc.org. G CMS Eases Up on Physician Certifications Under IPPS; Will Its Auditors Follow Suit? Reprinted from the Sept. 16, 2013, issue of Report on Medicare Compliance. In new guidance, CMS softened the blow of the certification requirements for inpatient admission under the two-midnight standard, which was set forth in the 2014 inpatient prospective payment system (IPPS) regulation. The jury is out on whether auditors will deny claims based on the lower bar in the guidance or the higher bar in the regulation, but there s no doubt that subregulatory guidance carries weight in the eyes of administrative law judges and federal courts, one lawyer says. Starting Oct. 1, 2013, CMS generally will assume inpatient admissions that cross two midnights are medically necessary unless they are delayed on purpose, and auditors will turn their attention to shorter stays except for procedures on the inpatient-only list, according to the IPPS rule. As a condition of payment under Part A, physicians must document the medical necessity of an admission, which includes a certification with an admission order, the reason for the inpatient services, the estimated time the

53 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 49 patient will stay in the hospital, and plans for post-hospital care. At critical access hospitals, physicians must certify they expect inpatients to be transferred or discharged within 96 hours. Hospitals were shaken up by the certification requirements because it s another demand on harried physicians. But CMS eased up in its Sept. 5, 2013, subregulatory guidance on the hospital admission order and certification, compliance experts say. For one thing, if hospitals don t have a separate certification form, CMS and its contractors will consider a default methodology for initial certification. They will hunt and peck their way through the medical records to find support for the inpatient admission. The guidance appears to say that an admission order implies the physician expects the patient to stay in the hospital for two midnights. The estimated time requirement will be met by the inpatient admission order written in accordance with the two-midnight benchmark, supplemented by the physician notes and discharge planning instructions, the guidance states. That takes the pressure off hospitals as they brainstorm their way into compliance with the two-midnight rule and its certification and other requirements, says Ronald Hirsch, M.D., vice president of the regulations and accreditation group at Accretive Physician Advisory Services. People are freaking out about how they get physicians to estimate length of stay, he says. The way I read the guidance is, if the physician writes the inpatient order based on his or her knowledge of the two-midnight benchmark, that serves as a de facto certification that the patient needs two or more midnights in the hospital and the physician does not need to estimate length of stay. This was confirmed by a CMS official in an sent to Hirsch. The guidance also addresses the specificity of orders. The preamble to the regulation says that admission orders must include the word inpatient either admit as an inpatient, for inpatient services, to inpatient or similar language. But physicians shouldn t use specific destinations, such as Admit to ICU or Admit to 4C. CMS Answers Trigger New Questions While the guidance says it s better when orders include the word inpatient, it opens another door. In the event that explicit identification of the admission as inpatient is not specified, the admission order may still be consistent with 42 CFR provided that the intent to admit as an inpatient is clear, CMS says. Orders that specify admission to an inpatient unit (e.g., Admit to 7W, Admit to ICU ), admission for a service that is typically provided on an inpatient basis ( Admit to Medicine ), or admission under the care of an admitting practitioner ( Admit to Dr. Smith ), and orders that do not specify beyond the word Admit, will be considered to specify admission to an inpatient status provided that this interpretation is consistent with the remainder of the medical record. Hirsch says the regulation and guidance give conflicting directions on orders. On top of that, the logic doesn t always hold when it comes to intensive care units, which

54 50 AIS s Management Insight Series are not by definition inpatient units. According to the rule, if patients are expected to need only one night in the hospital and spend it in the ICU, they will be outpatients because they haven t crossed the two-midnight threshold unless they had procedures on the inpatient-only list, he says. But if CMS is saying an ICU order implies it s an inpatient, then it s a contradiction, Hirsch contends. Presumably hospitals will find the guidance easier to comply with. But can hospitals count on it? Or will RACs and other auditors hold them to the standards articulated in the regulation? RACs will do whatever they want to do, says Washington, D.C., attorney Andy Ruskin, with Morgan Lewis. Although they must base decisions on regulations, manual provisions, national and local coverage determinations and coding/coverage articles, RACs are sometimes unfamiliar with subregulatory guidance, he says. And once they ve decided a provider is wrong, there is some stickiness to their decision even if it s clear the decision is not aligned with CMS policy, Ruskin says. If auditors deny claims based on the regulatory requirements for certification, hospitals probably would have to appeal their cases all the way to administrative law judges on the grounds that the guidance gave them more latitude, he says. Yet even at the ALJ level, judges are not always aware of how to determine the weight of an authority under federal law. But hospitals definitely would win in federal court, Ruskin says. It s well-established through case law that subregulatory guidance is entitled to the deference of a regulation unless it conflicts with it. The only way CMS can change the subregulatory guidance is through rulemaking. An interpretation of a regulation is in effect considered to be like the regulation itself, he says. Regulators have acknowledged they live by that principle. That means CMS is bound by it. He adds that language in the preamble carries less weight than the regulation. Therefore, CMS s provision on using the word inpatient in admission orders is not in conflict with its guidance, which might make it more of a best practice. The two-midnight stay and its certification don t mean hospitals are home free in terms of medical necessity. The certification is a prerequisite for a two-midnight stay, but the documentation must support the medical necessity of the admission. That s why the two-midnight rule ducked a fundamental problem, says Larry Hegland, M.D., chief medical officer and system medical director for recovery audit and appeal services at Ministry Saint Clare s Hospital and Ministry Good Samaritan Health Center in Weston, Wis. Auditors are arbitrary, he says. They use information not available to physicians at the time of admission, such as the patient did well or there were no complications, to determine the patient should have been treated in observation, he says. This rule doesn t change that. Unless CMS publishes clearer direction for RAC auditors, I don t see how it will be any different under the new two-midnight process, although I am hopeful because I believe CMS is well-intentioned.

55 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 51 There is an advantage to the certification requirement, Hegland says. It will drive a lot more clinical documentation education toward physicians, he says. Physicians use the chart as a communication tool, but Medicare views it as a billing tool. CMS wants it in a format and at a level of detail that is clear to a layperson, so two different processes are going on at the same time, Hegland says. Medicare auditors look for linkage language. For example, if the physician writes pneumonia, positive sputum culture, gram negative bacteria without the words due to, the claim will be denied. It seems obvious to physicians, but auditors expect to see pneumonia due to gram negative bacteria. Without the words due to, the coder is required by coding rules to code the less-specific, lower paying community-acquired pneumonia, he says. Physicians generally don t grasp the distinction between documentation as a clinical communication vs. a billing tool and are unfamiliar with documentation requirements for hospital billing. There is very little bandwidth left for learning documentation rules and the quirks of coding and billing language, he says. Hegland educates physicians any place he can. He grabs them, one by one, and buys them a sandwich so he can explain compliance issues. I focus on the rationale of why we have case managers and clinical documentation improvement specialists so when they come to talk to them, the physicians understand [the case managers and CDI specialists] are there to help. He also slips into department meetings, puts it on the Intranet, makes presentations to the medical executive and case management committees and sends out newsletters. It s the multiple-hit theory, Hegland says. I try to flood the airwaves with general information that a big change is coming. I rely on human curiosity. As for the new certification requirement, he doesn t expect much trouble. We are an all-digital hospital, he says. I can build screens in the computer physician order entry system. Physicians can t continue with their documentation unless they state they believe the patient requires two midnights. If hospitals are still using paper orders, they may want to turn the process over to case management. Contact Hirsch at rhirsch@accretivehealth.com, Hegland at larry.hegland@ministryhealth.org and Ruskin at aruskin@morganlewis.com. View the new guidance at Downloads/IP- Certification-and-Order pdf. G Example of Certification for Two-Midnight Stay Reprinted from the Sept. 16, 2013, issue of Report on Medicare Compliance. With two weeks to go until Oct. 1, 2013, when hospitals must comply with the 2014 inpatient prospective payment system regulation, they are drafting forms designed to comply with new physician certification requirements under the two-midnight rule. Ann Kunkel, director of case management at Wellspan Health in York, Pa., led the team that developed this draft certification. Contact her at akunkel@wellspan.org. G

56 52 AIS s Management Insight Series Admit to inpatient care: Based on my medical assessment, after consideration of patient s risk factors age, comorbidities and patient presenting symptoms and acuity I expect that this patient will remain in the hospital for greater than two midnights or that the services needed warrant inpatient care because: Specify patient risk factors Services provided: Estimated length of stay (LOS): Post Hospital Care (if known): Observation advancing to Admit to Inpatient: This patient is advancing from an outpatient level of care to an inpatient level of care because: There are continued needs for hospitalized care beyond the observation period due to: Services provided (acuity): Estimated LOS: Post Hospital Care (if known) I certify that my determination is in accordance with my understanding of Medicare s requirements for reasonable and necessary inpatient services [42 CFR e)] Provider Signature Date Supervising Provider (as appropriate) CMS s Plan to Package Far More Outpatient Services Plays Into the Two-Midnight Rule Reprinted from the Sept. 16, 2013, issue of Report on Medicare Compliance. The superpackaging of outpatient procedures and the new two-midnight rule for inpatient admissions are moving parts of the same mechanism, with CMS shifting the gears to reward hospitals for quality and efficiency instead of performing more services, experts say. The interdependence of the inpatient and outpatient prospective payment systems also affects audits. Auditors may get a leg up from CMS s plan to package more HCPCS codes for goods and services into APCs, as set forth in the 2014 proposed outpatient prospective payment system (OPPS) regulation. In one fell swoop, they could deny claims for certain procedures if hospitals don t establish medical necessity with the appropriate diagnosis code. On the inpatient side, auditors will focus more on one-day stays on the presumption that stays that cross two midnights are medically necessary if there s supporting documentation and the hospital isn t playing games. It s a massive culture change, said William Malm, senior data projects manager at Craneware in Atlanta, at the Finally Fridays webinar sponsored by the Appeal Academy on Aug. 30, Outpatient has always operated more on an à la carte methodology while inpatient is more a buffet, and they are starting to close the loopholes on à la carte. They are saying get out of the culture of separate payments. They want to see a continuum of care based on evidence-based medicine.

57 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 53 CMS Rules Are Meshing In the 2014 OPPS, CMS takes a giant step toward making the word prospective meaningful. Right now OPPS is a hybrid, with some goods and services packaged into APCs and others paid separately. But that is expected to change on Jan. 1, 2014, when Medicare would: (1) Pay a fixed price for 29 device-dependent procedures; (2) Package payment for seven categories of integral, ancillary, supportive, dependent or adjunctive items and services; (3) Replace the two observation APCs with a new, streamlined version, and (4) Pay a flat facility fee for emergency room and provider-based clinic visits instead of letting hospitals choose from five levels of service. Meanwhile, if patients are headed for a stay that will last for two midnights, they are admitted under the new benchmark in the 2014 inpatient prospective payment system regulation. In between is observation, Malm said, which becomes more of a true outpatient event. The two rules seem to dovetail and are a significant sea change in the direction Medicare is moving, says Larry Hegland, M.D., chief medical officer and system medical director for recovery audit and appeal services at Ministry Saint Clare s Hospital and Ministry Good Samaritan Health Center in Weston, Wis. You start to see the lines blurring with the inpatient rules around observation status and the outpatient bundling. Self-Administered Drugs to Be Bundled The final OPPS, which is due out in November, probably won t deviate much from the proposed rule because it s key to making the other regulations work properly, Malm said. In the last two years, we have found a change in the way CMS approaches things. It s interrelated you can t read just one rule and follow the money. You have to look at the inpatient rule and [Medicare physician fee schedule] rule and outpatient rule. Under the OPPS proposal, Medicare creates comprehensive APCs for 29 of the 39 device-dependent procedures, which means the device is the most expensive part. The 29 APCs encompass 136 HCPCS codes and include implantation of infusion devices, replacement of pacemakers, insertion of cardiac defibrillators and female reproductive procedures. All kinds of services would be bundled in and some are eye-openers. For example, CMS plans to include room and board charges. That s a big change operationally, Malm said. People who use chargemasters are not used to billing room and board on the outpatient side and now they have to do that to make sure the rate setting is [accurate]. They want to incorporate room and board into the outpatient payment of the future, because they will do so many more bundled types of payments.

58 54 AIS s Management Insight Series It s unclear, however, that Medicare administrative contractors are equipped to deal with these data. But it was the inclusion of self-administered drugs in the comprehensive APCs that threw me for a loop, Malm said. According to the proposed regulation, drugs ordered by the physician as a supply would be packaged in the 29 device-dependent APCs. That allows CMS to sidestep the Social Security Act mandate that beneficiaries pay for self-administered drugs, said Malm, who is a physician assistant. Also included in the comprehensive APCs are integral, ancillary, supportive, dependent, and adjunctive services. They include diagnostic tests and procedures, lab tests, visits and evaluations, certain outpatient therapy services, durable medical equipment, and other components reported by HCPCS codes. One thing that keeps coming through is this will take you up to the two-midnight rule, he says. Hospitals will use a new status indicator (J1) when billing for 29 device-dependent procedures. J1 is king of the prom, Malm said. If any HCPCS code with J1 appears on the claim, the entire procedure-based claim will be packaged. Comprehensive APCs are a dream for auditors. They won t have to connect all the HCPCS dots to determine if a procedure was reasonable and necessary by Medicare standards. If the whole payment is based on the J1 status indicator, the diagnosis code and medical necessity will have to support the procedure, Malm said. For example, recovery auditors could easily identify dual-chamber pacemakers with a diagnosis code for diabetes. Claims would be denied, with no payment for any of the services that are now part of the superpackaged APCs. They enhance the government s ability to do automated and semi-automated reviews based on medical necessity because [Medicare] will pay based only on one thing, Malm says. Bundling May Add to Infusion Confusion In the rule, CMS proposed another kind of packaging. Payment for seven categories of integral, ancillary, supportive, dependent, and adjunctive services would be bundled into the APCs they support. The categories include drugs and biologicals for tests/procedures, certain clinical lab tests, add-on codes, ancillary services with the status indicator X, diagnostic tests on the bypass list, and device removal procedures. That means, for example, all add-on codes, such as concurrent and subsequent infusions and injections, would be packaged. Medicare would pay only for the initial infusion and for hydration. This will make hospitals crazy, Malm said. They have spent a bundle on consultants and software to ensure they bill infusions and injections in compliance with Medicare rules (i.e., initial and sequential infusions, hydration and injections). While the add-on codes must be reported correctly, they won t result in additional payment. Anything with a plus in the CPT book is packaged to the primary

59 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 55 procedure, he said. Malm worries hospitals won t bother, since they re spread so thin with the government mandates and audits. But that s not a good move. Coding all services is required, and CMS needs the data to ensure payment rates are accurate, he said. Malm predicts that commercial payers will follow Medicare s lead and shift to packaged payments because if they don t, the Affordable Care Act probably will be less effective, he said. Already several major commercial payers don t pay separately for infusions and injections and he sees more future bundling of ancillary services. Full-Fledged PPS Is the Objective The march toward a full-fledged prospective payment system continues with observation and facility fee coding. CMS would do away with the two composite observation APCs for extended assessment and management and replace them with one (APC 8009). And CMS is ditching the five evaluation and management (E/M) codes for emergency room and provider-based clinic visits. Instead, hospitals will select one code, although there will be different codes for clinic visits vs. Type A or Type B emergency room visits. If the rule is finalized more or less as is, hospitals may want to reconfigure their revenue cycle process to focus more on the front end rather the back end. The typical revenue cycle department depends too heavily on magical edits to keep bills clean, he said. Instead, there are denials and additional data requests and appeals, and hospitals are reaching the breaking point. It doesn t help that registration employees aren t paid much, so usually they don t attract the college-educated crowd, Malm said. Some hospitals that are doing it right are putting college grads at registration. Also, hospitals have to ditch convenience ordering, he said. Nurses may order EKGs and chest X-rays on patients with chest pain, who often leave before seeing a physician. As CMS pushes for efficiency on the outpatient side, the inpatient stays have gotten shorter, Hegland notes. We are a highly efficient hospital, he says. Average Medicare lengths of stay are about three days. Emergency-room physicians order tests and initiate therapies quickly, going beyond the role of triage. You get to the point where you wonder, what is inpatient vs. outpatient status? In terms of how we care for patients, it doesn t matter there is a continuum of care. You start to see CMS driving in the direction of simplification, where they can fold the inpatient and outpatient together. But the government also is afraid of tempting hospitals to delay discharges so their patients cross the two-midnight threshold and they collect MS-DRGs, which often pay more than outpatient services. It s human nature to follow the incentives, he says. That s why you need a review process. Contact Malm at wmalm@craneware.com and Hegland at larry.hegland@ ministryhealth.org. G

60 56 AIS s Management Insight Series Two-Midnight Stays May Be Audited Due to the Separation of Part A and Part B Claims Reprinted from the Oct. 14, 2013, issue of Report on Medicare Compliance. There may be a crimp in CMS s plans to steer clear of audits of inpatient stays that last two midnights. Claims for inpatient stays that cross the two-midnight threshold will still be pulled for review when patients spend the first night in observation or the emergency room because, on the surface, they resemble one-day stays, experts say. Without delving into the medical records, auditors won t be able to distinguish between dubious one-day stays and medically necessary two-midnight stays where only the second midnight was pursuant to an inpatient order. CMS has said the clock starts ticking on the two midnights when patients begin receiving care regardless of the setting, but that may not do hospitals much good auditwise, depending on how audits play out. The question is, when the auditors dig into the medical record and find that the patient did cross the two midnights, will they close the file? Or, having gone this far, will they continue with the audit to see if the medical record was documented correctly and the order and certification requirements are met? My guess is the latter, says Washington, D.C., attorney Don Romano, former director of the CMS Division of Technical Payment Policy. It will all depend on what instructions CMS gives the auditors. That s one of the lingering concerns with the two-midnight rule, which is a controversial part of the 2014 inpatient prospective payment system regulation that took effect Oct. 1. CMS generally will assume inpatient admissions that cross two midnights are medically necessary unless they are delayed on purpose, and auditors will turn their attention to shorter stays except for procedures on the inpatient-only list. However, CMS delayed until Jan. 1 recovery audit contractor (RAC) reviews and most Medicare administrative contractor (MAC) reviews of inpatient admissions with dates of service from Oct. 1 to Dec. 31, 2013, although MACs will audit short stays per hospital over the next three months to get a feel for compliance with life under the two-midnight rule. Meanwhile, hospitals are adapting to new physician certification requirements that are part and parcel of the two-midnight rule. Jessica Gustafson, an attorney with The Health Law Partners in Southfield, Mich., says the segregation of Part A and B claim data is the reason there will be audits of two-midnight stays. There is nothing hospitals can do at this point to avoid claims being targeted for medical review by RACs and MACs after Jan. 1, These are exactly the claims that will be audited, says Gustafson, who spoke at a Sept. 26, 2013, webinar sponsored by Atlantic Information Services. The hope and expectation is that CMS in reviewing those cases will apply the two-midnight benchmark in good faith. Auditors use MedPARS data that do not include Part B observation and emergency

61 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 57 room services in the dates of Part A stays, says Romano, who is with Foley & Lardner. If RACs go over a lot of cases where there are not two midnights on the surface, then a lot of those stays will end up getting denied, he says. Obviously, this dilemma doesn t exist for inpatient stays where the admission order kicked off an inpatient stay of two or more midnights. Two-Midnight Rule Is a Yardstick for Docs The two-midnight rule is a yardstick for physicians making clinical decisions, and as long as they document their expectations that the medically necessary inpatient stay will be two midnights, hospitals should avoid denials even if patients recover faster and are discharged sooner, Gustafson says. In the IPPS rule, CMS introduced two medical review policies related to the two-midnight rule: a two-midnight presumption and a two-midnight benchmark. The presumption refers to CMS telling auditors to steer clear of cases where a hospitalization crosses two midnights after an inpatient order is written (for the purposes of determining whether an inpatient admission is medically necessary), as long as hospitals aren t playing games and the services provided are medically necessary. However, the two-midnight benchmark may be applied to those cases where the entirety of a hospital stay crosses two midnights, but the time spent in the hospital after the inpatient order doesn t cross two midnights, Gustafson says. If the entire stay crosses two midnights, hospitals shouldn t face denials for medically unnecessary admissions. For example, if patients receive observation services across one midnight and the physician feels the patient requires hospital care for at least one more midnight, the physician may properly order inpatient admission, she says. When the claim is pulled for medical review which is likely since in the Medicare system, the inpatient time will appear to have crossed only one midnight CMS auditors may apply the two-midnight benchmark and not deny the claim, since the entirety of the hospital stay crossed two midnights, Gustafson says. While inpatient stays clearly begin when the admission order is written, it s a little fuzzy when hospitals can start counting outpatient hours for purposes of crossing two midnights. Is it when physicians put their hands on the patient in an emergency room? Or when the nurse does? Some consultants say it needs to be a doctor, but I m not sure I agree, Gustafson says. But sitting in a waiting room won t count. This should be fleshed out in forthcoming CMS subregulatory guidance. In terms of other aspects of the two-midnight rule, hospitals should expect reviews of admissions for MS-DRG coding, for the medical necessity of services and for evidence of systemic gaming to push patients across two midnights, Gustafson says. Documentation will be your saving grace, especially in the history and physical and the progress notes. Often we see thorough H&Ps and not a lot more from the physician except maybe one to two sentences throughout, she says. It will be more important for doctors to document the continued medical necessity of hospital care,

62 58 AIS s Management Insight Series especially with the close-call cases that Medicare auditors focus on (e.g., chest pain, transient ischemic attacks). ALJs also will look for physician documentation of the expectation of a two-midnight stay and an explanation for it, says Abby Pendleton, a lawyer with The Health Law Partners, who also spoke at the AIS webinar. You have to train doctors to write like this. It may fall on deaf ears, but with the review activity and the False Claims Act, you have to document for the regulatory environment, she says. Contact Romano at dromano@foley.com, Gustafson at jgustafson@thehlp.com and Pendleton at apendleton@thehlp.com. G Two-Midnight Rule Is Still in Flux; No Magic Words Are Needed in Certification Reprinted from the February 10, 2014, issue of Report on Medicare Compliance. Medicare s two-midnight rule for inpatient admissions is alive and well, but CMS has delayed audits until Oct. 1 while hospitals get their bearings and absorb changes to the physician certification requirement announced on Jan. 31. Although CMS said at a Feb. 4 open-door forum that its documentation expectations are status quo for the most part, hospitals are troubled by uncertainty surrounding some aspects of the twomidnight rule and certification. Their best bet may be to avoid false complexity, as one lawyer says, and focus on core requirements so auditors don t deny their claims. Under the two-midnight rule, which debuted in the 2014 inpatient prospective payment system (IPPS) regulation, CMS generally presumes that inpatient admissions crossing two midnights are medically necessary. That s not the case for shorter stays, which will face scrutiny unless patients are having procedures on the inpatient-only list. Because the two-midnight rule is a radical change in payment policy, CMS now says recovery audit contractors (RACs) can never audit claims with dates of submission between Oct. 1, 2013, and Sept. 30, 2014, in terms of admission necessity. CMS also gave Medicare administrative contractors (MACs) until Oct. 1 to finish their probe and educate reviews of compliance with the two-midnight rule. And CMS again clarified its order and certification requirements for inpatient admissions, updating its Sept. 5 guidance and adding more fuel to the fire. The rest of the two-midnight rule should be embraced by every hospital, but CMS muddied it with the certification requirement, says Ronald Hirsch, M.D., vice president of the regulations and education group at Accretive Physician Advisory Services. Two-Midnight Audits Delayed The IPPS rule requires physicians to complete certifications, which include admission orders, the expectation of a two-midnight stay, the reason for inpatient services and the plan for post-hospital care. In its original guidance, CMS said certifications

63 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 59 should include the estimated time the beneficiary requires or required in the hospital. Now, CMS says, expected or actual length of stay may be documented in the order or a separate certification or recertification form, but it is also acceptable if discussed in the progress notes assessment and plan or as part of routine discharge planning. CMS went out of its way to reinforce its easygoing attitude toward certification during the Feb. 4 open-door forum. What we are looking for for certification purposes is regular good documentation, said Donald Thompson, acting deputy director of the Division of Acute Care. We are not looking for magic words. We are not looking to change the nature of medical practice or good documentation practice. We hope this puts hospitals at ease. We are looking for what they do every day. Physicians don t have to use the language I certify, added Daniel Schroeder, insurance specialist in the Division of Acute Care. More specific documentation is always better than less specific documentation, but for certification we are not looking for inherently new requirements when reviewing [cases] under the two-midnight policy. It is status quo for a majority of the sections referenced. By the same token, the certification itself isn t proof the admission was medically necessary, Schroeder said. There must be other documentation, such as the severity of signs and symptoms, current medical needs and the risk of an adverse event. CMS also beat a retreat on its earlier demand that residents, nurse practitioners (NPs) and emergency-room physicians confer with attending physicians before admitting patients. That threw hospitals for a loop because residents, for example, don t normally wake up attending physicians at 3 a.m. to discuss admissions; their imprimatur comes the next day. Now it s clear from the revised guidance that residents, NPs and others can write orders if they are authorized by the state and hospital bylaws or policies and the orders are authenticated before discharge. The ordering practitioner may allow these individuals to write inpatient admission orders on his or her behalf, if the ordering practitioner approves and accepts responsibility for the admission decision by counter-signing the order prior to discharge, the guidance states. The two-midnight clock starts ticking when the order is written on behalf of the attending physician, Schroeder said. If there isn t a valid admission order before the patient s discharged, however, hospitals can t bill Part A, he noted. Experts: Don t Drown in the Details The revised guidance also says the time the patient is discharged is when the discharge is effectuated, not when the discharge order is written. A Medicare beneficiary is considered a patient of the hospital until the effectuation of activities typically specified by the physician as having to occur prior to discharge (e.g., discharge after supper or discharge after voids ), the guidance says. CMS included this section to give hospitals some leeway, Schroeder explained. It s not necessarily a discharge when a piece of paper is signed. But Hirsch says CMS didn t define effectuation in

64 60 AIS s Management Insight Series practical terms. While discharge after voids makes clinical sense and indicates the patient is stable to go home, eating supper is not a medical intervention. So why is the patient still an inpatient when they are eating their soup but suddenly be considered discharged when they finish their sherbet? While the two-midnight rule and certification requirement can be confusing and frustrating, we are making it more complicated than it needs to be, says Minneapolis attorney David Glaser, with Fredrikson & Byron. Sometimes I think we are asking for too much precision. You can make it simpler. For example, if the physician orders an admission at midnight and it s entered in the computer at 12:15 a.m., don t agonize over when the clock started. That s false complexity, he says. If you know when the doctor ordered it, go with that time. Don t think of all the ways someone can interpret it. He says he wouldn t advise hospitals to refund money because a verbal order isn t signed. If auditors take the money back, so be it, although he would appeal the recoupment. In fact, the transcript of the open-door call, with CMS s emphasis on its commonsense approach to certification, can support hospital appeals of future claim denials, Glaser notes. Hirsch agrees that if you spend too much time trying to figure out the minutiae of a certification form, the doctor will have no time left to explain why the patient needs to be in the hospital. He thinks hospitals should take advantage of the audit reprieve to educate physicians on how to count two midnights, how to document well and how to think in ink. The best audit defense is legible, complete progress notes, says Howard Stein, D.O., associate director of medical affairs at CentraState Healthcare System. There is going to be a potential for MAC and RAC auditors to look at the progress notes and say, we can t read them or they don t justify the certification, and we are denying the stay, he says. If the SOAP subjective, objective, assessment and plan is documented in the progress notes, hospitals should be able to satisfy certification requirements, Stein says. CentraState is not using a separate form; it just added the phrase admit to inpatient care to its orders. People are taking different approaches. I m not sure anything is the wrong approach. Meanwhile, CMS officials also discussed the MAC probe and educate reviews at the open-door forum. Melanie Combs-Dyer, acting director of the CMS Provider Compliance Group, said even though MACs have six more months to complete the reviews, they will audit the same number of claims per hospital 10 to 15, with repeat audits at hospitals with deficiencies. MACs will deny payment for claims that don t comport with the two-midnight rule and educate hospitals on improving their compliance. RACs and MACs are free to audit all claims for the medical necessity of the services and for coding compliance. Some MACs have already exceeded the cap for medical-record requests, hospital officials said at the open-door forum. We got 30, said one caller, who confirmed her hospital has one national provider identifier. CMS urged hospitals with this kind

65 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 61 of problem to describe it in an and send it to Or think of more probe audits as a good thing, Hirsch says. Do we really want to count on the results and rationale of the MACs based on 10 charts to guide us through years of future RAC audits? For more information, contact Stein at hstein@centrastate.com, Hirsch at rhirsch@ accretivehealth.com and Glaser at dglaser@fredlaw.com. View the Jan. 31 CMS announcements and guidance at G

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67 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 63 Part IV: CMS Regulations and Guidance 42 C.F.R , , and : Regulatory Language Relating to the Two-Midnight Rule and Physician Orders and Certification Added to or amended by the FY 2014 Inpatient Prospective Payment System Final Rule, 78 Fed. Reg (Aug. 19, 2013) Part 412 Prospective Payment Systems for Inpatient Hospital Services Subpart A General Provisions Admissions. (a) For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and (c), (c), and (a)(4)(iii) of this chapter for a critical access hospital. This 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. In addition to these physician orders, inpatient rehabilitation facilities also must adhere to the admission requirements specified in of this chapter. (b) The order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is knowledgeable about the patient s hospital course, medical plan of care, and current condition. The practitioner may not delegate the decision (order) to another individual who is not authorized by the State to admit patients, or has not been granted admitting privileges applicable to that patient by the hospital s medical staff. (c) The physician order also constitutes a required component of physician certification of the medical necessity of hospital inpatient services under subpart B of Part 424 of this chapter. (d) The physician order must be furnished at or before the time of the inpatient admission. (e)(1) Except as specified in paragraph (e)(2) of this section, when a patient enters a hospital for a surgical procedure not specified by Medicare as inpatient only under (n) of this chapter, a diagnostic test, or any other treatment, and the physician expects to keep the patient in the hospital for only a limited period of time that does not cross 2 midnights, the services are generally inappropriate for inpatient admission and inpatient payment under Medicare Part A, regardless of the hour that the patient came to the hospital or whether the patient used a bed. Surgical procedures, diagnostic tests, and other treatment are generally appropriate for inpatient admission and inpatient hospital payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights. The expectation of the physician should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration. (2) If an unforeseen circumstance, such as a beneficiary s death or transfer, results in a shorter beneficiary stay than the physician s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and hospital inpatient payment may be made under Medicare Part A. Subpart C Conditions for Payment Under the Prospective Payment Systems for Inpatient Operating Costs and Inpatient Capital-Related Costs Medical review requirements. (a) Physician acknowledgement. (1) Basis. Because payment under the prospective payment system is based in part on each patient s principal and secondary diagnoses and major procedures performed, as evidenced by the physician s entries in the patient s medical record, physicians must complete an acknowledgement statement to this effect. (2) Content of physician acknowledgement statement. When a claim is submitted, the hospital must have on file a signed and dated acknowledgement from the attending physician that the physician has received the following notice: Notice to Physicians: Medicare payment to hospitals is based in part on each patient s principal and secondary diagnoses and the major procedures performed on the patient, as attested to by the patient s attending physician by virtue of his or her signature in

68 64 AIS s Management Insight Series the medical record. Anyone who misrepresents, falsifies, or conceals essential information required for payment of Federal funds, may be subject to fine, imprisonment, or civil penalty under applicable Federal laws. (3) Completion of acknowledgement. The acknowledgement must be completed by the physician at the time that the physician is granted admitting privileges at the hospital, or before or at the time the physician admits his or her first patient. Existing acknowledgements signed by physicians already on staff remain in effect as long as the physician has admitting privileges at the hospital. (b) Physician s order and certification regarding medical necessity. No presumptive weight shall be assigned to the physician s order under or the physician s certification under Subpart B of Part 424 of the chapter in determining the medical necessity of inpatient hospital services under section 1862(a)(1) of the Act. A physician s order or certification will be evaluated in the context of the evidence in the medical record. Part 424 Conditions for Medicare Payment Subpart B Certification and Plan Requirements General procedures. (a) Responsibility of the provider. The provider must (1) Obtain the required certification and recertification statements; (2) Keep them on file for verification by the intermediary, if necessary; and (3) Certify, on the appropriate billing form, that the statements have been obtained and are on file. (b) Obtaining the certification and recertification statements. No specific procedures or forms are required for certification and recertification statements. The provider may adopt any method that permits verification. The certification and recertification statements may be entered on forms, notes, or records that the appropriate individual signs, or on a special separate form. Except as provided in paragraph (d) of this section for delayed certifications, there must be a separate signed statement for each certification or recertification. (c) Required information. The succeeding sections of this subpart set forth specific information required for different types of services. If that information is contained in other provider records, such as physicians' progress notes, it need not be repeated. It will suffice for the statement to indicate where the information is to be found. (d) Timeliness. (1) The succeeding sections of this subpart also specify the timeframes for certification and for initial and subsequent recertifications. (2) A hospital or SNF may provide for obtaining a certification or recertification earlier than required by these regulations or vary the timeframe (within the prescribed outer limits) for different diagnostic or clinical categories. (3) Delayed certification and recertification statements are acceptable when there is a legitimate reason for delay. (For instance, the patient was unaware of his or her entitlement when he or she was treated.) Delayed certification and recertification statements must include an explanation of the reasons for the delay. (4) A delayed certification may be included with one or more recertifications on a single signed statement. (5) For all inpatient hospital or critical access hospital inpatient services, including inpatient psychiatric facility services, a delayed certification may not extend past discharge. (e) Limitation on authorization to sign statements. A certification or recertification statement may be signed only by one of the following: (1) A physician who is a doctor of medicine or osteopathy. (2) A dentist in the circumstances specified in (c). (3) A doctor of podiatric medicine if his or her certification is consistent with the functions he or she is authorized to perform under State law. (4) A nurse practitioner or clinical nurse specialist as defined in paragraph (e)(5) or (e)(6) of this section, or a physician assistant as defined in section 1861(aa)(5)(A) of the Act, in the circumstances specified in (e). (5) For purposes of this section, to qualify as a nurse practitioner, an individual must (i) Be a registered professional nurse who is currently licensed to practice nursing in the State where he or she practices; be authorized to perform the services of a nurse practitioner in accordance with State law; and have a master's degree in nursing; (ii) Be certified as a nurse practitioner by a professional association recognized by CMS that has, at a minimum, eligibility requirements that meet the standards in paragraph (e)(5)(i) of this section; or

69 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 65 (iii) Meet the requirements for a nurse practitioner set forth in paragraph (e)(5)(i) of this section, except for the master's degree requirement, and have received before August 25, 1998 a certificate of completion from a formal advanced practice program that prepares registered nurses to perform an expanded role in the delivery of primary care. (6) For purposes of this section, to qualify as a clinical nurse specialist, an individual must (i) Be a registered professional nurse who is currently licensed to practice nursing in the State where he or she practices; be authorized to perform the services of a clinical nurse specialist in accordance with State law; and have a master's degree in a defined clinical area of nursing; (ii) Be certified as a clinical nurse specialist by a professional association recognized by CMS that has at a minimum, eligibility requirements that meet the standards in paragraph (e)(6)(i) of this section; or (iii) Meet the requirements for a clinical nurse specialist set forth in paragraph (e)(6)(i) of this section, except for the master's degree requirement, and have received before August 25, 1998 a certificate of completion from a formal advanced practice program that prepares registered nurses to perform an expanded role in the delivery of primary care Requirements for inpatient services of hospitals other than inpatient psychiatric facilities. (a) Content of certification and recertification. Certification begins with the order for inpatient admission. Medicare Part A pays for inpatient hospital services (other than inpatient psychiatric facility services) only if a physician certifies and recertifies the following: (1) That the services were provided in accordance with of this chapter. (2) The reasons for either (i) Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or (ii) Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F of Part 412 of this chapter). (3) The estimated time the patient will need to remain in the hospital. (4) The plans for posthospital care, if appropriate. (b) Timing of certification. For all hospital inpatient admissions, the certification must be completed, signed, and documented in the medical record prior to discharge. For outlier cases under subpart F of Part 412 of this chapter that are not subject to the PPS, the certification must be signed and documented in the medical record and as specified in paragraphs (e) through (h) of this section. (c) Certification of need for hospitalization when a SNF bed is not available. (1) The physician may certify or recertify need for continued hospitalization if he or she finds that the patient could receive proper treatment in a SNF but no bed is available in a participating SNF. (2) If this is the basis for the physician s certification or recertification, the required statement must so indicate; and the certifying physician is expected to continue efforts to place the patient in a participating SNF as soon as a bed becomes available. (d) Signatures. (1) Basic rule. Except as specified in paragraph (d)(2) of this section, certifications and recertifications must be signed by the physician responsible for the case, or by another physician who has knowledge of the case and who is authorized to do so by the responsible physician or by the hospital s medical staff. (2) Exception. If the intermediary requests certification of the need to admit a patient in connection with dental procedures, because his or her underlying medical condition and clinical status or the severity of the dental procedures require hospitalization, that certification may be signed by the dentist caring for the patient. (e) Timing of certifications and recertifications: Outlier cases not subject to the prospective payment system (PPS). (1) For outlier cases that are not subject to the PPS, certification is required no later than as of the 12th day of hospitalization. A hospital may, at its option, provide for the certification to be made earlier, or it may vary the timing of the certification within the 12- day period by diagnostic or clinical categories. (2) The first recertification is required no later than as of the 18th day of hospitalization. (3) Subsequent recertifications are required at intervals established by the UR committee (on a caseby-case basis if it so chooses), but no less frequently than every 30 days. (f) Timing of certification and recertification: Outlier cases subject to PPS. For outlier cases subject to the PPS, certification is required as follows: (1) For day outlier cases, certification is required no later than 1 day after the hospital reasonably assumes that the case meets the outlier criteria, established in accordance with (a)(1)(i) of this chapter, or no later than 20 days into the hospital stay, whichever is earlier. The first and subsequent recertifications are required at

70 66 AIS s Management Insight Series intervals established by the UR committee (on a case-by-case basis if it so chooses) but not less frequently than every 30 days. (2) For cost outlier cases, certification is required no later than the date on which the hospital requests cost outlier payment or 20 days into the hospital stay, whichever is earlier. If possible, certification must be made before the hospital incurs costs for which it will seek cost outlier payment. In cost outlier cases, the first and subsequent recertifications are required at intervals established by the UR committee (on a case-by-case basis if it so chooses). (g) Recertification requirement fulfilled by utilization review. (1) At the hospital s option, extended stay review by its UR committee may take the place of the second and subsequent recertifications required for outlier cases not subject to PPS and for PPS dayoutlier cases. (2) A utilization review that is used to fulfill the recertification requirement is considered timely if performed no later than the seventh day after the day the recertification would have been required. The next recertification would need to be made no later than the 30th day following such review; if review by the UR committee took the place of this recertification, the review could be performed as late as the seventh day following the 30th day. (h) Description of procedures. The hospital must have available on file a written description that specifies the time schedule for certifications and recertifications, and indicates whether utilization review of long-stay cases fulfills the requirement for second and subsequent recertifications of all outlier cases not subject to PPS and of PPS day outlier cases Requirements for inpatient services of inpatient psychiatric facilities. (a) Requirements for certification and recertification: General considerations. Certification begins with the order for inpatient admission. The content requirements differ from those for other hospitals because the care furnished in inpatient psychiatric facilities is often purely custodial and thus not covered under Medicare. The purpose of the statements, therefore, is to help ensure that Medicare pays only for services of the type appropriate for Medicare coverage. Accordingly, Medicare Part A pays for inpatient services in an inpatient psychiatric facility only if a physician certifies and recertifies the need for services consistent with the requirements of this section, as appropriate. (b) Content of certification. The physician must certify (1) That inpatient psychiatric services were required for treatment that could reasonably be expected to improve the patient s condition, or for diagnostic study. (2) That the inpatient psychiatric services were provided in accordance with of this chapter. (c) Content of recertification. (1) Inpatient services furnished since the previous certification or recertification were, and continue to be, required (i) For treatment that could reasonably be expected to improve the patient's condition; or (ii) For diagnostic study; and (2) The hospital records show that the services furnished were (i) Intensive treatment services; (ii) Admission and related services necessary for diagnostic study; or (iii) Equivalent services. (3) The patient continues to need, on a daily basis, active treatment furnished directly by or requiring the supervision of inpatient psychiatric facility personnel. (d) Timing of certification and recertification. (1) Certification is required at the time of admission or as soon thereafter as is reasonable and practicable, and must be completed and documented in the medical record prior to discharge. (2) The first recertification is required as of the 12th day of hospitalization. Subsequent recertifications are required at intervals established by the UR committee (on a case-by-case basis if it so chooses), but no less frequently than every 30 days. (e) Other requirements. Inpatient psychiatric facilities must also meet the requirements set forth in (c), (d), (g), and (h) Requirements for inpatient CAH services. (a) Medicare Part A pays for inpatient CAH services only if a physician certifies that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH, and that the services are provided in accordance with of this chapter. (b) Certification begins with the order for inpatient admission. The certification must be completed, signed, and documented in the medical record prior to discharge.

71 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers C.F.R : Regulatory Language Relating to the Part B Inpatient Billing Added by the FY 2014 Inpatient Prospective Payment System Final Rule, 78 Fed. Reg (Aug. 19, 2013) Part 414 Payment for Part B Medical and Other Health Services Subpart A General Provisions Hospital services paid under Medicare Part B when a Part A hospital inpatient claim is denied because the inpatient admission was not reasonable and necessary, but hospital outpatient services would have been reasonable and necessary in treating the beneficiary. (a) If a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was not reasonable and necessary, or if a hospital determines under (d) of this chapter or of this chapter after a beneficiary is discharged that the beneficiary s inpatient admission was not reasonable and necessary, the hospital may be paid for any of the following Part B inpatient services that would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient rather than admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B: (1) Services described in (a) of this chapter that do not require an outpatient status. (2) Physical therapy services, speech language pathology services, and occupational therapy services. (3) Ambulance services, as described in section 1861(v)(1)(U) of the Act, or, if applicable, the fee schedule established under section 1834(l) of Act. (4) Except as provided in 419.2(b)(11) of this chapter, prosthetic and orthotic devices. (5) Except as provided in 419.2(b)(10) of this chapter, durable medical equipment supplied by the hospital for the patient to take home. (6) Clinical diagnostic laboratory services. (7)(i) Effective December 8, 2003, screening mammography services; and (ii) Effective January 1, 2005, diagnostic mammography services. (8) Effective January 1, 2011, annual wellness visit providing personalized prevention plan services as defined in of this chapter. (b) If a Medicare Part A claim for inpatient hospital services is denied because the inpatient admission was not reasonable and necessary, or if a hospital determines under (d) of this chapter or of this chapter after a beneficiary is discharged that the beneficiary s inpatient admission was not reasonable and necessary, the hospital may be paid for hospital outpatient services described in 412.2(c)(5), , , or (f) of this chapter or (c)(2) of this chapter that are furnished to the beneficiary prior to the point of inpatient admission (that is, the inpatient admission order). (c) The claims for the Part B services filed under the circumstances described in this section must be filed in accordance with the time limits for filing claims specified in (a) of this chapter.

72 68 AIS s Management Insight Series Preamble, Hospital Inpatient Prospective Payment Systems for Acute Care Hospital, 78 Fed. Reg , (Aug. 19, 2013) C. Admission and Medical Review Criteria for Hospital Inpatient Services Under Medicare Part A 1. Background As we discussed in section XI.A. of the preamble of this final rule, in response to concerns about the provision of observation services for increasingly long periods of time albeit in a small percentage of cases, and in response to stakeholders' concerns about the clarity and appropriateness of Medicare's hospital inpatient admission and medical review guidelines, we proposed several clarifications and changes in policy in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR through 27650). In this section of this final rule, we discuss the public comments we received in response to our proposals and provide our final policies after consideration of the public comments we received. 2. Requirements for Physician Orders a. Statutory Basis, Relationship to Physician Certification, and Timing In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR through 27647), we clarified that a beneficiary becomes a hospital inpatient if formally admitted as such pursuant to a physician order for hospital inpatient admission. While the requirement for a physician order for hospital inpatient admission has long been clear in the hospital CoPs, we proposed to state explicitly in our payment regulations that admission pursuant to this order is the means whereby a beneficiary becomes a hospital inpatient and, therefore, is required for payment of hospital inpatient services under Medicare Part A. We stated that a beneficiary becomes a hospital inpatient when admitted as such after a physician (or other qualified practitioner as provided in the regulations) orders inpatient admission in accordance with the CoPs, and that Medicare pays under Part A for such an admission if the order is documented in the medical record. We stated that the order must be supported by objective medical information for purposes of the Part A payment determinations. Accordingly, we proposed new 42 CFR 412.3(a), which states, For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and (c), (c), and (a)(4)(iii) of this chapter for a critical access hospital. We stated that this 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 (78 FR 27647). In addition, in the proposed rule, we discussed the statutory requirement for certification of hospital inpatient services for payment under Medicare Part A. The certification requirement for inpatient services other than psychiatric inpatient services is found in section 1814(a)(3) of the Act, which provides that Medicare Part A payment will only be made for such services which are furnished over a period of time, [if] a physician certifies that such services are required to be given on an inpatient basis. The regulation implementing this requirement is found at 42 CFR (a). The requirement for certification and recertification of inpatient psychiatric services as a condition of payment are found in section 1814(a)(2) of the Act and 42 CFR We did not propose to exclude any hospitals from our proposed clarification of the requirement for the physician order and physician certification for Part A payment of hospital inpatient services. Comment: One commenter asked CMS to clarify what is meant by physician certification. Some commenters believed that CMS did not articulate a statutory authority for requiring the physician order as a condition of Part A payment. The commenters stated that the proposed rule implied that the physician order requirement flows from section 1814(a)(3) of the Act, which sets forth conditions and limitation on payment, one of which is a requirement for a physician certification that inpatient hospital services furnished over a period of time are required on an inpatient basis for such individual's medical treatment. Other commenters assumed that, in the proposed rule, CMS was equating the physician order with the physician certification that is required for payment under section 1814(a)(3) of the Act, stating that in the Social Security Amendments of 1967 to this section of the Act, Congress found that admission orders are not required for Medicare payment because hospital admissions are almost always medically necessary. These commenters objected to the proposal to clarify that inclusion of the inpatient admission order in the medical record is a condition of payment. The commenters acknowledged that the hospital CoPs already require as a health and safety measure that the inpatient admission decision be made upon the recommendation of a physician. However, they believed it would be duplicative to also require an order as a condition of payment, and were concerned that the requirement would become the basis for hospital liability under the False Claims Act. One commenter stated that CMS' proposal crossed the line in dictating the practice

73 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 69 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations of medicine. Some commenters believed that CMS proposed a new requirement that is not supported in the statute and is contrary to longstanding practice under the Medicare program. These commenters argued that the statutory reference to services furnished over a period of time as well as the regulation s lack of any specific deadline for physician certifications in nonoutlier cases indicate that no certification is required for short-stay cases. In support of their argument, the commenters cited the legislative history of section 1814(a)(3) of the Act, which they interpret to apply only to certain long-term stays. They noted that, in the Social Security Amendments of 1967, Congress amended the statutory language from requiring physician certification of hospital inpatient services to requiring physician certification only for inpatient hospital services... which are furnished over a period of time. Moreover, the commenters cited congressional reports 196 explaining this statutory change by stating that it eliminate[d] the requirement for hospital insurance payments that there be a physician s certification of medical necessity with respect to admissions to hospitals which are neither psychiatric nor tuberculosis institutions and that such a certification is required only in cases of hospital stays of extended duration. The commenters suggested that the House report also explains the reason for the change, stating that admissions to general hospitals are almost always medically necessary and the requirement for a physician s certification of this fact results in largely unnecessary paperwork (H.R. Rep. No , at 38 (1967)). Based upon all of the above factors, the commenters argued that, since 1967, the agency has not had authority to require a physician order as a condition of payment for hospital inpatient stays other than extended stays. Response: We do not agree that these arguments mandate the conclusion that the physician certification requirement only applies to long-stay cases. The statute does not define over a period of time, and further provides that such certification shall be furnished only in such cases, and with such frequency, and accompanied by such supporting material... as may be provided by regulations. By this language, Congress explicitly delegated authority to the agency to elucidate this provision of the statute by regulation. Accordingly, CMS 196 S. Rep. No , at 239 (1967), H.R. Rep. No , at 149 (1967). is authorized to interpret the statutory phrase over a period of time so long as its interpretation is not arbitrary, capricious, or manifestly contrary to statute (Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984)). Section of the regulations does not contain any length-of-time restrictions on the applicability of the certification requirement. Instead, (a) provides that Medicare Part A payment will only be made for inpatient hospital services (other than inpatient psychiatric services) if a physician certifies or recertifies the need for continued hospitalization of the patient for medical treatment or medically required inpatient diagnostic study. Therefore, in its implementing regulations, CMS interpreted the statute s requirement of a physician certification for inpatient hospitals services furnished over a period of time to apply to all inpatient admissions. While this is not the only possible interpretation of the statute, we believe that it is a permissible interpretation. We recently reiterated our requirement of a physician order for all inpatient admissions in the preamble to the CY 2012 Medicare Physician Fee Schedule final rule. In a discussion regarding whether services furnished to a patient who is at the hospital overnight, but for less than 24 hours, should be billed as outpatient or inpatient services, CMS stated that [u]nless a treating physician has written an order to admit the patient as an inpatient, the patient is considered for Medicare purposes to be a hospital outpatient, not an inpatient (76 FR 73106). In addition, the CoPs illustrate that CMS policy requires a physician order in order to justify inpatient hospitalization (including inpatient psychiatric hospitalizations). Under 42 CFR (c)(2), a hospital s governing body must ensure that [p]atients are admitted to the hospital only on the recommendation of a licensed practitioner permitted by the State to admit patients to a hospital. In addition, (c) requires that a patient s medical record contain information to justify admission and continued hospitalization. We also have indicated our current policy and its applicability to all types of hospitals in our subregulatory guidance. In the MBPM, Chapter 1, Section 10, we define an inpatient as a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient services. This section further explains that [g]enerally, a patient is considered an inpatient if formally admitted as inpatient with an expectation that he or she will remain at least overnight and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight. In addition, Section 10 provides that [t]he physician or other practitioner responsible for a patient s care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient. CMS policy is also reflected in the Medicare Claims Processing Manual (MCPM) (Pub ), Chapter 3, Section (K), which discusses the circumstance where a patient is admitted to an inpatient hospital, but dies or is discharged before being assigned to a room. Certainly, this circumstance would not qualify as a long stay, but CMS still requires a physician order to justify the admission, stating that [a] patient of an acute care hospital is considered an inpatient upon issuance of written doctor s orders to that effect. Finally, Chapter 4 of the Medicare General Information, Eligibility, and Entitlement Manual also addresses the certification requirement. Section 10 of Chapter 4 provides that [p]ayments may be made for covered hospital services only if a physician certifies and recertifies to the medical necessity for the services at designated intervals of the hospital inpatient stay. As members of the hospital community have noted in the past, this section also states that [f]or patients admitted to a general hospital... a physician certification is not required at the time of admission. However, this merely means that the certification need not be contemporaneous with the admission, rather than indicating that no certification is required. Therefore, our longstanding policy, as reflected in our regulations and other guidance, has been that a physician order is required for all inpatient hospital admissions, regardless of the length of stay. We believe that this policy is a legally supportable interpretation of section 1814(a) of the Act. In order to clarify this policy going forward, we are finalizing 412.3(a) to include the proposed language as well as the provision we described in the proposed rule (78 FR 27647) that the order must be present in the medical record and supported by the physician admission and progress notes. We are adding this preamble language from the proposed rule to the regulation text to improve clarity and provide consistency with our policy on medical review of inpatient admissions (section XI.C.3. of the preamble of this proposed rule) that, ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 4

74 70 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations while the physician order and the physician certification are required for all inpatient hospital admissions in order for payment to be made under Part A, the physician order and the physician certification are not considered by CMS to be conclusive evidence that an inpatient hospital admission or service was medically necessary. Rather, the physician order and physician certification are considered along with other documentation in the medical record. As finalized, 412.3(a) reads: For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner in accordance with this section and (c), (c), and (a)(4)(iii) of this chapter for a critical access hospital. This 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. In addition to these physician orders, inpatient rehabilitation facilities also must adhere to the admission requirements specified in of this chapter. (We discuss the application of these final policies to IRFs in section XI.C.2.c. of the preamble of this final rule.) To provide further clarity and to more closely mirror the authorizing statutory language, we are deleting the word continued and adding the word inpatient before the phrase medical treatment in (a)(2), to reflect that the content of the certification of inpatient services (other than inpatient psychiatric services) includes the reason for inpatient hospital services. The amended paragraph reads, (a) Content of certification and recertification. Certification begins with the order for inpatient admission. Medicare Part A pays for inpatient hospital services (other than inpatient psychiatric facility services) only if a physician certifies and recertifies the following: (1) That the services were provided in accordance with of this chapter (2) The reasons for either (i) Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or (ii) Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F of Part 412 of this chapter). We believe this language better reflects the statutory content of the certification required by section 1814(a)(3) of the Act [t]hat such services are required to be given on an inpatient basis for such individual s medical treatment, or that inpatient diagnostic study is medically required and such services are necessary for such purpose. We note that the particular elements of the certification, for example, the order for inpatient services and documentation of the reason for continued hospitalization (diagnosis) should be documented within the medical record. Therefore, we are not finalizing any new documentation requirements. The existing provisions in continue to apply, for example paragraphs (b) and (c) which provide that no specific procedures or forms are required for certification and recertification statements. The provider may adopt any method that permits verification. The certification and recertification statements may be entered on forms, notes, or records that the appropriate individual signs, or on a special separate form. Except as provided for delayed certifications, there must be a separate signed statement for each certification or recertification. The succeeding sections of Part 424, subpart B set forth specific information required for different types of services. If that information is contained in other provider records, such as physicians progress notes, it need not be repeated. It will suffice for the statement to indicate where the information is to be found. To clarify the relationship between the physician order and the physician certification, we are adding new 42 CFR 412.3(c) which states that The physician order also constitutes a required component of the physician certification of the medical necessity of hospital inpatient services under Part 424 of this chapter. Similarly, we are revising paragraph (a) of to include in the content of the certification for inpatient hospital services (other than inpatient psychiatric services): (1) [t]hat the services were provided in accordance with of this chapter [the order]. We are adding parallel provisions in 42 CFR (b) and (a) to include in the content of the physician certification for payment of inpatient psychiatric services and inpatient CAH services, respectively, that the services were provided in accordance with We discuss additional rules for certification that apply to inpatient services furnished in IRFs in section XI.C.2.c. of the preamble of this final rule. To further clarify the relationship between the physician order and the physician certification, and our requirement that, like the order, the certification applies to all hospital inpatient admissions (not just extended stays), we are adding new provisions to the regulations regarding timing of the certification. In , we are providing that the certification must be signed and documented in the medical record prior to the hospital discharge (except for recertifications of extended stays, which are required earlier). We are redesignating existing paragraphs (b) through (g) of as paragraphs (c) through (h), respectively, in order to add a new paragraph (b). We are requiring under new (b) that, for inpatient services other than inpatient psychiatric services: For all hospital inpatient admissions, the certification must be completed, signed, and documented in the medical record prior to discharge. For outlier cases under subpart F of Part 412 of this chapter that are not subject to the PPS, the certification must be signed and documented in the medical record and as specified in paragraphs (e) through (h) of this section. For inpatient psychiatric services, we are adding the phrase and must be completed and documented in the medical record prior to discharge at the end of (d)(1) so that the paragraph reads, Certification is required at the time of admission or as soon thereafter as is reasonable and practicable, and must be completed and documented in the medical record prior to discharge. We will continue to provide under paragraph (d)(2) of that the first recertification is required as of the 12th day of hospitalization. Subsequent recertifications are required at intervals established by the utilization review committee (on a case-by-case basis if it so chooses), but no less frequently than every 30 days. Like other components or elements of the physician certification, the physician order reflects affirmation by the ordering practitioner that hospital inpatient services are medically necessary. However, the order serves the unique purpose of initiating the inpatient admission and documenting the physician s (or other qualified practitioner as provided in the regulations) intent to admit the patient, which impacts its required timing. Therefore we are specifying in new paragraph (d) of that The physician order must be furnished at or before the time of the inpatient admission (unlike the rest of the certification which may be completed prior to discharge, except for the outlier ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 4

75 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 71 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations extended stays described in (e) through (g)). Similarly, we are providing in the regulations on the certification that the certification begins with the order for inpatient admission. We are adding this as the new first sentence in (a), (a), and (b) for CAHs. Also, we are including a conforming amendment in new paragraph (d)(5) of that, for hospital or CAH hospital inpatient services, a delayed certification may not extend past discharge. The existing delayed certification provisions in existing (d)(3) and (d)(4) will continue to apply, but only for certification of the outlier extended stay cases described in (e) through (g). To clarify that the rules for timing of certification and recertification for cases not subject to the PPS in redesignated paragraphs (e) through (h) of apply only to IPPS outlier cases, we are adding the word outlier prior to the phrase subject to the PPS in paragraphs (e), (f), (g), and (h). We are finalizing two conforming amendments in the regulation text governing physician certification. In (e)(2), we are removing the reference (c) and adding in its place (d) as redesignated. Similarly, we are amending (a) by removing the reference (e) and adding it its place subpart B of this Part. Comment: Several commenters asked what Medicare s payment rules would be regarding verbal inpatient admission orders. For example, the commenters asked whether the hospital could submit a Part A claim based upon a verbal order that is not documented in the medical record at the time the claim is submitted. In addition, the commenters asked how CMS defines prompt authentication of orders, or address verbal order read-back processes. Response: Because the physician order is required as a condition of payment, if the order is not documented in the medical record, the hospital should not submit a claim for Part A payment. A verbal order is a temporary administrative convenience for the physician and hospital staff but it is not a substitute for a properly documented and authenticated order for inpatient admission. A verbal order must be properly countersigned by the practitioner who gave the verbal order. We intend to further discuss and develop our requirements regarding verbal orders for inpatient admission in our subregulatory guidance. The CoPs regarding verbal orders were carefully developed over a period time, and we believe we should take additional time to consider and potentially coordinate the CoP and payment rules. Comment: Some commenters believed that, while the order should be documented in the medical record as a best practice, documentation of the order should not be required if it is unintentionally omitted. They believed that the order is a technicality that should not serve as a condition of payment. The commenters stated that if the order to admit is missing, yet the physician intent and physician recommendation to admit to inpatient can clearly be derived from the medical record, for example if a medically necessary inpatient-only service was furnished, the contractor should consider these rather than requiring the physician order as a technical requirement for medical necessity and payment. Response: The admission order is evidence of the decision by the physician (or other practitioner who can order inpatient services) to admit the beneficiary to inpatient status. In very rare circumstances, the order to admit may be missing or defective (that is, illegible or incomplete), yet the intent, decision, and recommendation of the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient can clearly be derived from the medical record. In these rare situations, we have provided contractors with discretion to determine that this information constructively satisfies the requirement that the hospital inpatient admission order be present in the medical record. However, in order for the documentation to provide acceptable evidence to support the hospital inpatient admission, thus satisfying the requirement for the physician order, there can be no uncertainty regarding the intent, decision, and recommendation by the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient, and no reasonable possibility that the care could have been adequately provided in an outpatient setting. This narrow and limited alternative method of satisfying the requirement for documentation of the inpatient admission order in the medical record should be extremely rare, and may only be applied at the discretion of the medical review contractor. Even in those circumstances, all requirements for the other components of the physician certification must be met. Comment: Several commenters asked CMS to clarify whether, when a beneficiary would become an inpatient under the proposed policies, inpatient status would be conferred retroactive to the beginning of the hospital stay. One commenter recommended that the patient become inpatient after the physician writes the order and the patient starts receiving care based on those orders, whether or not it is in a bed on an inpatient nursing unit, a holding bed in the emergency department or another location, or whether the patient is sent to imaging or the operating room first. One commenter questioned what CMS meant by the term outpatient status. Another commenter questioned CMS current definition of inpatient, stating it is not defined in the Act. The commenter stated that, at the time of the law s passage, the meaning of inpatient was obvious and universal. The commenter stated that a patient that stays in a hospital is an inpatient, whereas a patient that goes home after treatment, or after a limited recovery period such as a few hours, is an outpatient. Response: As explained in the proposed rule, in response to concerns and suggestions of stakeholders, we aimed to provide more clarity regarding hospital inpatient admissions and Medicare payment. Toward those ends, in the FY 2014 IPPS/LTCH PPS proposed rule, we addressed medical review criteria and proposed to codify in regulation our longstanding policy (as reflected in manual provisions) that a patient becomes an inpatient when formally admitted as such pursuant to a physician order. CMS definition of inpatient has been upheld in litigation. Landers v. Leavitt, 545 F.3d 98 (2 d Cir. 2008). We did not propose policy changes regarding the definition of inpatient or inpatient status. In contrast to a hospital inpatient, we have defined a hospital outpatient in the MBPM, Chapter 6, Section 20, as a person who has not been admitted by the hospital as an inpatient but is registered on the hospital records as an outpatient and receives services (rather than supplies alone) from the hospital or CAH. This final rule provides that a beneficiary is considered a hospital inpatient following formal admission pursuant to the hospital inpatient admission order. We included the phrase pursuant to in recognition that, in most cases, the beneficiary is formally admitted and becomes a hospital inpatient concurrent with the physician order to admit to inpatient. However, in cases such as elective surgeries where the inpatient admission order is written as far as several weeks in advance, the beneficiary is not considered an inpatient until the time of formal admission at the hospital for the ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 4

76 72 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations inpatient services. In this example, the beneficiary is admitted and becomes an inpatient pursuant to the physician s order and could not be admitted without it, although there may be a time lag between when the order to admit is written and the time of formal admission. The physician order cannot be effective retroactively. In this final rule, we are not changing our definition of a hospital inpatient. Inpatient status only applies prospectively, starting from the time the patient is formally admitted pursuant to a physician order for inpatient admission, in accordance with our current policy. Comment: Several commenters expressed the opinion that physicians should not have to divide their attention between providing patient care and understanding Medicare s admission rules, which the commenters viewed as mere billing distinctions. Some commenters believed that CMS should allow physicians to delegate the determination of patient status to the hospital or its utilization review committee, while the physician focuses on ordering and providing the necessary clinical care. Further, some commenters stated that this is their current practice. Some commenters commented that their current processes provide for admission to case management or to utilization review rather than specifying inpatient admission. Response: As we discussed above, many public comments from physicians indicated that they believed the physician should be involved in the determination of patient status, and we agree. To reinforce this policy and reduce confusion among hospitals, beneficiaries, and physicians on the differences between outpatient observation and inpatient services, we are providing in this final rule that the order for inpatient admission must specify admission to or as an inpatient. In previous discussions, stakeholders have indicated that often physician orders only specify admission to a certain location in the hospital (for example, Admit to Tower 7 ) or do not clarify whether the physician s intent is to admit the beneficiary for outpatient observation services or for hospital inpatient services. Therefore, we are providing that, for payment of hospital inpatient services under Medicare Part A, the order must specify the admitting practitioner s recommendation to admit to inpatient, as an inpatient, for inpatient services, or similar language specifying his or her recommendation for inpatient care. In addition, as discussed in the proposed rule (78 FR 27646), we remind hospitals that patients are admitted to the hospital only on the recommendation of a physician or licensed practitioner permitted by the State to admit patients to a hospital, provided that the practitioner, either a physician or other licensed practitioner, has been granted such privileges by the hospital to do so. Hospitals and physicians routinely must work together to comply with billing, coding, and admission rules not just for Medicare, but also for Medicaid and private payers. b. Authorization to Sign the Physician Order We proposed new regulation provisions in 42 CFR 412.3(b) which state that, as a condition of payment, the order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is responsible for the inpatient care of the patient at the hospital. The practitioner could not delegate the decision (order) to another individual who is not responsible for the care of that patient, is not authorized by the State to admit patients, or has not been granted admitting privileges applicable to that patient by the hospital s medical staff. Comment: Commenters in the physician and Medicare contractor medical review communities generally supported the proposal to require the inpatient admission order, and to provide that it could not be delegated to another individual who does not possess the authority to order inpatient admission in his or her own right. In addition, some commenters representing hospitals did not object to this requirement because it is already standard practice. However, the commenters described a number of situations in which the ordering practitioner would appropriately not be the individual who takes responsibility for the inpatient care of the beneficiary, or for the entirety of the inpatient care. According to the commenters, these included emergency department physicians, hospitalists and other types of physicians in group practices who care for patients in the hospital, and residents working under the supervision of attending physicians. The commenters requested that if CMS finalizes a requirement for the inpatient order as a condition of Part A payment, CMS should allow it to be issued by any physician in the hospital who is knowledgeable about the beneficiary s condition and has admitting privileges at the hospital. Response: We agree with the commenters that it would be appropriate to allow practitioners who may not be responsible for the inpatient hospital care of the beneficiary but are otherwise qualified to admit patients at that hospital and are knowledgeable about the case to order the inpatient admission. Therefore, we are deleting the proposed language in paragraph (b) of that would have required the order to be issued by a practitioner who is responsible for the inpatient care of the patient at the hospital. We are replacing this language with new language to specify that, although the ordering practitioner need not be responsible for the patient s inpatient care, he or she must be knowledgeable about the patient s hospital course, medical plan of care, and current condition. We are finalizing all of the other proposed qualifications in paragraph (b) of for the ordering practitioner. The final language reads, (b) The order must be furnished by a qualified and licensed practitioner who has admitting privileges at the hospital as permitted by State law, and who is knowledgeable about the patient s hospital course, medical plan of care, and current condition. The practitioner may not delegate the decision (order) to another individual who is not authorized by the State to admit patients, or has not been granted admitting privileges applicable to that patient by the hospital s medical staff. We discuss the application of these final policies to IRFs in section XI.C.2.c. of the preamble of this final rule. c. Applicability to Inpatient Rehabilitation Facilities (IRFs) We note that IRFs that are excluded from the IPPS and paid under the IRF prospective payment system (IRF PPS) specified in 42 CFR 412.1(a)(3) have certain requirements in 42 CFR (a)(3), (a)(4), and (a)(5) that govern an inpatient admission to an IRF. These requirements specify the admission criteria that must be documented in the medical record for an IRF admission of a Medicare Part A fee-for-service beneficiary to be considered reasonable and necessary under section 1862(a)(1) of the Act. For example, the documentation requirements contained in these regulations specify that a comprehensive preadmission screening must be conducted and must serve as the basis for the initial determination of whether or not the patient meets the requirements for admission to an IRF. A rehabilitation physician, defined as a licensed physician with specialized training and experience in rehabilitation, must document that he or she has reviewed and concurs with the preadmission screening prior to the ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 5

77 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 73 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations admission. However, we note that Chapter 1, Section of the MBPM also specifies that, at the time each Medicare Part A fee-for-service patient is admitted to an IRF, a physician must generate admission orders for the patient s care. Therefore, although the required physician orders discussed in section XI.C.2.a. of the preamble of this final rule apply to all inpatient hospital admissions, including inpatient admissions to an IRF, they do not determine the timing of an IRF admission, nor are they used to determine whether the IRF admission was reasonable and necessary. These determinations are governed by the requirements in (a)(3), (4), and (5) of the regulations. To clarify this, we have included a provision under new in this final rule that the IRF requirements at also must be met in order for the IRF to be paid for hospital inpatient services under Medicare Part A. However, due to the aforementioned inherent differences in the operation of and beneficiary admission to IRFs, such providers are excluded from the 2-midnight admission guidelines and medical review instruction, as provided under XI.C.3. of the preamble of this final rule. 3. Inpatient Admission Guidelines CMS is authorized under section 1893 of the Act to implement the Medicare Integrity Program to conduct medical review of claims and ensure appropriateness of Medicare payment. Medicare review contractors, such as Medicare Administrative Contractors (MACs), Recovery Auditors (formerly known as the Recovery Audit Contractors, or RACs), the Comprehensive Error Rate Testing (CERT) Contractor, and other review contractors are hired by CMS to review claims on a pre-payment or postpayment basis to determine whether a claim should be paid or denied or whether a payment was properly made under Medicare payment rules. Following documentation reviews, many claim denials are made or improper payments identified because either The claim was incorrectly coded (for example, the provider did not appropriately assign the individual or grouper inpatient and/or outpatient coding for the care documented); or The services were not medically necessary (that is, the review indicates that the services billed were not reasonable and necessary based upon Medicare payment policies or that the documentation was insufficient to support the medical necessity of the services billed). CMS developed the CERT program to calculate the annual Medicare FFS program improper payment rate. The CERT program considers any claim that was paid when it should have been denied or paid at another amount (including both overpayments and underpayments) to be an improper payment. Hospital claim errors are identified more frequently for shorter lengths of stay. In 2012, the CERT contractor found that Medicare Part A inpatient hospital admissions for 1-day stays or less had an improper payment rate of 36.1 percent. The improper payment rate decreased significantly for 2-day or 3-day stays, which had improper payment rates of 13.2 percent and 13.1 percent, respectively. The improper payment rate further decreased to 8 percent for those beneficiaries who were treated as hospital inpatients for 4 days. Hospital claim errors are identified more frequently for shorter lengths of stay. The majority of improper payments under Medicare Part A for short-stay inpatient hospital claims have been due to inappropriate patient status (that is, the services furnished were reasonable and necessary, but should have been furnished on a hospital outpatient, rather than hospital inpatient, basis). Inpatient hospital short-stay claim errors are frequently related to minor surgical procedures or diagnostic tests. In such situations, the beneficiary is typically admitted as a hospital inpatient after the procedure is completed, monitored overnight as an inpatient, and discharged from the hospital in the morning. Medicare review contractors typically find that while the underlying services provided were reasonable and necessary, the inpatient hospitalization following the procedure was not (that is, the services following the procedure should have been provided on an outpatient basis). In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR through 27650), we sought to clarify our longstanding policy on how Medicare review contractors review inpatient hospital admissions for payment under Medicare Part A. We also issued proposed guidance to physicians and hospitals regarding when a hospital inpatient admission should be ordered for Medicare beneficiaries. In this final rule we discuss the public comments we received in response to our proposals relating to admission guidance and medical review and provide our final policies after considerations of those public comments. a. Correct Coding Reviews We did not propose any changes to coding review strategies for hospital claims. Reviewers will continue to ensure that the correct codes were applied and are supported by the medical record documentation. b. Complete and Accurate Documentation When conducting complex medical review, we proposed that Medicare review contractors would continue to employ clinicians to review practitioner documented procedures and ensure that they are supported by the submitted medical record documentation. Such has been the case for complex medical review as historically performed, and will continue to be the case per this final rule instruction. c. Medical Necessity Reviews (1) Physician Order and Certification In the proposed rule (78 FR 27647), we proposed to codify in 42 CFR (b) the longstanding requirement that medical documentation must support the physician s order and certification, as prescribed by CMS Ruling Under the proposed new paragraph (b) titled Physician s order and certification regarding medical necessity, CMS reiterated that No presumptive weight shall be assigned to the physician s order under or the physician s certification under Subpart B of Part 424 of this chapter in determining the medical necessity of inpatient hospital services under section 1862(a)(1) of the Act. A physician s order and certification will be evaluated in the context of the evidence in the medical record. We also stated that current requirements for practitioner documentation of services ordered and furnished would remain unchanged. That is, while the physician order and the physician certification are required for all inpatient hospital admissions in order for payment to be made under Part A, the physician order and the physician certification are not considered by CMS to be conclusive evidence that an inpatient hospital admission or service was medically necessary. Rather, the physician order and physician certification are considered along with other documentation in the medical record. Comment: Some commenters disagreed with the proposal for reviewing the physician order and certification in accord with the documentation in the medical record. Rather, the commenters suggested that an assumption of medical necessity for the inpatient stay would more ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 5

78 74 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations appropriately stem from the physician order to admit to inpatient, particularly due its requirement for admission purposes. Response: Satisfying the requirements regarding the physician order and certification alone does not guarantee Medicare payment. Rather, in order for payment to be provided under Medicare Part A, the care must also be reasonable and necessary, as specified under section 1862(a)(1) of the Act. In addition, section 1869(a) of the Act provides that determinations regarding entitlement to benefits are under the authority of the Secretary. As stated in our proposed rule, the instruction for reviewers to account for all documentation in the medical record, in addition to the actual order for inpatient admission, is consistent with statutory instruction and our prior policy as outlined in Medicare Ruling 93 1, and is being codified for transparency and consistency. Comment: Commenters requested that CMS define what constitutes objective medical information, which is required to support the order for a hospital inpatient admission. Response: We appreciate the commenters suggestions that additional documentation guidelines would be helpful. We will consider them as we develop implementation instructions and manual revisions. (2) Inpatient Hospital Admission Guidelines In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27648), we indicated that longstanding Medicare policy has recognized that there are certain situations in which a hospital inpatient admission is rarely appropriate. We have stated in the MBPM that when a beneficiary receives a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for only a few hours (less than 24), the services should be provided as outpatient hospital services, regardless of the hour the beneficiary comes to the hospital, whether he or she uses a bed, and whether he or she remains in the hospital past midnight (Section 10, Chapter 1 of the MBPM). In applying this benchmark, we have been clear that this instruction does not override the clinical judgment of the physician to keep the beneficiary at the hospital, to order specific services, or to determine appropriate levels of nursing care or physical locations within the hospital. Rather, this instruction provided a benchmark to ensure that all beneficiaries received consistent application of their Part A benefit to whatever clinical services were medically necessary. Due to persistently large improper payment rates in short-stay hospital inpatient claims, and in response to requests to provide additional guidance regarding the proper billing of those services, we proposed to modify and clarify our general rule and provide at 412.3(c)(1) that, in addition to services designated by CMS as inpatient only (which are appropriate for inpatient admission without regard to duration of care), surgical procedures, diagnostic tests, and other treatments would be generally appropriate for inpatient admission and inpatient hospital payment under Medicare Part A when the physician expects the beneficiary to require a stay that crosses at least 2 midnights and admits the beneficiary to the hospital based upon that expectation. Conversely, when a beneficiary enters a hospital for a surgical procedure not specified by Medicare as inpatient only under (n), a diagnostic test, or any other treatment, and the physician expects to keep the beneficiary in the hospital for only a limited period of time that does not cross 2 midnights, the services would be generally inappropriate for payment under Medicare Part A. This would be the case regardless of the hour that the beneficiary came to the hospital or whether the beneficiary used a bed. In the proposed rule, we provided inpatient hospital admission guidance specifying that a physician or other qualified practitioner (herein we will refer to the physician, with the understanding that this can also pertain to another qualified practitioner) should order admission if he or she expects that the beneficiary s length of stay will exceed a 2-midnight benchmark or if the beneficiary requires a procedure specified as inpatient-only under We proposed that the starting point for this 2-midnight instruction would be when the beneficiary is moved from any outpatient area to a bed in the hospital in which additional hospital services would be provided. We also sought public comment regarding alternative methods of calculating the start time for the 2-midnight instruction. In the proposed rule, we stated that the judgment of the physician and the physician s order for inpatient admission should be based on the expectation of care surpassing 2 midnights, with both the expectation of time and the determination of the underlying need for medical care at the hospital supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. We also indicated that, in accordance with current policy, factors that may result in an inconvenience to a beneficiary or family would not justify an inpatient hospital admission. The factors that lead a physician to admit a particular beneficiary based on the physician s clinical expectation are significant clinical considerations and must be clearly and completely documented in the medical record. Because of the relationship that develops between a physician and his or her patient, the 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 2 midnights was appropriate in the context of that beneficiary s acute condition. We stated in the proposed rule that a reasonable expectation of a stay crossing 2 midnights, which is based on complex medical factors and is documented in the medical record, will provide the justification needed to support medical necessity of the inpatient admission, regardless of the actual duration of the hospital stay and whether it ultimately crosses 2 midnights. As such, we acknowledged in the proposed rule that there may be an unforeseen circumstance that results in a shorter beneficiary stay than the physician s expectation of surpassing 2 midnights. We stated that we would expect that the majority of such inpatient hospital admissions would occur when an inpatient hospital admission is appropriately ordered, but a beneficiary s transfer or death interrupts the beneficiary s hospital stay that would have otherwise spanned at least 2 midnights. Therefore, we provided in proposed 412.3(c)(2), that If an unforeseen circumstance, such as beneficiary death or transfer, results in a shorter beneficiary stay than the physician s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and the hospital inpatient payment may be made under Medicare Part A. We indicated that documentation in the medical record of such a circumstance would be required for purposes of supporting whether the inpatient hospital admission was reasonable and necessary for Medicare Part A payment. In addition, we explained that the physician must certify that inpatient hospital services were medically necessary in accordance with section 1814(a) of the Act and 42 CFR Part 424, Subpart B. ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 5

79 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 75 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Comment: Commenters pointed to CMS guidance that time should not be the leading factor in the decision to admit a beneficiary and that the decision should rely on the physician s clinical judgment and evaluation of the beneficiary s needs based on the severity of illness, the intensity or complexity of care, and the predictability of high-risk adverse outcomes. The commenters stated that there are many beneficiaries who stay in a hospital for less than 2 midnights but still require an inpatient level of care. Response: In our existing guidance, we stated that the decision to admit a patient as an inpatient is a complex medical decision based on many factors, including the risk of an adverse event during the period considered for hospitalization, and an assessment of the services that the beneficiary will need during the hospital stay. The crux of the medical decision is the choice to keep the beneficiary at the hospital in order to receive services or reduce risk, or discharge the beneficiary home because they may be safely treated through intermittent outpatient visits or some other care. Our previous guidance also provided for a 24-hour benchmark, instructing physicians that, in general, beneficiaries who need to stay at the hospital less than 24 hours should be treated as outpatients, while those requiring care greater than 24 hours may usually be treated as inpatients. Our proposed 2-midnight benchmark, which we now finalize, simply modifies our previous guidance to specify that the relevant 24 hours are those encompassed by 2 midnights. While the complex medical decision is based upon an assessment of the need for continuing treatment at the hospital, the 2-midnight benchmark clarifies when beneficiaries determined to need such continuing treatment are generally appropriate for inpatient admission or outpatient care in the hospital. Contrary to the commenters suggestion, we do not refer to level of care in guidance regarding hospital inpatient admission decisions. Rather, we have consistently provided physicians with the aforementioned time-based admission framework to effectuate appropriate inpatient hospital admission decisions. This is supported by recent findings by the Office of Inspector General (OIG) (OIG, Hospitals Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries, OEI , July 2013). The OIG found that the reasons for short inpatient stays and for outpatient observation stays were often the same. They further noted that the relative use of short inpatient stays versus outpatient observation stays varied widely between hospitals, consistent with medical review findings that identical beneficiaries may receive identical services as either inpatients or outpatients in different hospitals. We believe that this supports our proposed continuation of our existing policy that there are no prohibitions against a patient receiving any individual service as either an inpatient or an outpatient, except for those services designated by the Outpatient Prospective Payment System (OPPS) Inpatient-Only list as inpatient-only services. We further believe that this supports our proposed policy that the physician is expected to continue to use his or her complex clinical judgment in determining whether a beneficiary needs to stay at the hospital, what services and level of nursing care (for example, low-level, monitored, or one-on-one) the beneficiary will need, and what location (unit) is most appropriate. This does not require that the physician memorize complex billing or utilization guidelines; rather, the physician should generally order an inpatient admission when he or she has determined either that the beneficiary requires care at the hospital that is expected to transcend at least 2 midnights or that it will involve a procedure designated by the OPPS Inpatient-Only list as an inpatient-only procedure. Comment: Commenters asserted that making a time-based prediction is difficult for the physician. They stated that making such a determination is contradictory to medical professionals training, which is centered on the assessment of patients and the development of treatment plans, as opposed to focusing on the utilization review process. The commenters also stated that predicting length of stay is difficult because individual patients respond differently to care provided. Commenters suggested that a physician often does not have enough information about a patient at the onset of treatment to make an informed decision regarding anticipated length of stay. For example, a hospitalist admitting a beneficiary through the emergency department likely will not be familiar with the patient and may not have access to extensive medical history documentation on which to make a decision. Commenters suggested that beneficiaries with unknown or uncertain diagnoses should be kept under observation status until their diagnosis and course of treatment become clear. At that point, the commenters added, the hospital would be in the best position to determine the length of treatment, make the decision to admit to inpatient status, or discharge the patient home. Response: It has been longstanding Medicare policy to require physicians to admit a beneficiary as a hospital inpatient based on their expected length of stay. However, we recognized when we published our definition of observation services that long-term predictions are inherently more difficult than short-term predictions. Therefore, we revised our guidance to indicate that, when it was difficult to make a reasonable prediction, the physician should not admit the beneficiary but should place the beneficiary in observation as an outpatient. As new information becomes available, the physician must then reassess the beneficiary to determine if discharge is possible or if it is evident that an inpatient stay is required. We believe that this principle still applies and have reiterated this in the final rule. For those hospital stays in which the physician cannot reliably predict the beneficiary to require a hospital stay greater than 2 midnights, the physician should continue to treat the beneficiary as an outpatient and then admit as an inpatient if and when additional information suggests a longer stay or the passing of the second midnight is anticipated. Comment: Commenters pointed out that although the proposal is framed as a presumption, the proposed rule, would, in effect, inappropriately establish a per se rule that inpatient admissions that are not expected to last at least 2 midnights are not medically reasonable and necessary (unless the beneficiary is receiving an inpatientonly service or procedure). The commenters stated that the proposed rule offers no legal or medical support for the idea that a 1-day stay that is expected to be a 1-day stay is not medically reasonable and necessary as an inpatient admission. Other commenters requested that CMS clarify that no per se rule would be created that inpatient payment is always inappropriate following procedures not on the inpatient-only list. Response: The proposed rule did not create a per se standard; rather, consistent with historical instruction, the proposed rule continues the use of a benchmark to ensure a uniform understanding of the circumstances under which an inpatient admission should be ordered or when the care should be provided on an outpatient basis. This common standard is not a per se rule but a necessary reference to ensure similar beneficiary cost-sharing and hospital reimbursement for similar ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

80 76 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations care. The 2-midnight benchmark, rather, provides that hospital stays expected to last less than 2 midnights are generally inappropriate for inpatient hospital admission and Part A payment absent rare and unusual circumstance to be further detailed in sub-regulatory instruction. In applying this benchmark, we have been clear that this instruction does not override the clinical judgment of the physician to keep the beneficiary at the hospital, to order specific services, or to determine appropriate levels of nursing care or physical locations within the hospital. Rather, this instruction provides a benchmark to ensure that all beneficiaries received consistent application of their Part A benefit to whatever clinical services were medically necessary. Comment: Commenters urged CMS to consider situations that result in a shorter beneficiary stay than the physician s expectation of care transcending 2 midnights. The commenters stated that in the proposed rule, CMS indicated that it would expect that the majority of such cases to be due to beneficiary death or transfer. Commenters expressed concern that these exceptions are too restrictive and urged CMS to recognize other exceptions, such as when a beneficiary leaves against medical advice (AMA) before reaching the 2-midnight benchmark, when the beneficiary improves more rapidly than expected, or when the beneficiary requires care in the intensive care unit (ICU). One commenter inquired whether a beneficiary who receives intensive services and expires prior to crossing 2 midnights would automatically be classified as appropriately outpatient. Response: We appreciate industry feedback, and believe the rule, as finalized, provides for sufficient flexibility because of its basis in the physician s expectation of a 2-midnight stay. Such would include situations in which the beneficiary improves more rapidly than the physician s reasonable, documented expectation. Such unexpected improvement may be provided and billed as inpatient care, as the regulation is framed upon a reasonable and supportable expectation, not the actual length of care, in defining when hospital care is appropriate for inpatient payment. We do not believe beneficiaries treated in an intensive care unit should be an exception to this standard, as our 2-midnight benchmark policy is not contingent on the level of care required or the placement of the beneficiary within the hospital. In addition, while we did not specify the situation in which a beneficiary leaves AMA as an exception under the proposed rule, we acknowledge that an AMA departure is usually an unexpected event and that an inpatient admission could still be appropriate provided that the medical record demonstrates a reasonable expectation of a 2-midnight stay when the admission order is written. As we develop our manual guidance to implement this proposed rule, we will identify those unusual situations in which we expect that the 2 midnight benchmark does not apply. Comment: Commenters voiced concerns that the use of observation would increase under the proposed policy, regardless of CMS intent to reduce the incidence of long observation stays. Some commenters believed that if the physician would have to predict a greater than 2 midnight stay, only the sickest individuals and those receiving procedures on the inpatient-only list would be admitted as inpatients, while many more beneficiaries would be placed in observation so as to avoid an inaccurate length of stay determination and subsequent short-stay audits. Other commenters believed that because an increase in observation stays will happen, many hospital stays that would generally be appropriate for an inpatient admission under CMS current 24-hour guidance would now be generally inappropriate for Part A payment unless the 2-midnight benchmark is met. Commenters voiced concern that the increase in observation will lead to a strain in outpatient beds and resources, leading the hospitals to use inpatient beds for beneficiaries in outpatient status who need more intense monitoring than is currently available in outpatient areas without a proportionate increase in outpatient reimbursement from Medicare. Commenters also urged CMS to recalibrate its outpatient payment so that hospitals will be adequately compensated for handling the increase in observation cases, particularly for those stays requiring complex monitoring and intervention. The commenters believed that as beneficiaries have the potential for greater cost-sharing for an observation stay than an inpatient stay, this may lead to greater financial liability for beneficiaries. Response: While previous guidance provided a 24-hour benchmark to be used in making inpatient admission decisions, we now specify that the 24 hours relevant to inpatient admission decisions are those encapsulated by 2 midnights. As we provide in this final rule, we expect that the decision to admit the beneficiary should be based on the cumulative time spent at the hospital beginning with the initial outpatient service. In other words, if the physician makes the decision to admit after the beneficiary arrived at the hospital and began receiving services, he or she should consider the time already spent receiving those services in estimating the beneficiary s total expected length of stay. For example, if the beneficiary has already passed 1 midnight as an outpatient observation patient or in routine recovery following outpatient surgery, the physician should consider the 2 midnight benchmark met if he or she expects the beneficiary to require an additional midnight in the hospital. This means that the decision to admit becomes easier as the time approaches the second midnight, and beneficiaries in medically necessary hospitalizations should not pass a second midnight prior to the admission order being written. The potential increase in very short (less than 2 midnights) observation stays should be balanced by a significant decrease in long (2 midnights or more) observation stays. Because we expect that this revision should virtually eliminate the use of extended observation, we also anticipate it will concurrently limit beneficiary cost-sharing for outpatient services. We are not expecting any change in the utilization of specific beds or facilities, as the expectation of the duration of needed care is independent of the beneficiary s location at the hospital. Comment: One commenter inquired about the appropriate use of Condition Code 44 in a situation when the physician expected a stay that met the 2-midnight standard but the beneficiary experienced an unanticipated recovery. Response: We refer commenters to the instruction provided at section XI.B. of the preamble of this rule, in which we expanded on Condition Code 44 requirements and application. Under this section, we state that providers may continue to change patient status to outpatient during the hospital stay upon meeting the Condition Code 44 requirements. However, we note that Condition Code 44 is not to be used for unexpected events because, as described above, those situations can remain appropriately inpatient. Thus, a beneficiary who experiences an unexpected recovery during a medically necessary stay should not be converted to an outpatient but should remain an inpatient if the 2-midnight expectation was reasonable at the time the inpatient order was written, but unexpectedly the stay did not fully transpire. In contrast, Condition Code 44 is specifically for the situation when the utilization review or management committee determines that the physician has not appropriately ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

81 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 77 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations admitted a patient and the physician concurs that the status should be converted to outpatient prior to beneficiary discharge. Comment: Commenters indicated that inpatient-only procedures that require a 1-day length of stay would be affected by this proposed policy and may not be adequately reimbursed under Medicare Part B. The commenters requested that CMS specify that all services on the inpatient-only list should automatically be deemed to meet inpatient service criteria, even if the beneficiary is in the hospital for less than 2 midnights. Conversely, another commenter suggested that excluding inpatient-only procedures, which may or may not require 2-midnight stays, contradicts a time-based policy. Response: In the proposed rule, we stated that procedures on the OPPS inpatient-only list are always appropriately inpatient, regardless of the actual time expected at the hospital, so long as the procedure is medically necessary and performed pursuant to a physician order and formal admission. Procedures designated as inpatient-only are deemed statutorily appropriate for inpatient payment at (n). As such, we believe that inpatient-only procedures are appropriate for exclusion from the 2-midnight benchmark. Under this final rule, inpatient-only procedures currently performed as inpatient 1-day procedures will continue to be provided as inpatient 1- day procedures, and therefore this rule will not result in any change in status or reimbursement. Comment: Commenters recommended that CMS remove the 2-midnight guidance for certain procedures, allowing physicians to continue admitting as inpatient high risk, complex beneficiaries who are to undergo a surgery with added complexity, regardless of the expected length of stay. The commenters stated that many Medicare beneficiaries have multiple comorbidities, and the execution of seemingly simple procedures may require more pre-, intra-, and post-operative services than would be necessary for younger or healthier patients, even when there is no expectation that the beneficiary will require a stay of at least 2 midnights. Commenters added that the provision of such services may exceed the level of care typically associated with observation care. Other commenters suggested that CMS explicitly preclude from further review any services that are not typically available in an outpatient setting, such as telemetry. Response: We agree with commenters that factors such as the procedures being performed and the health status of the beneficiary are important considerations in the decision to keep the beneficiary in the hospital. However, as we note above, the beneficiary s required level of care is not part of the guidance regarding hospital inpatient admission decisions. Rather, we provide physicians with a 2-midnight admission framework to effectuate appropriate inpatient hospital admission decisions. More specifically, we have stipulated that factors such as the procedures being performed and the beneficiary s condition and comorbidities apply when the physician formulates his or her expectation regarding the need for hospital care, while the decision of whether to admit a beneficiary as an inpatient or keep as an outpatient is based upon the physician s expectation of the beneficiary s required length of stay. In this rule, we have not identified any circumstances where the 2- midnight benchmark restricts the physician to a specific pattern of care, as we have specified that the 2-midnight benchmark, like the previous 24-hour benchmark, does not prevent the physician from providing any service at any hospital regardless of the expected duration of the service. Rather, this policy provides guidance on when the hospitalized beneficiary is appropriate for coverage under Part A benefits as an inpatient, and when the hospitalized beneficiary should receive that treatment as a registered outpatient subject to Part B benefits. On the other hand, we also specify that certain procedures may have intrinsic risks, recovery impacts or complexities that would cause them to be appropriate for inpatient coverage under Part A regardless of the expected length of hospital time a specific physician expects a particular patient to require. We believe that the OPPS Inpatient- Only List identifies those procedures and we have proposed that this is a specific exception to the generally applicable 2 midnight benchmark. We may also specify other potential exceptions to the generally applicable benchmark as we revise our manuals to implement this proposed rule. Comment: Commenters recommended that the risk of an adverse event as being a determinant in the inpatient admission decision should be removed, qualified as high or unreasonable, or narrowly defined to only include risks during the beneficiary s course of treatment that can be addressed or managed by the hospital. The commenters pointed to past trends of inconsistency in the use of risk as a factor in the inpatient admission decision by hospitals and appeal entities. Commenters suggested that, at most, the beneficiary s risk of morbidity or mortality should be a factor considered when making the decision of whether the keep the beneficiary in the hospital or send the beneficiary home, not when determining the appropriate patient status as inpatient or outpatient. Response: We believe that, due to the nature of the Medicare population, coexisting or concurrent medical conditions are a frequent occurrence. As a result, admission decisions centered around risk must relate to current disease processes or presenting symptoms, and not merely be part of the beneficiary s benign or latent past medical history. We note that risk in common usage describes an unacceptable probability of an adverse outcome, as in risky behavior. We reiterate our stance that the decision to hospitalize a beneficiary is a complex medical decision made by the physician in consideration of various risk factors, including the beneficiary s age, disease processes, comorbidities, and the potential impact of sending the beneficiary home. It is up to the physician to make the complex medical decision of whether the beneficiary s risk of morbidity or mortality dictates the need to remain at the hospital because the risk of an adverse event would otherwise be unacceptable under reasonable standards of care, or when the beneficiary may be discharged home. If the resultant length of stay for medically necessary hospitalization is expected to surpass 2 midnights, the physician should admit the patient as an inpatient. Comment: Commenters pointed out that the complexity of caring for the elderly beneficiary and the limited access to resources in the community continues to be challenging. While a beneficiary may not meet the screening criteria for an inpatient admission, the beneficiary s complex needs and lack of access to medical therapies outside the hospital require the admitting physician to make a judgment as to whether such patients are in greater danger of serious illness or death if they are discharged than if they are admitted, and may result in the hospital being unable to release a beneficiary into the community. Conversely, a commenter wanted to remind CMS that convenience factors or nonmedically necessary care violate the Social Security Act, which excludes custodial care from Medicare coverage. Response: While we will not dictate the hospital or physician admission decision, we also note that Medicare is statutorily prohibited under section Date Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

82 78 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations 1862(a)(1)(A) of the Act from paying for services that are not reasonable and necessary. Therefore, we have identified so-called social admissions and admissions to avoid inconvenience as inappropriate from Medicare payment per the aforementioned statutory exclusion. This is consistent with current manual instructions. We will look for opportunities to offer additional guidance addressing these types of medical necessity decisions as we update our policy manuals. Comment: Commenters requested that CMS provide clarification for how hospitals receiving beneficiaries from another hospital should make the admission decision under the proposed policy. Response: We recognize that, in addition to the occurrence of unexpected transfers out of a hospital, there are a number of possible scenarios involving transfers into a hospital that that may impact the length of stay determination under this policy. We noted in the proposed rule that an unexpected transfer out of the sending hospital is one reason why an inpatient stay that lasts less than 2 midnights may still be appropriately inpatient. Due to the complexity of the possible transfer scenarios, we believe that explicit guidance should be reserved for manual instruction. Drafting these instructions will be one of the highest priorities as we develop our implementation instructions. Comment: Commenters pointed out that, under this proposal, the distinction between inpatient and outpatient may come down to small time discrepancies. For example, a beneficiary whose hospital stay begins shortly before midnight and lasts just over 48 hours will be considered an inpatient because the stay will cross 2 midnights, while a beneficiary whose hospital stay begins shortly after midnight and lasts just under 48 hours will be considered an outpatient because the stay will only cross 1 midnight. Response: The application of 2 midnights was proposed for the purpose of providing both consistency and clarity. We have expected and continue to expect that physicians will make the decision to keep a beneficiary in the hospital when clinically warranted and will order all appropriate treatments and care in the appropriate location based on the beneficiary s individual medical needs. We also expect that physicians will apply the revised benchmark as they have previously applied the existing benchmark, providing any medically necessary services in an inpatient status whenever the benchmark is met and in all other instances providing identical services to patients staying at the hospital in a day or overnight outpatient status. While we have historically referenced a 24-hour benchmark, we now specify that the 24 hours relevant to inpatient admission decisions are those encapsulated by 2 midnights. This distinction is consistent with our application of Medicare utilization days, which are based on the number of midnights crossed. Medicare charges beneficiaries for utilization days and pays hospitals for utilization days when it applies per diem adjustments, such as the transfer adjustment. A beneficiary who is admitted just before midnight and discharged 36 hours later is currently charged 2 utilization days, while a beneficiary admitted just after midnight is charged 1 day. In addition, the use of 2 midnights is an easy concept for beneficiaries to understand in assessing the appropriateness of their assigned status, associated coverage, and impacts. Comment: Commenters provided alternate proposals for guiding inpatient admissions and medical review. Some commenters suggested that physicians are not apprised of admission criteria, but rather the medical treatment necessary for the beneficiary, and suggested that case management be permitted to make inpatient admission determinations, which could be concurred or nonconcurred to by the treating physician. Conversely, other commenters believed the physician was most apprised of the patient condition and, therefore, the need for inpatient admission or care spanning 2 midnights. As such, some commenters believed the physician order should trigger a presumption of appropriate payment for medical review purposes. One commenter suggested good faith protections for facilities in strict adherence to their hospital comprised utilization review plan. Another commenter disagreed with the need for any change to the current medical review policy. Response: In the proposed rule, we focused on clarifying and modifying the distinction between hospitalization as an outpatient and hospitalization as an inpatient. While the proposed approach arose out of significant consideration for provider impact, ease in implementation and operationalization, we will assess commenter feedback falling within the scope of CMS policy in implementing changes to our manual provisions. Comment: Commenters requested further guidance to clarify what criteria support a reasonable and necessary inpatient admission. The commenters suggested sources of such guidance included evidence-based guidelines offered through the Agency for Healthcare Research and Quality (AHRQ) National Guidelines Clearinghouse and the various medical specialty societies and commercial hospital screening guidelines. Some commenters also suggested that inpatient admissions be deemed reasonable and necessary based on the use of such sources. Another commenter indicated that a time-based policy contradicts CMS instructions contained in the Program Integrity Manual pertaining to the use of screening tools as part of the review of inpatient hospital claims. Regardless of the criteria chosen, commenters iterated that CMS and its contractors must update existing inpatient admission guidance and policies to ensure consistency in application by all Medicare review contractors. Commenters also inquired whether providers would have the opportunity to comment on any additional guidance that will be created to implement this rule. Response: Medicare review contractors must abide by CMS policies in conducting payment determinations, but are permitted to take into account evidence-based guidelines or commercial utilization tools that may aid such a decision. We also acknowledge that this type of information may be appropriately considered by the physician as part of the complex medical judgment that guides his or her decision to keep a beneficiary in the hospital and formulation of the expected length of stay. As we update our manuals and take additional steps to implement this rule, we anticipate using our usual processes to develop and release subregulatory guidance such as manual instructions and educational materials, which may include open door forums, regional meetings, correspondence and other ongoing interactions with stakeholders; and that our contractors will continue to involve local entities as they implement these rules. Comment: Several commenters indicated that CMS should delay enforcement of the revised admissions criteria until a time after October 1, 2013, due to the significant system changes and educational efforts that will be required. Some commenters indicated that CMS should use this delay in order to conduct further research and collaborate with providers, while others suggested that CMS conduct a thorough analysis of current payment policy and planned payment reforms that could affect inpatient admission decisions, including those ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

83 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 79 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations with implications for patient safety, quality, and beneficiary cost-sharing, before finalizing its guidance. Other commenters suggested that claim reviews for inpatient stays of greater than 2 midnights should continue without evidence of gaming for a period of time following implementation of the new policy to ensure that hospitals are properly billing under the revised criteria. The commenters stated that after that time has passed, reviews of inpatient stays longer than 2 midnights would be based on evidence of overutilization. Response: We proposed only a change in the inpatient admissions benchmark from an hourly expectation (24 hours) to a daily (2-midnights) expectation. We do not believe that delays in implementation are necessary or desirable, and we expect, through collaboration with stakeholders, to develop additional guidance and instruction as part of that implementation. Comment: Commenters questioned the applicability of the proposed rule to differing types of hospital facilities. Commenters specifically requested clarity regarding application of the rule to IRFs and IPFs. Commenters further asserted that this distinction may conflict with State laws requiring inpatient admissions post 24 hours, and such States should be granted exception. Response: In the proposed rule, our reference to section 1861(e) of the Act was intended to specify that CAHs were included in the proposed policies, not that we were proposing that IPFs or other non-ipps hospitals should be excluded. Having considered the public comments to the proposed rule, we believe that all hospitals, LTCHs, and CAHs, with the exception of IRFs, would appropriately be included in our final policies regarding the 2-midnight admission guidance and medical review criteria for determining the general appropriateness of inpatient admission and Part A payment. Due to the inherent differences in the operation of and beneficiary admissions to IRFs, such providers must be excluded from the aforementioned admission guidelines and medical review instruction. We disagree with the commenters assertion that the 2-midnight admission and medical review policies conflict with existing state laws regarding observation. The 2-midnight benchmark does not prohibit physicians from ordering inpatient admission in accordance with state law; rather, this policy indicates when Medicare payment will be deemed appropriate. To the extent that State law requires admission in situations where Medicare payment would not be appropriate, providers should work with their States to resolve those discrepancies. Comment: Commenters indicated that the proposed policy, which clarifies when a beneficiary becomes an inpatient, promotes the integrity and accuracy of the 340B program. They stated that the 340B program creates an incentive for hospitals to keep beneficiaries in observation status for the purpose of obtaining the deeply discounted 340B acquisition price that would otherwise by unavailable. Thus, they added, the 340B spread creates a financial incentive for 340B hospitals to keep beneficiaries in outpatient/ observation status for the sole purpose of administering drugs. Response: We appreciate the observation of the commenters and concur that this policy promotes consistent application of an inpatient status to all stakeholders. (3) Medical Review of Inpatient Hospital Admissions Under Part A Under this revised policy, services designated by the OPPS Inpatient-Only list as inpatient-only, would continue to be appropriate for inpatient hospital admission and payment under Medicare Part A. In addition, surgical procedures, diagnostic tests, and other treatments would be generally deemed appropriate for inpatient hospital admission and payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient to the hospital based upon that expectation. We proposed, and are now finalizing, two distinct, though related, medical review policies, a 2-midnight presumption and a 2-midnight benchmark. Under the 2-midnight presumption, inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed generally appropriate for Part A payment and will not be the focus of medical review efforts absent evidence of systematic gaming, abuse or delays in the provision of care in an attempt to qualify for the 2-midnight presumption (that is, inpatient hospital admissions where medically necessary treatment was not provided on a continuous basis throughout the hospital stay and the services could have been furnished in a shorter timeframe). Beneficiaries should not be held in the hospital absent medically necessary care for the purpose of meeting the 2-midnight benchmark. Review contractors will also continue to assess claims in which the beneficiary span of care after admission crosses 2 midnights: To ensure the services provided were medically necessary; To ensure that the stay at the hospital was medically necessary; To validate provider coding and documentation as reflective of the medical evidence; When the CERT Contractor is directed to do so under the Improper Payments Elimination and Recovery Improvement Act of 2012 (Pub. L ); or If directed by CMS or other authoritative governmental entity (including but not limited to the HHS Office of Inspector General and Government Accountability Office). Conversely, under this revised policy, CMS medical review efforts will focus on inpatient hospital admissions with lengths of stay crossing only 1 midnight or less after admission (that is, only 1 Medicare utilization day, as defined in 42 CFR and implemented in the MBPM, Chapter 3, Section 20.1). As previously described, such claims have traditionally demonstrated the largest proportion of inpatient hospital improper payments under Medicare Part A. If the physician admits the beneficiary as an inpatient but the beneficiary is in the hospital for less than 2 midnights after the order is written, CMS and its medical review contractors will not presume that the inpatient hospital status was reasonable and necessary for payment purposes, but may instead evaluate the claim pursuant to the 2-midnight benchmark. Medicare review contractors will (a) evaluate the physician order for inpatient admission to the hospital, along with the other required elements of the physician certification, (b) the medical documentation supporting the expectation that care would span at least 2 midnights, and (c) the medical documentation supporting a decision that it was reasonable and necessary to keep the patient at the hospital to receive such care, in order to determine whether payment under Part A is appropriate. In their review of the medical record, Medicare review contractors will consider complex medical factors that support a reasonable expectation of the needed duration of the stay relative to the 2-midnight benchmark. Both the decision to keep the beneficiary at the hospital and the expectation of needed duration of the stay are based on such complex medical factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk (probability) of an adverse event occurring during the ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

84 80 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations time period for which hospitalization is considered. In other words, if it was reasonable for the physician to expect the beneficiary to require a stay lasting 2 midnights, and that expectation is documented in the medical record, inpatient admission is generally appropriate, and payment may be made under Medicare Part A; this is regardless of whether the anticipated length of stay did not transpire due to unforeseen circumstances such as beneficiary death or transfer (so long as the physician s order and certification requirements also are met). As discussed above, an inpatient admission is appropriate and Part A payment may also be made in the case of services on Medicare s inpatientonly list, regardless of the expected length of stay. Comment: Some commenters shared concerns regarding the proposed method of calculating the length of stay for purposes of the 2-midnight benchmark, beginning when the beneficiary is moved from any outpatient area to a bed in the hospital in which the additional hospital services will be provided. Commenters noted that hospital capacity issues can lead to situations in which a beneficiary is boarded in the emergency department until a bed becomes available, which can be hours after the admission order is written. In other instances, the commenters added, an inpatient admission may be planned after a surgical procedure and the beneficiary becomes an inpatient when he or she reports to the operating room for preoperative assessment and preparation. Commenters pointed out that if the clock does not start until beneficiary movement to another area of the hospital occurs, the beneficiary may not meet the 2-midnight benchmark although he or she was receiving treatment in the hospital for greater than 2 midnights. Commenters provided various alternate suggestions for when the clock should start. Many commenters suggested that CMS start the clock the earliest of: (1) When the physician writes an order for admission or observation; (2) when the beneficiary is treated in the emergency department; or (3) when the beneficiary is placed in a bed for observation. Other commenters suggested that the clock should begin when the beneficiary meets inpatient admission criteria or when the nursing intake notes specify the time the beneficiary is admitted to the floor and is put in a bed. Regardless of the decision CMS made on this point, commenters requested that clarification be provided on when the inpatient order should be written and how the time should be counted for medical review purposes. Response: We agree with the concerns noted by commenters, and are revising the proposed rule accordingly. In this final rule, we specify that the ordering physician may consider time the beneficiary spent receiving outpatient services (including observation services, treatments in the emergency department, and procedures provided in the operating room or other treatment area) for purposes of determining whether the 2-midnight benchmark is expected to be met and therefore inpatient admission is generally appropriate. For beneficiaries who do not arrive through the emergency department or are directly receiving inpatient services (for example, inpatient admission order written prior to admission for an elective admission or transfer from another hospital), the starting point for medical review purposes will be from the time the patient starts receiving any services after arrival at the hospital. We emphasize that the time the beneficiary spent as an outpatient before the inpatient admission order is written will not be considered inpatient time, but may be considered by physicians in determining whether a patient should be admitted as an inpatient, and during the medical review process for the limited purpose of determining whether the 2-midnight benchmark was met and therefore payment is generally appropriate under Part A. Claims in which a medically necessary inpatient stay spans at least 2 midnights after the beneficiary is formally admitted as an inpatient will be presumed appropriate for inpatient admission and inpatient hospital payment and will generally not be subject to medical review of the inpatient admission, absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. Comment: Commenters requested clarification regarding the distinction between inpatient time and outpatient time for purposes of meeting the 2- midnight benchmark, specifically for those beneficiaries who are first treated in observation status and then later as hospital inpatients pursuant to a physician s order. Commenters recommended that CMS consider observation care to count toward the 2- midnight rule when complications arise that lead to previously unanticipated extended care in accord with requirements for skilled nursing facility eligibility. Response: As noted above, we will allow the physician to consider time spent in the hospital as an outpatient in making their inpatient admission decision. This is consistent with CMS existing instructions and medical review guidance, which allow physicians and Medicare review contractors to account for the beneficiary s medical history and physical condition prior to the inpatient admission decision. Therefore, if upon beneficiary presentation, the physician is unable to make an evaluation and corresponding expected length of stay determination, the physician may first monitor the beneficiary in observation or continue to perform diagnostics in the outpatient arena. If the beneficiary s medical needs and condition after 1 midnight in outpatient status dictate the need for an additional midnight within the hospital receiving medically necessary care, the physician may consider the care in the outpatient setting when making his or her admission decision. Medicare review contractors would similarly apply the 2- midnight benchmark to all time spent within the hospital receiving medically necessary services in their claim evaluation. We reiterate that the physician order, the remaining elements of the physician certification, and formal inpatient admission remain the mandated means of inpatient admission. While outpatient time may be accounted for in application of the 2-midnight benchmark, it may not be retroactively included as inpatient care for skilled nursing care eligibility or other benefit purposes. Inpatient status begins with the admission based on a physician order. Comment: Commenters expressed concern about the additional scrutiny that 1-day inpatient hospital stays would undergo under this policy. Commenters also were particularly interested in how the review contractors would review inpatient stays that lasted less than 2 midnights, including whether current review criteria would continue to be utilized for such reviews. The commenters requested that CMS define situations in which a hospital stay lasting less than 2 midnights would properly qualify as inpatient. Response: If the physician admits the beneficiary as an inpatient but the beneficiary is in the hospital for less than 2 midnights after the admission begins, CMS and the Medicare review contractors will not presume that the inpatient hospital admission was reasonable and necessary for payment purposes, but will apply the 2-midnight benchmark in conducting medical review. In making their determination of whether the inpatient admission is appropriate, Medicare review ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

85 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 81 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations contractors will evaluate: (a) The physician order for inpatient admission to the hospital, along with the other required elements of the physician certification; (b) the medical documentation supporting that the order was based on an expectation of need for care spanning at least 2 midnights; and (c) the medical documentation supporting a decision that it was reasonable and necessary to keep the patient at the hospital to receive such care. In their review of the medical record, Medicare review contractors will consider complex medical factors that support a reasonable expectation of the needed duration of the stay relative to the 2- midnight benchmark. These include such factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. Comment: Commenters asserted that the proposed rule penalizes efficiency, as those hospitals that are able to treat beneficiaries in less than 2 midnights will be able to admit fewer beneficiaries than those less efficient hospitals who do not have the same resources. Other commenters expressed concern that the new proposed policy would encourage hospitals to hold beneficiaries in the hospital solely for the purpose of meeting the 2-midnight presumption and avoid audits of their claims. The commenters stated that consequences of such practices on the beneficiaries could include prolonged exposure to additional medical risks and would also lead to increased costs to the Medicare program, due to medically unnecessary time in the hospital. Conversely, some commenters indicated that they did not believe that hospitals would not hold patients for longer than necessary to meet inpatient requirements. Response: We have noted that the decision to admit is based on an expectation of medically necessary care transcending 2 midnights resulting from the practitioner s consideration of the beneficiary s condition and medical needs. We will monitor all hospitals for intentional or unwarranted delays in the provision of care, which may result in increased inpatient admissions secondary to the 2 midnight instruction. We are also cognizant of concerns related to unnecessarily elongated hospital admissions, and will be monitoring for such patterns of systemic delays indicative of fraud or abuse. If a hospital is unnecessarily holding beneficiaries to qualify for the 2- midnight presumption, CMS and/or its contractors may conduct review on any of its inpatient claims, including those which surpassed 2 midnights after admission. Comment: One commenter stated that while it is reasonable that a medically necessary hospital stay crossing 2 midnights may be appropriately billed as inpatient, there should be no presumption that such a 2-midnight stay was itself medically necessary simply because a patient was in the hospital 2 consecutive nights. The commenter stated that the proposed rule includes a requirement that review will only be permitted when the error rate is sufficient to warrant auditing activity; however, the audit that would establish this error would itself be precluded under CMS presumption. The commenter stated that, alternatively, data analysis of the claims should remain the foundation for selection of claims for medical record review to determine whether the documentation supports the claim as billed. The commenter believed that a presumption of medical necessity based on the time a beneficiary stays in the hospital places the Medicare trust fund and taxpayers at risk. Response: We note that it was not our intent to suggest that a 2-midnight stay was presumptive evidence that the stay at the hospital was necessary; rather, only that if the stay was necessary, it was appropriately provided as an inpatient stay. We have discussed in response to other comments that, in accordance with our statutory obligations, some medical review is always necessary to ensure that services provided are reasonable and necessary, and that we will continue to review these longer stays for the purposes of monitoring, determining correct coding, and evaluating the medical necessity for the beneficiary to remain at the hospital, irrespective of the inpatient or outpatient status to which the beneficiary was assigned. In addition, claims that evidence that a hospital is effectuating systematic abuse of the 2- midnight presumption, such as unexplained delays in the provision of care or aberrancies in billing, may be subject to medical review despite surpassing 2 midnights after admission. Comment: Commenters requested that CMS provide guidance on what would constitute abuse or gaming for this review purpose. Some commenters were concerned that enabling Medicare review contractors to make these determinations would unravel the presumption if the contractors had incentives to identify erroneous claims. Other commenters believed that Medicare contractors, who have expertise in utilization review and Medicare data, should be tasked with identifying providers that are gaming or abusing the system for purposes of meeting the 2-midnight presumption. Comments also suggested that CMS examine hospitals utilization review process rather than rely on claim outputs. Commenters also urged CMS to be clear that audits will occur only if a pattern is detected. Response: In the proposed rule, we stated that patient status reviews for inpatient admissions with lengths of stay greater than 2 midnights after admission would typically be conducted if we suspect that a provider is using the 2-midnight presumption to effectuate systematic abuse or gaming. We have elaborated on our review plans above and summarize by stating that while we have a statutory obligation to ensure that all services are medically necessary and correctly paid, we believe that these changes in our benchmarks and the additional guidance accompanying them will allow us to reduce the administrative burden of reviews. We will do this by reviewing stays spanning at least 2 midnights after admission for the purpose of monitoring and responding to patterns of incorrect DRG assignments, inappropriate or systemic delays, and lack of medical necessity for the stay at the hospital, but not for the purpose of routinely denying payment for such inpatient admissions on the basis that the services should have been provided on an outpatient basis. We expect to shift our attention to the smaller anticipated volume of 0 and 1 day short stays and then, to the extent that facilities correctly apply the proposed benchmark, away from short stays to other areas with persistently high improper payment rates. Comment: Commenters voiced concerns that while CMS proposed that those inpatient hospital admissions meeting the 2-midnight benchmark would be generally appropriate for Part A payment, there is no guarantee that the Medicare contractors would follow this guidance. Some commenters expressed apprehension that the timebased policy would not result in fewer reviews, as the policy stated that contractors could review whether the physician s expectation was reasonable, while others thought the doors would be opened to more hospital claim audits focusing on the need for the beneficiary to stay in the hospital for greater than 2 midnights. Commenters also sought assurance from CMS that reviews would be conducted based on the information the physician had available at the time he or she developed the expectation of a 2-midnight stay and wrote the order pursuant to that expectation. ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2 5

86 82 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations Response: We acknowledge that it is very important that clear and consistent instructions are provided to facilities, physicians, and Medicare review contractors. We intend to quickly develop implementation instructions, manual guidance, and additional education to ensure that all entities receive initial and ongoing guidance in order to promote consistent application of these changes and repeatable and reproducible decisions on individual cases. We intend to ensure that our instructions to providers and reviewers alike emphasize that the decision to admit should be based on and evaluated in respect to the information available to the admitting practitioner at the time of the admission. After consideration of the public comments we received, we are including in this final rule several revisions and clarifications to the proposed policy. First, we are finalizing at 412.3(e)(1) the 2-midnight benchmark as proposed at 412.3(c)(1), that services designated by the OPPS Inpatient-Only list as inpatient-only would continue to be appropriate for inpatient hospital admission and payment under Medicare Part A. In addition, surgical procedures, diagnostic tests, and other treatments would be generally deemed appropriate for inpatient hospital admission and payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient to the hospital based upon that expectation. We proposed at 412.3(c)(2), and are finalizing at 412.3(e)(2), that if an unforeseen circumstance, such as beneficiary death or transfer, results in a shorter beneficiary stay than the physician s expectation of at least 2 midnights, the patient may still be considered to be appropriately treated on an inpatient basis, and the hospital inpatient payment may be made under Medicare Part A. We proposed, and are now finalizing, two distinct, although related, medical review policies, a 2- midnight benchmark and a 2-midnight presumption. The 2-midnight benchmark represents guidance to admitting practitioners and reviewers to identify when an inpatient admission is generally appropriate for Medicare coverage and payment, while the 2- midnight presumption directs medical reviewers to select claims for review under a presumption that the occurrence of 2 midnights after admission appropriately signifies an inpatient status for a medically necessary claim. The starting point for the 2-midnight benchmark will be when the beneficiary begins receiving hospital care on either an inpatient basis or outpatient basis. That is, for purposes of determining whether the 2-midnight benchmark will be met and, therefore, whether inpatient admission is generally appropriate, the physician ordering the admission should account for time the beneficiary spent receiving outpatient services such as observation services, treatments in the emergency department, and procedures provided in the operating room or other treatment area. From the medical review perspective, while the time the beneficiary spent as an outpatient before the admission order is written will not be considered inpatient time, it may be considered during the medical review process for purposes of determining whether the 2-midnight benchmark was met and, therefore, whether payment is generally appropriate under Part A. For beneficiaries who do not arrive through the emergency department or are directly receiving inpatient services (for example, inpatient admission order written prior to admission for an elective admission or transfer from another hospital), the starting point for medical review purposes will be when the beneficiary starts receiving services following arrival at the hospital. We proposed that both the decision to keep the patient at the hospital and the expectation of needed duration of the stay would be based on such factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. In this final rule, we now are clarifying that risk (or probability) of an adverse event relates to occurrences during the time period for which hospitalization is considered. We are finalizing that inpatient hospital claims with lengths of stay greater than 2 midnights after the formal admission following the order will be presumed generally appropriate for Part A payment and will not be the focus of medical review efforts absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. We also are clarifying in this final rule how we will instruct contractors to review inpatient stays spanning less than 2 midnights after admission. Such claims would not be subject to the presumption that services were appropriately provided during an inpatient stay rather than an outpatient stay because the total inpatient time did not exceed 2 midnights. However, upon medical review, the time spent as an outpatient will be counted toward meeting the 2-midnight benchmark that the physician is expected to apply to determine the appropriateness of the decision to admit. In other words, even though the inpatient admission was for only 1 Medicare utilization day, medical reviewers will consider the fact that the beneficiary was in the hospital for greater than 2 midnights following the onset of care when making the determination of whether the inpatient stay was reasonable and necessary. For those admissions in which the basis for the physician expectation of care surpassing 2 midnights is reasonable and well-documented, reviewers may apply the 2-midnight benchmark to incorporate all time receiving care in the hospital. We will continue to use our existing monitoring and audit authority, such as the CERT program, to ensure that our review efforts focus on those subsets of claims with the highest error rates and reduce the administrative burden for those subsets that have demonstrated compliance with our clarified and modified guidance. 4. Impacts of Changes in Admission and Medical Review Criteria In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR through 27650), we discussed our actuaries estimate that our proposed 2-midnight policy (referred to in this final rule as the 2-midnight benchmark and the 2- midnight presumption) would increase IPPS expenditures by approximately $220 million. These additional expenditures result from an expected net increase in hospital inpatient encounters due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS. Specifically, our actuaries examined FY 2009 through FY 2011 Medicare claims data for extended hospital outpatient encounters and shorter stay hospital inpatient encounters and estimated that approximately 400,000 encounters would shift from outpatient to inpatient and approximately 360,000 encounters would shift from inpatient to outpatient, causing a net shift of 40,000 encounters. These estimated shifts of 400,000 encounters from outpatient to inpatient and 360,000 encounters from inpatient to outpatient represent a significant portion of the approximately 11 million encounters paid under the IPPS. The net shift of 40,000 encounters represents an increase of approximately 1.2 percent in the number of shorter stay hospital inpatient encounters paid under the IPPS. Because shorter stay hospital inpatient encounters currently represent approximately 17 percent of the IPPS expenditures, our actuaries estimated ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

87 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 83 Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations that 17 percent of IPPS expenditures would increase by 1.2 percent under our proposed policy. These additional expenditures are partially offset by reduced expenditures from the shift of shorter stay hospital inpatient encounters to hospital outpatient encounters. Our actuaries estimated that, on average, the per encounter payments for these hospital outpatient encounters would be approximately 30 percent of the per encounter payments for the hospital inpatient encounters. In light of the widespread impact of the proposed 2-midnight policy on the IPPS and the systemic nature of the issue of inpatient status and improper payments under Medicare Part A for short-stay inpatient hospital claims, we stated our belief that it is appropriate to use our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act to propose to offset the estimated $220 million in additional IPPS expenditures associated with the proposed policy. This special exceptions and adjustment authority authorizes us to provide for such other exceptions and adjustments to [IPPS] payment amounts... as the Secretary deems appropriate. We proposed to reduce the standardized amount, the hospital-specific rates, and the Puerto Rico-specific standardized amount by 0.2 percent. Comment: Commenters generally did not support the proposed -0.2 percent payment adjustment. Comments included the following assertions: CMS actuaries estimated increase in IPPS expenditures of $220 million was unsupported and insufficiently explained to allow for meaningful comment; CMS did not provide sufficient rationale for the use of our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act; CMS should not be adjusting the IPPS payment rates for expected shifts in utilization between inpatient and outpatient; CMS did not take into account the impact of the Part B Inpatient Billing proposed rule in developing its estimates; CMS should provide parallel treatment regarding the financial impact of both the medical review policy in the FY 2014 IPPS/ LTCH PPS proposed rule and the policies in the Part B Inpatient Billing proposed rule and offset and restore the $4.8 billion dollar reduction to hospital payments over 5 years contained in the Part B Inpatient Billing proposed rule; and CMS proposed policy was a coverage decision and CMS should not adjust IPPS rates for coverage decisions. Response: We disagree with commenters who indicated that our actuaries estimated increase in IPPS expenditures of $220 million was unsupported and insufficiently explained to allow for meaningful comment. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27649), we specifically discussed the methodology used and the components of the estimate. Our actuaries examined FY 2009 to FY 2011 claims data. Based on this examination, we stated the number of encounters our actuaries estimated would shift from inpatient to outpatient (360,000) and the number of encounters they estimated would shift from outpatient to inpatient (400,000). We described the methodology we used to translate this net shift of 40,000 encounters into our $220 million estimate, including an estimate of the increase these 40,000 encounters represent in shorter stay hospital inpatient encounters (1.2 percent), the share that expenditures for shorter stay hospital inpatient encounters represent of IPPS expenditures (17 percent), and our estimate of the payment difference between OPPS and IPPS for these encounters (OPPS payment for these encounters was estimated to be 30 percent of the IPPS payment for these encounters). In addition to the opportunity to comment on the estimate, any component of the estimate, or the methodology, commenters had an opportunity to provide alternative estimates for us to consider. In determining the estimate of the number of encounters that would shift from outpatient to inpatient, our actuaries examined outpatient claims for observation or a major procedure. Claims not containing observation or a major procedure were excluded. The number of claims spanning 2 or more midnights based on the dates of service that were expected to become inpatient was approximately 400,000. This estimate did not include any assumption about outpatient encounters shorter than 2 midnights potentially becoming inpatient encounters. In determining the estimate of the number of encounters that would shift from inpatient to outpatient, our actuaries examined inpatient claims containing a surgical MS DRG. Claims containing medical MS DRGs were excluded. The number of claims spanning less than 2 midnights based on the length of stay that were expected to become outpatient, after excluding encounters that resulted in death or transfers, was approximately 360,000. The estimates of the shifts in encounters as described above were primarily based on FY 2011 Medicare inpatient and outpatient claims data. However, our actuaries also examined FY 2009 and FY 2010 Medicare inpatient and outpatient claims data and found the results for the earlier years were consistent with the FY 2011 results. While there is a certain degree of uncertainty surrounding any cost estimate, our actuaries have determined that the methodology, data, and assumptions used are reasonable for the purpose of estimating the overall impact of our proposed policy. We note that the assumptions used for purposes of reasonably estimating the overall impact in FY 2014 should not be construed as absolute statements about every individual encounter. For example, we fully expect that not every single surgical MS DRG encounter spanning less than 2 midnights will shift to outpatient and that not every single outpatient observation stay or major surgical encounter spanning more than 2 midnights will shift to inpatient. We also disagree with commenters who indicated that we did not provide sufficient rationale for the use of our exceptions and adjustments authority under section 1886(d)(5)(I)(i) of the Act. We discussed that the issue of patient status has a substantial impact on improper payments under Medicare Part A for short-stay inpatient hospital claims, citing the fact that the majority of improper payments under Medicare Part A for short-stay inpatient hospital claims have been due to inappropriate patient status. In 2012, for example, the CERT contractor found that inpatient hospital admissions for 1-day stays or less had a Part A improper payment rate of 36.1 percent. The improper payment rate decreased significantly for 2-day or 3-day stays, which had improper payment rates of 13.2 percent and 13.1 percent, respectively. We stated that we believed the magnitude of these national figures demonstrates that issues surrounding the appropriate determination of a beneficiary s patient status are not isolated to a few hospitals. We also noted that the RAs had recovered more than $1.6 billion in improper payments because of inappropriate beneficiary patient status. While we agree with commenters that our exceptions and adjustments authority should not be routinely used in the IPPS system, we believe that the systemic and widespread nature of this issue justifies an overall adjustment to the IPPS rates and such an adjustment is authorized under section 1886(d)(5)(I)(i) of the Act. For similar reasons, while we generally agree with commenters that it is not necessary to routinely estimate utilization shifts to ensure appropriate IPPS payments, this is a unique situation. Policy clarifications such as ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

88 84 AIS s Management Insight Series Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules and Regulations this do not usually result in utilization shifts of sufficient magnitude and breadth to significantly impact the IPPS. In this situation, we believe it would be inappropriate to ignore such a utilization shift in the development of the IPPS payment rates. With respect to the comments that we did not take into account the impact of the Part B Inpatient Billing proposed rule in developing our estimates, we note that our actuaries did take those impacts into account in developing our proposed adjustment. Our estimate of the net shift in FY 2014 encounters between inpatient and outpatient would have been substantially higher in the absence of the policies discussed in the Part B Inpatient Billing proposed rule, in particular the discussion of timely filing. Specifically, in the absence of the timely filing requirement, there would be fewer inpatient encounters estimated to become outpatient encounters, which would have resulted in a larger cost than our estimated $220 million. With respect to the comment that CMS should provide parallel treatment regarding the financial impact of the medical review policy in the FY 2014 IPPS/LTCH PPS proposed rule and the interrelated Part B Inpatient Billing proposed rule by offsetting and restoring the estimated $4.8 billion dollar reduction to hospital payments contained in that rule, we note that, although we estimated a decrease in expenditures as a result of our proposed Part B inpatient billing policy, this decrease in expenditures is offset by the costs of the significant number of related administrative appeal decisions as well as CMS Ruling 1455 R, which allows hospitals to seek payment of Part B inpatient services on claims filed outside the timely filing period. As discussed in greater detail in the Regulatory Impact Analysis in the Part B Inpatient Billing proposed rule (78 FR 16643), the combined impact of the appeals decisions, CMS Ruling 1455 R, and Part B inpatient billing policy, to which the 12-month timely filing requirement applies, is an estimated cost to the Medicare program of $1.03 billion over the CY 2013 to CY 2017 time period. We estimate in the Regulatory Impact Analysis of the final Part B inpatient payment policy in this final rule that the combined impact of the appeals decisions, CMS Ruling 1455 R, and the Part B inpatient billing policy will cost the Medicare program $1.260 billion over the CY 2013 to CY 2017 time period. Finally, we disagree with those comments asserting that the modification and clarification of our current instructions regarding the circumstances under which Medicare will generally pay for a hospital inpatient admission in order to improve hospitals ability to make appropriate admission decisions are actually coverage decisions in the context of this adjustment. As we clearly stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27648), we will continue to review individual claims to ensure the hospital services furnished to beneficiaries are reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, as required by section 1862(a)(1) of the Act. Any hospital service determined to be not reasonable or necessary may not be paid under Medicare Part A or Part B. In the context of this adjustment, these are not new hospital services. Our actuaries continue to estimate there will be approximately $220 million in additional expenditures resulting from our 2-midnight benchmark and 2-midnight presumption medical review policies. This net increase in hospital inpatient encounters is due to some encounters spanning more than 2 midnights moving to the IPPS from the OPPS, and some encounters of less than 2 midnights moving from the IPPS to the OPPS. Therefore, after consideration of the comments we received, and for the reasons described above, we are finalizing a reduction to the standardized amount, the hospitalspecific rates, and the Puerto Ricospecific standardized amount of 0.2 percent to offset the additional $220 million in expenditures. XII. MedPAC Recommendations Under section 1886(e)(4)(B) of the Act, the Secretary must consider MedPAC s recommendations regarding hospital inpatient payments. Under section 1886(e)(5) of the Act, the Secretary must publish in the annual proposed and final IPPS rules the Secretary s recommendations regarding MedPAC s recommendations. We have reviewed MedPAC s March 2013 Report to the Congress: Medicare Payment Policy and have given the recommendations in the report consideration in conjunction with the policies set forth in this final rule. MedPAC recommendations for the IPPS for FY 2014 are addressed in Appendix B to this final rule. For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact MedPAC at (202) , or visit MedPAC s Web site at: XIII. Other Required Information A. Requests for Data From the Public In order to respond promptly to public requests for data related to the prospective payment system, we have established a process under which commenters can gain access to raw data on an expedited basis. Generally, the data are now available on compact disc (CD) format. However, many of the files are available on the Internet at: Fee-for-Service-Payment/ AcuteInpatientPPS/index.html. We listed the data files and the cost for each file, if applicable, in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR through 27748). Commenters interested in discussing any data used in constructing the proposed rule or this final rule should contact should contact Nisha Bhat at (410) B. Collection of Information Requirements 1. Statutory Requirement for Solicitation of Comments Under the Paperwork Reduction Act of 1995, we are required to provide 60- day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues: The need for the information collection and its usefulness in carrying out the proper functions of our agency. The accuracy of our estimate of the information collection burden. The quality, utility, and clarity of the information to be collected. Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR through 27755), we solicited public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). We discuss and respond to any public comments we received in the relevant sections. 2. ICRs for Add-On Payments for New Services and Technologies Section II.I.1. of the preamble of the proposed rule and this final rule discusses add-on payments for new ate Mar<15> :51 Aug 16, 2013 Jkt PO Frm Fmt 4701 Sfmt 4700 E:\FR\FM\19AUR2.SGM 19AUR2

89 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 85 CMS: Frequently Asked Questions: 2 Midnight Inpatient Admission Guidance & Patient Status Reviews for Admissions on or after October 1, 2013 FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 I. PROBE REVIEWS OF INPATIENT HOSPITAL CLAIMS Updated* 12/23/13 Q1.1: Will CMS direct the Medicare review contractors to apply the 2-midnight presumption that is, contractors should not select Medicare Part A inpatient claims for review if the inpatient stay spanned 2 midnights from the time of formal admission? A1.1: Yes. The 2-midnight presumption directs medical reviewers to select Part A claims for review under a presumption that the occurrence of 2 midnights after formal inpatient hospital admission pursuant to a physician order indicates an appropriate inpatient status for a reasonable and necessary Part A claim. CMS will instruct the Medicare Administrative Contractors (MACs) and Recovery Auditors that, absent evidence of systematic gaming or abuse, they are not to review claims spanning 2 or more midnights after admission for a determination of whether the inpatient hospital admission and patient status was appropriate. In addition, for a period of 6 months, CMS will not permit Recovery Auditors to conduct patient status reviews on inpatient claims with dates of admission between October 1, 2013 and March 31, These reviews will be disallowed permanently; that is, the Recovery Auditors will never be allowed to conduct patient status reviews for claims with dates of admission during that time period. CMS reminds providers that a claim subject to the 2 midnight presumption may still be reviewed for issues unrelated to appropriateness of inpatient admission in accord with the 2-midnight benchmark (i.e. patient status). Medicare review contractors may review claims to ensure the services provided during the inpatient stay were reasonable and necessary in the treatment of the beneficiary, to ensure accurate coding and documentation, and may conduct other reviews as dictated by CMS and/or another authoritative governmental agency. Q1.2: Will Medicare review contractors base their review of a physician s expectation of medically necessary care surpassing 2 midnights upon the information available to the admitting practitioner at the time of admission? A1.2: Yes. CMS longstanding guidance has been that Medicare review contractors should evaluate the physician s expectation based on the information available to the admitting practitioner at the time of the inpatient admission. This remains unchanged and CMS will provide clear guidance and training to our contractors on this medical review instruction.

90 86 AIS s Management Insight Series FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 Updated* 12/23/13 Q1.3: What steps will CMS take to provide guidance and education about the inpatient rule to ensure hospital understanding and compliance with the instructions? A1.3: CMS will instruct the MACs to review a small sample of Medicare Part A inpatient hospital claims spanning 0 or 1 midnight after formal inpatient admission to determine the medical necessity of the inpatient status in accordance with the 2 midnight benchmark. CMS will establish a specific probe sample prepayment record limit of 10 to 25 claims per hospital. MACs will conduct probe reviews on Medicare Part A inpatient hospital claims spanning less than 2 midnights after formal inpatient admission with dates of admission October 1, 2013 through March 31, This probe sample will determine each hospital s compliance with the new inpatient regulations (CMS-1599-F) and provide important feedback to CMS for purposes of jointly developing further education and guidance. Because the probe reviews will be conducted on a prepayment basis, hospitals can rebill for medically reasonable and necessary Part B inpatient services provided during denied Part A inpatient hospital stays provided the denial is on the basis that the inpatient admission was not reasonable and necessary. Hospitals may rebill for Part B inpatient services in accordance with Medicare Part B payment rules and regulations. A sample of 10 claims will be selected for prepayment review for most hospitals, while 25 claims will be selected for prepayment review for large hospitals. If a MAC identifies no issues during the probe review, the MAC will cease further such reviews for that hospital for dates of admission spanning October to March 2014, unless there are significant changes in billing patterns for admissions. Based on the results of these initial reviews, CMS will conduct educational outreach efforts during the following 3 months. Each non-compliant claim will be denied and the reasons for denial will be sent via letter. Individualized phone calls will be offered by the MAC to those providers with either moderate to significant or major concerns. During such calls, the MAC will discuss the reasons for denial, provide pertinent education and reference materials, and answer questions. In addition to these educational outreach efforts, for those providers that are identified as having moderate to significant concerns or major concerns, Medicare review contractors will conduct additional probe reviews on claims with dates of admission between January and March The size of these additional probe reviews will be 10 (25 for large hospitals). For those providers identified as having continuing

91 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 87 FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 concerns after the 6 month period, samples of 100 claims (250 for large hospitals) will be selected. CMS will also monitor provider billing trends for variances indicative of abuse, gaming, or systematic delays in the submission of claims, for the purpose of avoiding the MAC prepayment probe audits during this initial probe and educate period. The MACs will submit periodic reports to CMS for purposes of tracking the frequency and types of errors seen during these probe reviews. During the probe and educate period of October 1, 2013 until March 31, 2014, CMS will instruct the MACs and Recovery Auditors not to review Part A claims spanning 2 or more midnights after formal inpatient admission for appropriateness of inpatient admission (i.e., patient status reviews). CMS reminds hospitals that while medical review will not be focused on Part A claims spanning 2 or more midnights after formal inpatient admission under the presumption the inpatient admission was reasonable and necessary, physicians should make inpatient admission decisions in accordance with the 2 midnight benchmark in the final rule. That is, physicians should generally admit as inpatients beneficiaries they expect will require 2 or more midnights of hospital services, and should treat most other beneficiaries on an outpatient basis. CMS believes that, with the exception of cases involving services on the inpatient-only list, only in rare and unusual circumstances would an inpatient admission be reasonable in the absence of a reasonable expectation of a medically necessary stay spanning at least 2midnights. CMS will work with the hospital industry and with MACs to identify any categories of patients that represent an appropriate inpatient admission, absent an expectation of a 2 midnight stay or unforeseen and interrupting circumstances such as unforeseen death, transfer to another hospital, departure against medical advice, or clinical improvement. Any evidence of systematic gaming, abuse or delays in the provision of care in an attempt to receive the 2-midnight presumption could warrant medical review. MACs and Recovery Auditors will not review any claims submitted by Critical Access Hospitals. In addition, CMS will not permit Recovery Auditors to review inpatient admissions of less than 2 midnights after formal inpatient admission that occur between October 1, 2013 and March 31, 2014.

92 88 AIS s Management Insight Series FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 II. START TIME FOR CALCULATING THE 2 MIDNIGHT BENCHMARK Q2.1: Can CMS clarify when the 2 midnight benchmark begins for a claim selected for medical review, and how it incorporates outpatient time prior to admission in determining the general appropriateness of the inpatient admission? A2.1: For purposes of determining whether the 2 midnight benchmark was met and, therefore, whether inpatient admission was generally appropriate, the Medicare review contractor will consider time the beneficiary spent receiving outpatient services within the hospital. This will include services such as observation services, treatments in the emergency department, and procedures provided in the operating room or other treatment area. From the medical review perspective, while the time the beneficiary spent as a hospital outpatient before the beneficiary was formally admitted as an inpatient pursuant to the physician order will not be considered inpatient time, it will be considered during the medical review process for purposes of determining whether the 2-midnight benchmark was met and, therefore, whether payment for the admission is generally appropriate under Medicare Part A. Whether the beneficiary receives services in the emergency department (ED) as an outpatient prior to inpatient admission (for example, receives observation services in the emergency room) or is formally admitted as an inpatient upon arrival at the hospital (for example, inpatient admission order written prior to an elective inpatient procedure or a beneficiary who was an inpatient at another hospital and is transferred), the starting point for the 2 midnight timeframe for medical review purposes will be when the beneficiary starts receiving services following arrival at the hospital. CMS notes that this instruction excludes wait times prior to the initiation of care, and therefore triaging activities (such as vital signs before the initiation of medically necessary services responsive to the beneficiary's clinical presentation) must be excluded. A beneficiary sitting in the ED waiting room at midnight while awaiting the start of treatment would not be considered to have passed the first midnight, but a beneficiary receiving services in the ED at midnight would meet the first midnight of the benchmark. The Medicare review contractor will count only medically necessary services responsive to the beneficiary's clinical presentation as performed by medical personnel.

93 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 89 FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 III. DELAYS IN THE PROVISION OF CARE Q3.1: If a Part A claim is selected for medical review and it is determined that the beneficiary remained in the hospital for 2 or more midnights but was expected to be discharged before 2 midnights absent a delay in the provision of care, such as when a certain test or procedure is not available on the weekend, will this claim be considered appropriate for payment under Medicare Part A as inpatient under the new 2 midnight benchmark? A3.1: Section 1862(a)(1)(A) of the Social Security Act statutorily limits Medicare payment to the provision of services that are reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body. As such, CMS' longstanding instruction has been and continues to be that hospital care that is custodial, rendered for social purposes or reasons of convenience, and is not required for the diagnosis or treatment of illness or injury, should be excluded from Part A payment. Accordingly, CMS expects Medicare review contractors will exclude extensive delays in the provision of medically necessary services from the 2 midnight benchmark. Medicare review contractors will only count the time in which the beneficiary received medically necessary hospital services. IV. DOCUMENTING THE DECISION TO ADMIT Q4.1: What documentation will Medicare review contractors expect physicians to provide to support that an expectation of a hospital stay spanning 2 or more midnights was reasonable? A4.1: Review contactors expectations for sufficient documentation will be rooted in good medical practice. Expected length of stay and the determination of the underlying need for medical or surgical care at the hospital must be supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event, which Medicare review contractors will expect to be documented in the physician assessment and plan of care. CMS does not anticipate that physicians will include a separate attestation of the expected length of stay, but rather that 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.

94 90 AIS s Management Insight Series FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 Updated* 12/23/13 Q4.2: What factors should the physician take into consideration when making the admission decision and document in the medical record? A4.2: For purposes of meeting the 2-midnight benchmark, in deciding whether an inpatient admission is warranted, the physician must assess whether the beneficiary requires hospital services and whether it is expected that such services will be required for 2 or more midnights. The decision to admit the beneficiary as an inpatient is a complex medical decision made by the physician in consideration of various factors, including the beneficiary s age, disease processes, comorbidities, and the potential impact of sending the beneficiary home. It is up to the physician to make the complex medical determination of whether the beneficiary s risk of morbidity or mortality dictates the need to remain at the hospital because the risk of an adverse event would otherwise be unacceptable under reasonable standards of care, or whether the beneficiary may be discharged. If, based on the physician's evaluation of complex medical factors and applicable risk, the beneficiary may be safely and appropriately discharged, then the beneficiary should be discharged, and hospital payment is not appropriate on either an inpatient or outpatient basis. If the beneficiary is expected to require medically necessary hospital services for 2 or more midnights, then the physician should order inpatient admission and Part A payment is generally appropriate per the 2-midnight benchmark. Except in cases involving services identified by CMS as inpatient-only, if the beneficiary is expected to require medically necessary hospital services for less than 2 midnights, then the beneficiary generally should remain an outpatient and Part A payment is generally inappropriate. We note that in the FY 2014 IPPS final rule we stated the 2-midnight benchmark provides that hospital stays expected to last less than 2 midnights are generally inappropriate for hospital admission and Medicare Part A payment absent rare and unusual circumstances. In that rule, we stated that we would provide additional subregulatory guidance on those circumstances. We believe that we have already identified many of these rare and unusual exceptions in our Inpatient Only List. In that list, we identify those services that we have said are rarely provided to outpatients and which typically require, for reasons of quality and safety, a significantly protracted stay at the hospital. We believe that it would be rare and unusual for a stay of 0 or 1 midnights, for patients with known diagnoses entering a hospital for a specific minor surgical procedure or other treatment that is expected to keep them in the hospital for less than 2 midnights, to be appropriately classified as inpatient and paid under Medicare Part A. This is consistent with our historical guidance in which we defined certain minor therapeutic and diagnostic services as appropriately furnished outpatient on the basis of an expected short length of stay. We also do not believe that the use of telemetry, by itself, constitutes a rare and unusual circumstance that would justify an inpatient admission in the absence of a 2 midnight

95 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 91 FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 expectation. We note that telemetry is neither rare nor unusual, and that it is commonly used by hospitals on outpatients (ER and observation patients) and on patients fitting the historical definition of outpatient observation (that is, patients for whom a brief period of assessment or treatment may allow the patient to avoid an inpatient hospital stay). We also specified in the final rule that we do not believe that the use of an ICU, by itself, would be a rare and unusual circumstance that would justify an inpatient admission in the absence of a 2 midnight expectation. In some hospitals, placement in an ICU is neither rare nor unusual, because an ICU label is applied to a wide variety of facilities providing a wide variety of services. Due to the wide variety of services that can be provided in different areas of a hospital, we do not believe that a patient assignment to a specific hospital location, such as a certain unit or location, would justify an inpatient admission in the absence of a 2 midnight expectation. CMS identified newly initiated mechanical ventilation (excluding anticipated intubations related to minor surgical procedures or other treatment) as its first rare and unusual exception to the 2 midnight rule (see Question 4.3). We recognize that there could be rare and unusual circumstances that we have not identified that justify inpatient admission absent an expectation of care spanning at least 2 midnights. As we continue to work with facilities and physicians to identify such other situations, we reiterate that we expect these situations to be rare and unusual exceptions to the general rule. If any such additional situations are identified, we will include them in subregulatory instruction, and we will expect that in these situations the physician at the time of admission must explicitly document the reason why the specific case requires inpatient care, as opposed to hospital services in an outpatient status. We do not believe that these rare and unusual circumstances can be imputed from the medical record. New* 12/3/13 Q4.3: Has CMS identified any rare and unusual circumstances in which an inpatient admission involving services not on the inpatient-only list would be reasonable in the absence of a reasonable expectation of a medically necessary stay spanning at least 2 midnights? A4.3: Yes. CMS has identified the following exception to the 2-midnight rule: Mechanical Ventilation Initiated During Present Visit: As CMS stated in the preamble to the Final Rule, treatment in an Intensive Care Unit, by itself, does not support an inpatient admission absent an expectation of medically necessary hospital care spanning 2 or more midnights. Stakeholders have notified CMS that they believe beneficiaries with newly initiated mechanical ventilation support an inpatient admission and Part A payment. CMS notes that newly initiated mechanical ventilation is rarely provided in hospital stays less than 2 midnights, and that it embodies similar characteristics as those procedures included in Medicare s

96 92 AIS s Management Insight Series FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 inpatient only list. While CMS believes a physician will generally expect beneficiaries with newly initiated mechanical ventilation to require 2 or more midnights of hospital care, if the physician expects that the beneficiary will only require 1 midnight of hospital care, inpatient admission and Part A payment is nonetheless generally appropriate. NOTE: This exception is not intended to apply to anticipated intubations related to minor surgical procedures or other treatment. CMS will continue to work with the hospital industry and with MACs to determine if there are any additional categories of services that should be added to this list. Suggestions should be ed to IPPSAdmissions@cms.hhs.gov with Suggested Exceptions to the 2 Midnight Benchmark in the subject line. Q4.4: Under the new 2 midnight benchmark, how should facilities treat, and bill Medicare for beneficiaries who require potentially short-term, medical treatment in an intensive care setting? A4.4: Beneficiaries treated in an intensive care unit are not an exception to the general rule that only patients requiring 2 or more midnights of hospital care require inpatient admission, as our 2- midnight benchmark policy is not contingent on the location of the beneficiary within the hospital. While patients requiring aggressive, intensive treatment would generally be expected to stay in the hospital for longer than 2 midnights, those patients that require a shorter period of time in the hospital should generally be furnished services that are billed on an outpatient basis. Therefore, absent rare and unusual circumstances, physicians should admit those beneficiaries whom they expect to require medically necessary hospital treatment spanning 2 or more midnights, and should generally provide care as outpatient for those beneficiaries whom they expect to require medically necessary hospital care for less than 2 midnights. If a physician believes at the time of admission that the situation is one of the rare and unusual situations where inpatient care is required despite the fact that such care is not expected to span at least 2 midnights, then he or she must explicitly document the reason why the specific case requires inpatient care, as opposed to hospital services in an outpatient status, for CMS review. Upon review, CMS and the Medicare review contractors would retain the discretion to conclude that the documentation is not sufficient to support the medical necessity of the inpatient admission.

97 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 93 FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 Q4.5: Does the beneficiary's hospital stay need to meet inpatient level utilization review screening criteria to be considered reasonable and necessary for Part A payment? A4.5: If the beneficiary requires medically necessary hospital care that is expected to span 2 or more midnights, then inpatient admission is generally appropriate. If the physician expects the beneficiary's medically necessary treatment to span less than 2 midnights, it is generally appropriate to treat the beneficiary in outpatient status. If the physician is unable to determine at the time the beneficiary presents whether the beneficiary will require 2 or more midnights of hospital care, the physician may order observation services and reconsider providing an order for inpatient admission at a later point in time. While utilization review (UR) committees may continue to use commercial screening tools to help evaluate the inpatient admission decision, the tools are not binding on the hospital, CMS or its review contractors. In reviewing stays lasting less than 2 midnights after formal inpatient admission (i.e., those stays not receiving presumption of inpatient medical necessity), Medicare review contractors will assess the reasonableness of the physician's expectation of the need for and duration of care based on complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event, which must be clearly documented. Q4.6: If a beneficiary is admitted for a minor surgical procedure, but then requires hospital care beyond the usual anticipated recovery time, when would it be appropriate for the physician to utilize outpatient observation and when would it would be appropriate to admit the beneficiary for inpatient hospital services? A4.6: If the beneficiary requires additional medically necessary hospital care beyond the usual anticipated recovery time for a minor surgical procedure, the physician should reassess the expected length of stay. Generally, if the physician cannot determine whether the beneficiary prognosis and treatment plan will now require an expected length of stay spanning 2 or more midnights, the physician should continue to treat the beneficiary as an outpatient. If additional information gained during the outpatient stay subsequently suggests that the physician would expect the beneficiary to have a stay spanning 2 or more midnights including the time in which the beneficiary has already received hospital care, the physician may admit the beneficiary as an inpatient at that point.

98 94 AIS s Management Insight Series FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 Updated* 12/23/13 Q4.7: Are there any circumstances outside of beneficiary transfer, death, departure against medical advice, or receipt of a Medicare Inpatient-Only procedure that permit a beneficiary to be appropriately admitted as an inpatient for a stay of less than 2 midnights in the hospital? A4.7: Yes. The regulation specifies that the decision to admit should generally be based on the physician s reasonable expectation of a length of stay spanning 2 or more midnights, taking into account complex medical factors that must be documented in the medical record. Because this is based upon the physician s expectation, as opposed to a retroactive determination based on actual length of stay, unforeseen circumstances that result in a shorter stay than the physician s reasonable expectation may still result in a hospitalization that is appropriately considered inpatient. As enumerated in the final rule, CMS anticipates that most of these situations will arise in the context of beneficiary death, transfer, or departure against medical advice. However, CMS does recognize that on occasion there may be situations in which the beneficiary improves much more rapidly than the physician s reasonable expectation. Such instances must be clearly documented and the initial expectation of a hospital stay spanning 2 or more midnights must have been reasonable in order for this circumstance to be an acceptable inpatient admission payable under Part A. The more usual situation would be the one in which the physician s initial expectation of the beneficiary s length of stay is uncertain. If the physician is uncertain whether the beneficiary will be able to be discharged after 1 midnight in the hospital or whether the beneficiary will require a second midnight of care, the initial day should be spent in observation until it is clearly expected that a second midnight would be required, at which time the physician may order inpatient admission. If the physician believes that a rare and unusual circumstance exists in which an inpatient admission is warranted, but does not expect the beneficiary to require 2 or more midnights in the hospital, the physician may admit the beneficiary to inpatient status but should thoroughly document why inpatient admission and Medicare Part A payment is appropriate. CMS will work with the hospital industry and with MACs to determine if there are any categories of patients that should be added to this list of exceptions to the 2-midnight benchmark (See Question 4.3). Suggestions should be ed to IPPSAdmissions@cms.hhs.gov with Suggested Exceptions to the 2-Midnight Benchmark in the subject line. During the initial probe review of inpatient admissions, the MACs are being instructed to deny these claims and submit them to CMS Central Office for further review. If CMS believes that such a stay warrants an inpatient admission, CMS will provide additional subregulatory instruction and the Part A inpatient denial will be reversed during the administrative appeals process.

99 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 95 FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 Q4.8: If a physician writes an inpatient order based on the expectation that the beneficiary will require care spanning 2 or more midnights, but prior to the passage of 2 midnights the beneficiary refuses any additional medical treatment and is discharged, would this be considered an unforeseen circumstance? A4.8: Under the 2 midnight benchmark, if a beneficiary refuses any additional care and is subsequently discharged, this will be considered similarly to departures against medical advice and could be considered an appropriate inpatient admission, so long as the expectation of the need for medically necessary hospital services spanning 2 or more midnights was reasonable at the time the inpatient order was written, and the basis for that expectation as well as the refusal of additional treatment, are documented in the medical record. Updated* 12/23/13 Q4.9: Under the new guidance, will all inpatient stays of less than 2 midnights after formal inpatient admission be automatically denied? A4.9: No. Under the new guidelines we expect that the majority of short (total of zero or one midnight) Medicare hospital stays will be provided as outpatient services. Because this is based upon the physician s expectation, as opposed to a retroactive determination based on actual length of stay, we expect to see services payable under Part A in a number of instances for inpatient stays less than 2 total midnights after formal inpatient admission. First, there will be cases where the physician had a reasonable expectation of a 2 midnight stay but there was an unforeseen circumstance that resulted in a shorter stay than the physician s reasonable expectation. As enumerated in the final rule, CMS anticipates that most of these situations will arise in the context of beneficiary death, transfer, or departure against medical advice. Second, if the beneficiary received a medically necessary service on the Inpatient-Only List and was able to be discharged before 2 midnights passed, those claims would be appropriately inpatient for Part A payment. Third, inpatient stays spanning less than 2 midnights will be evaluated in accordance with the 2 midnight benchmark during review, and payment will be appropriate if the total time receiving medically necessary hospital care (including pre-admission services) spanned at least 2 midnights. Inpatient claims for patients who unexpectedly improved and were discharged in less than 2 midnights would be payable as long as the medical record clearly demonstrated that the

100 96 AIS s Management Insight Series FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 admitting physician had reasonable expectation of a 2 midnight stay and the improvement that allowed an earlier discharge was clearly unexpected. Lastly, there may be rare and unusual cases where the physician did not expect a stay lasting 2 or more midnights but nonetheless believes inpatient admission was appropriate and documents such circumstance. The MACs are being instructed to deny these claims and to submit these records to CMS Central Office for further review. If CMS believes that such a stay warrants an inpatient admission, CMS will provide additional subregulatory instruction and the Part A inpatient denial will be reversed during the administrative appeals process. Medicare review contractors will review any claims that are subsequently submitted for payment in accordance with the most updated list of rare and unusual situations in which an inpatient admission of less than 2 midnights may be appropriate. Hospitals should focus their attention on short (0-1 total days) stays (without death, transfer, discharge against advice, an inpatient-only service or a preceding outpatient stay over midnight) to ensure that the physician clearly expected a longer stay, the discharge was unexpected, or some other rare and unusual circumstance supports that the Part A claims represent appropriate, payable inpatient services.

101 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 97 FREQUENTLY ASKED QUESTIONS 2 Midnight Inpatient Admission Guidance &Patient Status Reviews for Admissions on or after October 1, 2013 V. SELECTION OF CLAIMS FOR REVIEW Q5.1: How will Medicare review contractors identify facilities conducting systematic gaming, abuse or delays in the provision of care in an attempt to qualify for the 2-midnight presumption (that is, inpatient hospital admissions where medically necessary treatment was not provided on a continuous basis and the services could have been furnished in a shorter timeframe)? A5.1: Medicare review contractors will identify gaming by reviewing stays spanning 2 or more midnights after formal inpatient admission for the purpose of monitoring and responding to patterns of incorrect DRG assignments, inappropriate or systematic delays, and lack of medical necessity for services at the hospital, but not for the purpose of routinely denying Part A payment on the basis that the services should have been provided at the hospital on an outpatient basis. CMS will shift its attention to the smaller anticipated volume of 0 and 1 day short inpatient stays and then, to the extent that facilities correctly apply the 2 midnight benchmark, away from short stays to other areas with persistently high improper payment rates. CMS and its review contractors may identify such trends through data sources, such as that provided by the Comprehensive Error Rate Testing (CERT) contractor, First-look Analysis for Hospital Outlier Monitoring (FATHOM) and Program for Evaluating Payment Patterns Electronic Report (PEPPER). Updated* 12/23/13 Q5.2: Is there a way for providers to identify any time the beneficiary spent as an outpatient prior to admission on the inpatient claim so that Medicare review contractors can readily identify that the 2-midnight benchmark was met without conducting complex review of the claim? A5.2: CMS evaluated stakeholder feedback and suggestions and worked with the National Uniform Billing Committee (NUBC) to redefine Occurrence Span Code 72 to allow total time in the hospital to be recorded on an inpatient claim. Effective December 1, 2013, Occurrence Span Code 72 was refined to allow hospitals to capture contiguous outpatient hospital services that preceded the inpatient admission on inpatient claims (See NUBC implementation calendar). Occurrence Span Code 72 is a voluntary code, but may be evaluated by CMS for medical review purposes. CMS reminds providers that claims for stays of less than 2 midnights after formal inpatient admission may still be subject to complex medical record review, to which Occurrence Span Code 72 may be evaluated and the 2-midnight benchmark applied. Information in the medical record will continue to be used to determine whether total outpatient and inpatient time met the 2-midnight benchmark.

102 98 AIS s Management Insight Series CMS: Hospital Inpatient Admission Order and Certification DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 7500 Security Boulevard Baltimore, Maryland CENTER FOR MEDICARE January 30, 2014 Hospital Inpatient Admission Order and Certification As a condition of payment for hospital inpatient services under Medicare Part A, section 1814(a) of the Social Security Act requires physician certification of the medical necessity that such services be provided on an inpatient basis. The order to admit as an inpatient ( practitioner order ) is a critical element of the physician certification, and is therefore also required for hospital inpatient coverage and payment under Part A. The physician certification, which includes the practitioner order, is considered along with other documentation in the medical record as evidence that hospital inpatient service(s) were reasonable and necessary. When a physician signs the certification, they are certifying that inpatient hospital services were reasonable and necessary. The following guidance applies to all inpatient hospital and critical access hospital (CAH) services unless otherwise specified. For the remainder of this guidance, when we refer to hospitals, we are also referring to CAHs. The complete requirements for the physician certification are found in 42 CFR Part 424 subpart B and 42 CFR An electronic version of the CFR is available online at: A. Physician Certification. For physician certification of inpatient services of hospitals other than inpatient psychiatric facilities: 1. Content: The physician certification includes the following information: a. Authentication of the practitioner order: The physician certifies that the inpatient services were ordered in accordance with the Medicare regulations governing the order. This includes certification that hospital inpatient services are reasonable and necessary and in the case of services not specified as inpatient only under 42 CFR (n), that they are appropriately provided as inpatient services in accordance with the 2 midnight benchmark. The requirement to authenticate the practitioner order may be met by the signature or countersignature of the inpatient admission order by the certifying physician. b. Reason for inpatient services: The physician certifies the reasons for either (i) Hospitalization of the patient for inpatient medical treatment or medically required inpatient diagnostic study; or (ii) Special or unusual services for outlier cases under the applicable prospective payment system for inpatient services. For example, documentation of an admitting diagnosis could fulfill this part of the certification requirement. c. The estimated (or actual) time the beneficiary requires or required in the hospital: The physician certifies the estimated time in the hospital the beneficiary requires (if the certification is completed prior to discharge) or the actual time in the hospital (if the certification is completed at discharge). Estimated or actual length of stay is most commonly reflected in the progress notes where the practitioner discusses the assessment

103 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 99 and plan. For the purposes of meeting the requirement for certification, expected or actual length of stay may be documented in the order or a separate certification or recertification form, but it is also acceptable if discussed in the progress notes assessment and plan or as part of routine discharge planning. If the reason an inpatient is still in the hospital is that they are waiting for availability of a skilled nursing facility (SNF) bed, 42 CFR (c) and (e) provide that a beneficiary who is already appropriately an inpatient can be kept in the hospital as an inpatient if the only reason they remain in the hospital is they are waiting for a post-acute SNF bed. The physician may certify the need for continued inpatient admission on this basis. d. The plans for posthospital care, if appropriate, and as provided in 42 CFR e. For inpatient CAH services only, the physician must certify that the beneficiary may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH. Time as an outpatient at the CAH does not count towards the 96 hours requirement. The clock for the 96 hours only begins once the individual is admitted to the CAH as an inpatient. Time in a CAH swing-bed also does not count towards the 96 hour inpatient limit. If a physician certifies in good faith that an individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH and something unforeseen occurs that causes the individual to stay longer at the CAH, there would not be a problem with regards to the CAH designation as long as that individual s stay does not cause the CAH to exceed its 96-hour annual average condition of participation requirement. However, if a physician cannot in good faith certify that an individual may reasonably be expected to be discharged or transferred within 96 hours after admission to the CAH, the CAH will not receive Medicare reimbursement for any portion of that individual s inpatient stay. f. Inpatient Rehabilitation Facilities (IRFs): The documentation that IRFs are already required to complete to meet the IRF coverage requirements (such as the preadmission screening (including the physician review and concurrence), the post-admission physician evaluation, and the required admission orders) may be used to satisfy the certification and recertification statement requirements. 2. Timing: Certification begins with the order for inpatient admission. The certification must be completed, signed, dated and documented in the medical record prior to discharge, except for outlier cases which must be certified and recertified as provided in 42 CFR Under extenuating circumstances, delayed initial certification or recertification of an outlier case may be acceptable as long as it does not extend past discharge. With regard to the time of discharge, a Medicare beneficiary is considered a patient of the hospital until the effectuation of activities typically specified by the physician as having to occur prior to discharge (e.g., discharge after supper or discharge after voids ). So discharge itself can but does not always coincide exactly with the time that the discharge order is written, rather it occurs when the physician s order for discharge is effectuated. 3. Authorization to sign the certification: The certification or recertification may be signed only by one of the following:

104 100 AIS s Management Insight Series (1) A physician who is a doctor of medicine or osteopathy. (2) A dentist in the circumstances specified in 42 CFR (d). (3) A doctor of podiatric medicine if his or her certification is consistent with the functions he or she is authorized to perform under state law. Certifications and recertifications must be signed by the physician responsible for the case, or by another physician who has knowledge of the case and who is authorized to do so by the responsible physician or by the hospital s medical staff (or by the dentist as provided in 42 CFR ). Medicare considers only the following physicians, podiatrists or dentists to have sufficient knowledge of the case to serve as the certifying physician: the admitting physician of record ( attending ) or a physician on call for him or her; a surgeon responsible for a major surgical procedure on the beneficiary or a surgeon on call for him or her; a dentist functioning as the admitting physician of record or as the surgeon responsible for a major dental procedure; and, in the specific case of a non physician non dentist admitting practitioner who is licensed by the state and has been granted privileges by the facility, a physician member of the hospital staff (such as a physician member of the utilization review committee) who has reviewed the case and who also enters into the record a complete certification statement that specifically contains all of the content elements discussed above. The admitting physician of record may be an emergency department physician or hospitalist. Medicare does not require the certifying physician to have inpatient admission privileges at the hospital. 4. Format: As specified in 42 CFR , no specific procedures or forms are required for certification and recertification statements. The provider may adopt any method that permits verification. The certification and recertification statements may be entered on forms, notes, or records that the appropriate individual signs, or on a special separate form. Except as provided for delayed certifications, there must be a separate signed statement for each certification or recertification. If all the required information is included in progress notes, the physician's statement could indicate that the individual's medical record contains the information required and that hospital inpatient services are or continue to be medically necessary.

105 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 101 B. Inpatient Order: A Medicare beneficiary is considered an inpatient of a hospital if formally admitted as an inpatient pursuant to an order for inpatient admission by a physician or other qualified practitioner. As we stated in the CY 2014 IPPS final rule, if the order is not properly documented in the medical record, the hospital should not submit a claim for Part A payment (78 FR 50941). Meeting the 2 midnight benchmark does not, in itself, render a beneficiary an inpatient or serve to qualify them for payment under Part A. Rather, as provided in our regulations, a beneficiary is considered an inpatient (and Part A payment may only be made) if they are formally admitted as such pursuant to an order for inpatient admission by a physician or other required practitioner. 1. Content: The practitioner order contains the instruction that the beneficiary should be formally admitted for hospital inpatient care. The order must specify admission for inpatient services. Inpatient rehabilitation facilities (IRFs) also must adhere to the admission requirements specified in 42 CFR , and the 2 midnight benchmark does not apply in IRFs. 2. Qualifications of the ordering/admitting practitioner: The order must be furnished by a physician or other practitioner ( ordering practitioner ) who is: (a) licensed by the state to admit inpatients to hospitals, (b) granted privileges by the hospital to admit inpatients to that specific facility, and (c) knowledgeable about the patient s hospital course, medical plan of care, and current condition at the time of admission. The ordering practitioner makes the determination of medical necessity for inpatient care and renders the admission decision. The ordering practitioner is not required to write the order but must sign the order reflecting that he or she has made the decision to admit the patient for inpatient services. The ordering practitioner may be, but is not required to be, the physician who signs the certification. Please see section (B)(3) for a discussion of the requirements to be knowledgeable about the patient s hospital course. See section (A)(3) for the list of physicians authorized to certify a given case. The admission decision (order) may not be delegated to another individual who is not authorized by the state to admit patients, or has not been granted admitting privileges by the hospital's medical staff (42 CFR 412.3(b)). However, a medical resident, a physician assistant, nurse practitioner, or other non-physician practitioner may act as a proxy for the ordering practitioner provided they are authorized under state law to admit patients and the requirements outlined below are met. a. Residents and non-physician practitioners authorized to make initial admission decisions- Certain non-physician practitioners and residents working within their residency program are authorized by the state in which the hospital is located to admit inpatients, and are allowed by hospital by-laws or policies to do the same. The ordering practitioner may allow these individuals to write inpatient admission orders on his or her behalf, if the ordering practitioner approves and accepts responsibility for the admission decision by countersigning the order prior to discharge. (Please see (A)(2) for guidance regarding the definition of discharge time and (B)(3) for more guidance regarding knowledge of a patient s hospital course). In countersigning the order, the ordering practitioner approves and accepts responsibility for the admission decision. This process may also be used for physicians (such as emergency department physicians) who do not have admitting privileges but are authorized by the hospital to issue temporary or bridge inpatient admission orders.

106 102 AIS s Management Insight Series The countersigned order satisfies the order part of the physician certification, as long as the ordering practitioner also meets the requirements for a certifying physician in section (A)(3). b. Verbal orders- At some hospitals, practitioners who lack the authority to admit inpatients under state laws and hospital by laws (such as a registered nurse) may nonetheless enter the inpatient admission order as a verbal order. In these cases, the ordering practitioner directly communicates the inpatient admission order to staff as a verbal (not standing) order, and the ordering practitioner need not separately record the order to admit. Following discussion with and at the direction of the ordering practitioner, a verbal order for inpatient admission may be documented by an individual who is not qualified to admit patients in his or her own right, as long as that documentation (transcription) of the order for inpatient admission is in accordance with state law including scope of practice laws, hospital policies, and medical staff bylaws, rules, and regulations. In this case, the staff receiving the verbal order must document the verbal order in the medical record at the time it is received. The order must identify the qualified admitting practitioner, and must be authenticated (countersigned) by the ordering practitioner promptly and prior to discharge. (Please see (A)(2) for guidance regarding the definition of discharge time). A transcribed and authenticated verbal order for inpatient admission satisfies the order part of the physician certification as long as the ordering practitioner also meets the requirements for a certifying physician in section (A)(3). Example: Admit to inpatient per Dr. Smith would be considered an acceptable method of identifying the ordering practitioner and would meet the verbal order requirement if the verbal order (1) is appropriately documented in the medical record by the individual receiving the verbal order when the order is received; and (2) is authenticated (countersigned) by Dr. Smith promptly, prior to discharge. If Dr. Smith meets the qualifications for a certifying physician, then the authentication (countersignature) of this order by Dr. Smith also meets the requirement for the order component of the certification. c. Standing orders and protocols- The inpatient admission order cannot be a standing order. While Medicare s rules do not prohibit use of a protocol or algorithm that is part of a protocol, only the ordering practitioner, or a resident or other practitioner acting on his or her behalf under section (B)(2)(a) can make and take responsibility for the inpatient admission decision. d. Commencement of inpatient status- Inpatient status begins at the time of formal admission by the hospital pursuant to the physician order, including an initial order (under (B)(2)(a)) or a verbal order (under (B)(2)(b)) that is countersigned timely, by authorized individuals, as required in this section. If the physician or other practitioner responsible for countersigning an initial order or verbal order does not agree that inpatient admission was appropriate or valid (including an unauthorized verbal order), he or she should not countersign the order and the beneficiary is not considered to be an inpatient. The hospital stay may be billed to Part B as a hospital outpatient encounter. 3. Knowledge of the patient s hospital course: Medicare considers only the following practitioners to have sufficient knowledge about the beneficiary s hospital course, medical plan of care, and current condition to serve as the ordering practitioner: the admitting physician of record

107 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 103 ( attending ) or a physician on call for him or her, primary or covering hospitalists caring for the patient in the hospital, the beneficiary s primary care practitioner or a physician on call for the primary care practitioner, a surgeon responsible for a major surgical procedure on the beneficiary or a surgeon on call for him or her, emergency or clinic practitioners caring for the beneficiary at the point of inpatient admission, and other practitioners qualified to admit inpatients and actively treating the beneficiary at the point of the inpatient admission decision. Although a utilization review committee physician may sign the certification on behalf of a non physician admitting practitioner, a practitioner functioning in that role does not have direct responsibility for the care of the patient and is therefore not considered to be sufficiently knowledgeable to order the inpatient admission. The order must be written by one of the above practitioners directly involved with the care of the beneficiary, and a utilization committee physician may only write the order to admit if he or she is not acting in a utilization review capacity and fulfills one of the direct patient care roles, such as the attending physician. Utilization review may not be conducted by any individual who was professionally involved in the care of the patient whose case is being reviewed (42 CFR (d)(3)). 4. Timing: The order must be furnished at or before the time of the inpatient admission. The order can be written in advance of the formal admission (e.g., for a pre scheduled surgery), but the inpatient admission does not occur until formal admission by the hospital. Conversely, in the unusual case in which a patient is formally admitted as an inpatient prior to an order to admit and there is no documented verbal order, the inpatient stay should not be considered to commence until the inpatient admission order is documented. Medicare does not permit retroactive orders. Authentication of the order is required prior to discharge and may be performed and documented as part of the physician certification. 5. Specificity of the Order: The regulations at 42 CFR require that, as a condition of payment, an order for inpatient admission must be present in the medical record. The preamble of the FY 2014 IPPS Final Rule at 78 FR specifies that, the order must specify the admitting practitioner s recommendation to admit to inpatient, as an inpatient, for inpatient services, or similar language specifying his or her recommendation for inpatient care. While we are not requiring specific language to be used on the inpatient admission order, we believe that it is the interest of the hospital that the admitting practitioner use language that clearly expresses intent to admit the patient as inpatient that will be commonly understood by any individual that could potentially review documentation of the inpatient stay. We do not recommend using language that may have specific meaning individuals that work in the hospital (e.g. admit to 7W ) that will not be commonly understood by others. Treatment of such admission orders as properly inpatient is consistent with CMS historical interpretation of inpatient admission orders and hospitals historical standards of practice. However, if the usage of the order to specify inpatient or outpatient status is ambiguous, the hospital is encouraged to obtain and document clarification from the physician before initial Medicare billing (ideally before the beneficiary is discharged). Under this policy, CMS will continue to treat orders that specify a typically outpatient or other limited service (e.g., admit to ER, to Observation, to Recovery, to Outpatient Surgery, to Day Surgery, or to Short Stay Surgery ) as defining a non inpatient service, and such orders will not be treated as meeting the inpatient admission requirements.

108 104 AIS s Management Insight Series The admission order is evidence of the decision by the physician (or other practitioner who can order inpatient services) to admit the beneficiary to inpatient status. In extremely rare circumstances, the order to admit may be missing or defective (that is, illegible, or incomplete, for example inpatient is not specified), yet the intent, decision, and recommendation of the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient can clearly be derived from the medical record. In these extremely rare situations, we have provided contractors with discretion to determine that this information constructively satisfies the requirement that the hospital inpatient admission order be present in the medical record. However, in order for the documentation to provide acceptable evidence to support the hospital inpatient admission, thus satisfying the requirement for the physician order, there can be no uncertainty regarding the intent, decision, and recommendation by the physician (or other practitioner who can order inpatient services) to admit the beneficiary as an inpatient, and no reasonable possibility that the care could have been adequately provided in an outpatient setting. This narrow and limited alternative method of satisfying the requirement for documentation of the inpatient admission order in the medical record should be extremely rare, and may only be applied at the discretion of the medical review contractor. Even in those circumstances, all requirements for the other components of the physician certification must be met.

109 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 105 CMS: Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013 Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013 (Last Updated: 01/31/14) Medical Review of Inpatient Hospital Claims CMS plans to issue guidance to Medicare Administrative Contractors (MACs). The guidance CMS issues for determining the appropriateness of inpatient hospital admission and payment language will provide further guidance on the FY 2014 Hospital IPPS Final Rule CMS-1599-F. This regulation described two distinct, although related, medical review policies: a 2-midnight presumption and a 2-midnight benchmark. Patient Status Reviews Throughout this document, the term patient status reviews will be used to refer to reviews conducted by MACs to determine the appropriateness of an inpatient admission versus treatment on an outpatient basis. CMS will direct MACs to apply CMS-1599-F and the additional guidance CMS plans to issue in conducting Probe and Educate patient status reviews for claims submitted by acute care inpatient hospital facilities, Long Term Care Hospitals (LTCHs), Critical Access Hospitals (CAHs) and Inpatient Psychiatric Facilities (IPFs) for dates of admission on or after 10/1/2013. CMS will direct MACs NOT to apply these instructions to admissions at Inpatient Rehabilitation Facilities (IRFs). IRF patient status reviews are specifically excluded from the 2-midnight inpatient admission and medical review guidelines per CMS-1599-F and therefore are not subject to the Probe & Educate reviews. When conducting a Probe & Educate patient status review, CMS will instruct MACs to assess the hospital s compliance with three things: a) the admission order requirements, b) the certification requirements, and c) the 2-midnight benchmark I. Reviewing Hospital Claims for Inpatient Status: Inpatient Admission Order Requirements CMS plans to direct MACs that when they are conducting patient status reviews they should assess whether the requirements for order for inpatient admission were met. Requirements related to the inpatient order can be found at: II. Reviewing Hospital Claims for Inpatient Status: The Inpatient Certification Requirements CMS plans to direct MACs that when they are conducting patient status reviews they should assess whether the requirements for inpatient certification were met. Requirements related to the inpatient order can be found at:

110 106 AIS s Management Insight Series III. Reviewing Hospital Claims for Inpatient Status: The 2-Midnight Benchmark The 2-midnight benchmark represents guidance to medical reviewers to identify when an inpatient admission is generally appropriate for Medicare Part A payment under CMS-1599-F. A. General Rule for Expected 0-1 Midnight Stays When a patient enters a hospital for a surgical procedure not specified by Medicare as inpatient only under 42 C.F.R (n), a diagnostic test, or any other treatment, and the physician expects to keep the patient in the hospital for 0-1 midnights, the services are generally inappropriate for inpatient admission and inpatient payment under Medicare Part A, regardless of the hour that the patient came to the hospital or whether the patient used a bed. Where the medical record indicates that the physician did not or could not reasonably have expected to keep the patient in the hospital for greater than 2 midnights, MACs shall deny these inappropriate admissions unless the circumstances described in Section D apply. B. General Rule for Expected 2 or More Midnight Stays When a patient enters a hospital for a surgical procedure not on the inpatient only list, a diagnostic test, or any other treatment and the physician expects the beneficiary will require medically necessary hospital services for 2 or more midnights (including inpatient and pre-admission outpatient time), the services are generally appropriate for inpatient admission and inpatient payment under Medicare Part A. CMS will direct MACs to approve these cases so long as other requirements are met. C. General Rule for Services on Medicare s Inpatient-Only List Medicare s Inpatient-Only list at 42 C.F.R (n) defines services that support an inpatient admission and Part A payment as appropriate, regardless of the expected length of stay. CMS will direct MACs to approve these cases so long as other requirements are met. D. Short Inpatient Hospital Stays (0-1 Midnight) 1. When the Expected Length of Stay was 2 or More Midnights If an unforeseen circumstance results in a shorter beneficiary stay than the physician s reasonable expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis and hospital inpatient payment may be made under Medicare Part A. Such circumstances must be documented in the medical record in order to be considered upon medical review. Examples include unforeseen: death, transfer to another hospital, departure against medical advice, clinical improvement, and election of hospice care in lieu of continued treatment in the hospital.

111 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers When the Expected Length of Stay was Less Than 2 Midnights Except for cases involving services on the Inpatient-Only list, CMS believes that only in rare and unusual circumstances would an inpatient admission be reasonable in the absence of an expectation of a 2 midnight stay. Examples of situations that do not represent instances in which an inpatient admission would be appropriate without an expectation of a 2 midnight hospital stay include: Beneficiaries admitted for telemetry. CMS does not believe that the use of telemetry, by itself, is the type of rare and unusual circumstance that would justify an inpatient admission in the absence of a 2 midnight expectation. We note that telemetry is neither rare nor unusual, and that it is commonly used by hospitals on outpatients (ER and observation patients) and on patients fitting the historical definition of outpatient observation; that is, patients for whom a brief period of assessment or treatment may allow the patient to avoid a hospital stay. Beneficiaries admitted to an Intensive Care Unit (ICU). As CMS specified in the final rule, the use of an ICU, by itself, would not be the type of rare and unusual circumstance that would justify an inpatient admission in the absence of a 2 midnight expectation. An ICU label is applied to a wide variety of facilities providing a wide variety of services. Due to the wide variety of services that can be provided in different areas of a hospital, CMS does not believe that a patient assignment to a specific hospital location, such as a certain unit or location, would justify an inpatient admission in the absence of a 2-midnight expectation. CMS has identified the following exception to the 2-midnight rule: 1. Mechanical Ventilation Initiated During Present Visit: As noted above, treatment in an ICU, by itself, does not support an inpatient admission absent an expectation of medically necessary hospital care spanning 2 or more midnights. Stakeholders have notified CMS that they believe beneficiaries with newly initiated mechanical ventilation support an inpatient admission and Part A payment. CMS believes newly initiated mechanical ventilation to be rarely provided in hospital stays less than 2 midnights, and to embody the same characteristics as those procedures included in Medicare s inpatient only list. While CMS believes a physician will generally expect beneficiaries with newly initiated mechanical ventilation to require 2 or more midnights of hospital care, if the physician expects that the beneficiary will only require one midnight of hospital care, inpatient admission and Part A payment is nonetheless generally appropriate. CMS will continue to work with the hospital industry and with MACs to determine if there are any additional categories of patients or services that should be added to this list. Suggestions should be ed to IPPSAdmissions@cms.hhs.gov with Suggested Exceptions to the 2 Midnight Benchmark in the subject line.

112 108 AIS s Management Insight Series E. The Need for Hospital Services When conducting patient status reviews for services not on the inpatient-only list, CMS will direct the MAC to evaluate whether, at the time of the admission order, it was reasonable for the admitting practitioner to expect the beneficiary to require medically necessary hospital services (including inpatient and outpatient services) over a period of time spanning at least 2 midnights. We note that absent rare and unusual circumstances (See D.2 above), the medical necessity assessment to be conducted by the review contractor is whether the beneficiary s clinical presentation, prognosis, and expected treatment support the expectation of the need for hospital care spanning 2 or more midnights, as opposed to care outside of a hospital facility, such as a skilled nursing facility or other less intensive services. The beneficiary s severity of illness and intensity of services are complex medical factors that CMS will instruct the MAC to consider when assessing whether the physician was reasonable in forming his or her expectation that a beneficiary required hospital services for 2 or more midnights. Note: 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. 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 2 or more midnights. F. Documentation Requirements The 2-midnight benchmark is based upon the physician s expectation of the required duration of medically necessary hospital services at the time the inpatient order is written and the formal admission begins. CMS will direct the MACs that in conducting patient status reviews, MACs should consider complex medical factors that support a reasonable expectation of the needed duration of the stay relative to the 2-midnight benchmark. Both the decision to keep the beneficiary at the hospital and the expectation of needed duration of the stay are based on such complex medical factors as beneficiary medical history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk (probability) of an adverse event occurring during the time period for which hospitalization is considered. In other words, if reviewer determines that it was reasonable for the physician to expect the beneficiary to require medically necessary hospital care lasting 2 midnights, and that expectation is documented in the medical record, inpatient admission is generally appropriate, and payment may be made under Medicare Part A; this is regardless of whether the anticipated length of stay did not transpire due to unforeseen circumstances (See section D.) MACs will continue to follow longstanding guidance to review the reasonableness of the inpatient admission decision based on the information known to the physician at the time of admission. The expectation for sufficient documentation is well rooted in good medical practice. 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. Expectation of time and the determination of the underlying need for medical care at the hospital are supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event, which CMS will direct the MACs to expect to be documented in the physician assessment and plan of care. The entire medical record may be reviewed to support or refute the reasonableness of the decision, but entries after the point of the admission order are only used in the context of interpreting what the physician knew and expected at the time of admission. If the physician believes the beneficiary represents a rare and unusual exception to the 2-midnight benchmark, in which the expected length of stay is less than 2 midnights but inpatient admission may be appropriate, the physician must clearly document this rationale and supporting information in the medical record for CMS review.

113 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 109 G. The 2-Midnight Benchmark and Outpatient Time 1. General For purposes of determining whether the 2 midnight benchmark was met and, therefore, whether a claim for inpatient admission should be approved upon review, CMS will direct the MACs to consider time the beneficiary spent receiving outpatient services within the hospital prior to inpatient admission, in addition to the post-admission duration of care. This pre-admission time may include services such as observation services, treatments in the emergency department, and procedures provided in the operating room or other treatment area Midnight Benchmark Reviews (Clarification) Whether the beneficiary receives services in the emergency department (ED) as an outpatient prior to inpatient admission (for example, receives observation services in the emergency room) or is formally admitted as an inpatient upon arrival at the hospital (for example, inpatient admission order written prior to an elective inpatient procedure), the starting point for the 2 midnight timeframe for medical review purposes will be when the beneficiary starts receiving services following arrival at the hospital. For the purpose of determining whether the 2-midnight benchmark was met, CMS will direct the MAC to exclude triaging activities (such as vital signs) and wait times prior to the initiation of medically necessary services responsive to the beneficiary's clinical presentation. If the triaging activities immediately precede the initiation of medically necessary and responsive services, it is the initiation of diagnostic or therapeutic services responsive the beneficiary s condition that CMS will direct the MAC to consider to start the clock for purposes of the 2 midnight benchmark. CMS will direct MACs not to count the time a beneficiary spent in the ED waiting room while awaiting the start of treatment. In other words, a beneficiary sitting in the ED waiting room at midnight while awaiting the start of treatment would not be considered to have passed the first midnight, but a beneficiary receiving services in the ED at midnight would meet the first midnight of the benchmark. NOTE: While the time the beneficiary spent as an outpatient before the beneficiary is formally admitted as an inpatient pursuant to a physician order will not be considered inpatient time, it will be considered during the medical review process for purposes of determining whether the 2-midnight benchmark was met and, therefore, whether payment for the admission is generally appropriate under Part A.

114 110 AIS s Management Insight Series H. Delays in the Provision of Care 1862(a)(1)(A) of the Social Security Act statutorily limits Medicare payment to the provision of reasonable and necessary medical treatment. As such, CMS expects MACs will continue to follow CMS' longstanding instruction that Medicare payment is prohibited for care rendered for social purposes or reasons of convenience. Therefore, CMS will direct MACs to exclude extensive delays in the provision of medically necessary care from the 2 midnight benchmark calculation. CMS will instruct the MACs to only count the time in which the beneficiary received medically necessary hospital treatment. Factors that may result in an inconvenience to a beneficiary, family, physician or hospital do not, by themselves, justify inpatient admission. When such factors affect the beneficiary's health, CMS will direct MACs to consider them in determining whether inpatient hospitalization was appropriate. Without accompanying medical conditions, factors that would only cause the beneficiary inconvenience in terms of time and money needed to care for the beneficiary at home or for travel to a physician's office, or that may cause the beneficiary to worry, do not justify a continued hospital stay. I. Monitoring Hospital Billing Behaviors for Gaming In accordance with the 2-midnight benchmark, as further described in the document Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, 2013, CMS will instruct MACs to monitor inpatient hospital claims spanning 2 or more midnights after admission for evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2-midnight presumption. CMS will instruct MACs to identify such trends through probe reviews and through its data sources, such as that provided by the Comprehensive Error Rate Testing (CERT) contractor, First-look Analysis for Hospital Outlier Monitoring (FATHOM) and Program for Evaluating Payment Patterns Electronic Report (PEPPER).

115 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 111 CMS: Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, 2013 Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, 2013 (Last Updated: 11/04/13) On August 2, 2013 the Centers for Medicare & Medicaid Services (CMS) issued Final Rule CMS-1599-F, which modifies and clarifies CMS s longstanding policy on how Medicare contractors review inpatient hospital admissions for payment purposes. CMS intends to issue guidance to Medicare Administrative Contractors (MACs) about how to select hospital claims for review during a Probe and Educate program for admissions that occur October 1, 2013 through March 31, This document contains a summary of the technical direction that CMS will issue to the MACs. Throughout this document, the term patient status reviews will be used to refer to reviews conducted by MACs to determine a hospital s compliance with CMS-1599-F, which focuses on the appropriateness of an inpatient admission versus treatment on an outpatient basis. CMS will instruct the MACs to apply CMS-1599-F to the Probe and Educate patient status reviews they conduct for claims submitted by acute care inpatient hospital facilities, Long Term Care Hospitals (LTCHs), and Inpatient Psychiatric Facilities (IPFs) for dates of admission on or after October 1, 2013 but before March 31, CMS-1599-F is also applicable to Critical Access Hospitals (CAHs), but CAHs are specifically excluded from patient status reviews during this 6-month timeframe. MACs will NOT apply these instructions to admissions at Inpatient Rehabilitation Facilities (IRFs). IRFs are specifically excluded from the 2-midnight inpatient admission and medical review guidelines per CMS-1599-F. A. Claims for Hospital Admissions that Span 2 or More Midnights The 2-midnight presumption outlined in CMS-1599-F specifies that hospital stays spanning 2 or more midnights after the beneficiary is formally admitted as an inpatient pursuant to a physician order for such admission will be presumed to be reasonable and necessary for inpatient status as long as the stay at the hospital is medically necessary. CMS will direct MACs NOT to focus their medical review efforts on stays spanning at least 2 midnights after admission absent evidence of systematic gaming, abuse, or delays in the provision of care in an attempt to qualify for the 2- midnight presumption. However, MACs may review these claims as part of routine monitoring activity or as part of other targeted reviews. B. Claims for Hospital Admissions that Span 0-1 Midnights Inpatient stays spanning 0-1 midnights after the beneficiary is formally admitted as an inpatient are not subject to the presumption and may be selected for review. However, if total time in the hospital receiving medically necessary care (including pre-admission outpatient time from the time care is initiated in the hospital) spans 2 or more midnights, the 2-midnight benchmark for inpatient admission will be met and payment supported upon medical review. Effective for

116 112 AIS s Management Insight Series admissions on or after 10/1/2013, CMS will direct the MACs to conduct probe reviews and deny claims found to be out of compliance with CMS-1599-F. CMS will direct MACs to select a sample of 10 claims for prepayment review for most hospitals (25 claims will be selected for prepayment review for large hospitals). Based on the results of these initial reviews, MACs will conduct educational outreach efforts during the next 3 months. CMS will instruct MACs to deny each non-compliant claim and to outline the reasons for denial in a letter to the hospital. We will also instruct the MACs to offer individualized phone calls to those providers with either moderate/significant or major concerns. During such calls, the MAC will discuss the reasons for denials, provide pertinent education and reference materials, and answer questions. In addition to these educational outreach efforts, for those providers that are identified as having moderate/significant concerns or major concerns, the MACs will conduct additional probe reviews on claims with dates of admission between January and March The size of these probe reviews will be 10 additional claims (25 for large hospitals). If continuing concerns are identified at the end of the 6-month review period, samples of 100 claims (250 for large hospitals) may be selected for additional review. CMS will also monitor provider billing trends for variances indicative of abuse, gaming, or systematic delays in the submission of claims, for the purpose of avoiding the MAC prepayment probe audits during this initial probe and educate period. The MACs will submit periodic reports to CMS for purposes of tracking the frequency and types of errors seen during these probe reviews.

117 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 113 MAC Actions Following Patient Status Probe Reviews Number of Claims in Sample That Did NOT Comply with Policy (Dates of Admission October March 2014) No or Minor Concerns Moderate to Significant Concerns Major Concerns 10 claim sample 0-1* 2-6* 7 or more* 25 claim sample 0-2* 3-13* 14 or more* For each provider with no or minor concerns, CMS will direct the MAC to: For each provider with moderate to significant concerns, CMS will direct the MAC to : For each provider with major concerns, CMS will direct the MAC to : Action 1. Deny non-compliant claims 2. Send summary letter to providers indicating: What claims were denied and the reason for the denials That no more reviews will be conducted under the Probe & Educate process. That the provider will be subjected to the normal data analysis and review process 3. Await further instruction from CMS 1. Deny non-compliant claims 2. Send detailed review results letters explaining each denial 3. Send summary letter that: Offers the provider a 1:1 phone call to discuss Indicates the review contractor will REPEAT Probe & Educate process with 10 or 25 claims 4. Repeat Probe & Educate of 10 or 25 claims with dates of admission January March Deny non-compliant claims 2. Send detailed review results letters explaining each denial 3. Send summary letter that: Offers the provider a 1:1 phone call to discuss Indicates the review contractor will REPEAT Probe & Educate process with 10 or 25 claims 4. Repeat Probe & Educate of 10 or 25 claims with dates of admission January March If problem continues, Repeat Probe & Educate with increased claim volume of claims *Note: If the provider claim submissions do not fulfill the requested sample, the error rate shall be calculated based on percentage of claims with findings.

118 114 AIS s Management Insight Series CMS: MLN Matters MM8586 DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services Revised product from the Medicare Learning Network (MLN) Inpatient Rehabilitation Facility Prospective Payment System Fact Sheet, ICN , downloadable MLN Matters Number: MM8586 Related Change Request (CR) #: CR 8586 Related CR Release Date: January 24, 2014 Effective Date: December 1, 2013 Related CR Transmittal #: R1334OTN Implementation: February 25, 2014 Occurrence Span Code 72; Identification of Outpatient Time Associated with an Inpatient Hospital Admission and Inpatient Claim for Payment Provider Types Affected This MLN Matters Article is intended for hospitals submitting claims to Medicare Administrative Contractors (MACs) for services to Medicare beneficiaries. Provider Action Needed The Centers for Medicare & Medicaid Services (CMS) issued Change Request (CR) 8586 to provide clarification to hospitals regarding the billing of inpatient hospital stays and the 2-Midnight Rule, codified under the Fiscal Year 2014 Inpatient Prospective Payment System Final Rule CMS-1599-F. The 2-Midnight Rule allows hospitals to account for total hospital time (including outpatient time directly proceeding the inpatient admission) when determining if an inpatient admission order should be written based on the expectation that the beneficiary will stay in the hospital for 2 or more midnights receiving medically necessary care. Because currently the inpatient claim only permits CMS to accurately track inpatient time after formal inpatient order and admission (i.e., utilization days/midnights), CMS would also like to use Occurrence Span Code 72 to track the total, contiguous outpatient care prior to inpatient admission in the hospital. This will enable CMS to identify claims in Disclaimer This article was prepared as a service to the public and is not intended to grant rights or impose obligations. This article may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations and other interpretive materials for a full and accurate statement of their contents. CPT only copyright 2012 American Medical Association.

119 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 115 MLN Matters Number: MM8586 Related Change Request Number: 8586 which the beneficiary received care as an outpatient for 1 or more midnights and was subsequently admitted as an inpatient based on the expectation that the beneficiary would require 2 or more midnights of hospital care. Background The change in billing instruction is associated with CMS-1599-F, in which CMS clarifies and modifies its guidance regarding the proper billing of inpatient hospital stays. Under the rule, surgical procedures, diagnostic tests, and other treatments (not specifically designated as inpatient-only) are generally appropriate for inpatient hospital payment under Medicare Part A when the physician expects the beneficiary to require a stay that crosses at least 2 midnights and admits the beneficiary to the hospital based on that expectation. The final rule emphasizes the need for a formal order of inpatient admission to begin inpatient status and time, but permits the physician and the medical reviewer to consider all time a beneficiary has already spent in the hospital receiving outpatient services (including observation services and treatment in the emergency department, operating room, or other treatment area) in guiding their 2- midnight expectation. This rule is available in the Federal Register on Page at on the Internet. The redefinition of occurrence span code 72 allows providers to voluntarily identify those claims in which the 2- midnight benchmark was met because the beneficiary was treated as an outpatient in the hospital prior to the formal inpatient order and admission. In other words, it permits providers and subsequently review contractors to identify the contiguous outpatient hospital services [midnights] that preceded the inpatient admission, as well as the total number of midnights after formal inpatient order and admission, on the face of the claim. While MACs may still select this claim type for medical review, the use of occurrence span 72 will help support the medical record and the MAC s review decision. Since the 2 midnight benchmark allows hospitals to account for total hospital time in determining if the beneficiary is expected to meet the 2 midnight benchmark, CMS has provided examples scenarios below, to illustrate circumstances in which an outpatient midnight was pertinent to the inpatient admission decision. In the future, occurrence span 72 may also be used to guide the claim selection process at CMS discretion. Examples in which the 2-Midnight Benchmark was met based on total (outpatient and inpatient) hospital time. CMS would like to track the outpatient time on an automated basis, using occurrence span code 72, so we may focus medical review as needed: Example 1: Beneficiary is an outpatient and is receiving observation services at 10PM on 12/1/2013, and is still receiving observation services at one minute past midnight on 12/2/2013 and continues as an outpatient until admission. Beneficiary is admitted as an inpatient on 12/2/2013 at 3 AM, under the expectation that the beneficiary will require medically necessary hospital services for an additional midnight. Beneficiary is discharged on 12/3/2013 at 8AM. Total time in the hospital meets the 2 midnight benchmark. Disclaimer This article was prepared as a service to the public and is not intended to grant rights or impose obligations. This article may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations and other interpretive materials for a full and accurate statement of their contents. CPT only copyright 2012 American Medical Association.

120 116 AIS s Management Insight Series MLN Matters Number: MM8586 Related Change Request Number: 8586 Example 2: Beneficiary having arrived at the hospital and begun treatment in the ED at 8PM on 12/11/2013 is still in the Emergency Department (ED) at one minute past midnight on 12/12/2013 and continues as an outpatient until admission. The beneficiary is admitted as an inpatient on 12/12/2013 at 2 AM, under the expectation that the beneficiary will require medically necessary hospital services for an additional midnight. The beneficiary is discharged on 12/13/2013 at 8AM. Total time in the hospital meets the 2-midnight benchmark. Example 3: Beneficiary in an outpatient Surgical Encounter at 6PM on 12/21/2013 is still in the Outpatient Encounter at one minute past midnight on 12/22/2013 and continues as an outpatient until admission. Beneficiary is admitted as an inpatient on 12/22/2013 at 1 AM, under the expectation that the beneficiary will require medically necessary hospital services for an additional midnight. Beneficiary is discharged on 12/23/2013 at 8AM. Total time in the hospital meets the 2 midnight benchmark. Additional Information The official instruction, CR8586, issued to your MAC regarding this change is available at Guidance/Guidance/Transmittals/Downloads/R1334OTN.pdf on the CMS website. If you have any questions, please contact your MAC at their toll-free number, which may be found at on the CMS website. News Flash - Generally, Medicare Part B covers one flu vaccination and its administration per flu season for beneficiaries without co-pay or deductible. Now is the perfect time to vaccinate beneficiaries. Health care providers are encouraged to get a flu vaccine to help protect themselves from the flu and to keep from spreading it to their family, co-workers, and patients. Note: The flu vaccine is not a Part D-covered drug. For more information, visit: MLN Matters Article #MM8433, Influenza Vaccine Payment Allowances - Annual Update for Season MLN Matters Article #SE1336, Influenza (Flu) Resources for Health Care Professionals HealthMap Vaccine Finder - a free, online service where users can search for locations offering flu and other adult vaccines. While some providers may offer flu vaccines, those that don t can help their patients locate flu vaccines within their local community. The CDC website for Free Resources, including prescription-style tear-pads that allow you to give a customized flu shot reminder to patients at high-risk for complications from the flu. Disclaimer This article was prepared as a service to the public and is not intended to grant rights or impose obligations. This article may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations and other interpretive materials for a full and accurate statement of their contents. CPT only copyright 2012 American Medical Association.

121 The Two-Midnight Rule: Practical Strategies for Hospital Compliance Officers 117 CMS: MLN Matters SE1403 DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services Are you ready to transition to ICD-10 on October 1, 2014? In this MLN Connects video on ICD-10 Coding Basics, Sue Bowman from the American Health Information Management Association (AHIMA) provides a basic introduction to ICD-10 coding, including: Similarities and differences; ICD-10 code structure; and Coding process and examples. To receive notification of upcoming MLN Connects videos and calls and the latest Medicare program information on ICD-10, subscribe to the weekly MLN Connects Provider enews. MLN Matters Number: SE1403 Related CR Release Date: N/A Related CR Transmittal #: N/A Related Change Request (CR) #: N/A Effective Date: N/A Implementation Date: N/A Probe & Educate Medical Review Strategy: Probe Reviews of Inpatient Hospital Claims and Corresponding Provider Outreach and Education Provider Types Affected This MLN Matters Article (Special Edition) is intended for providers and suppliers who submit institutional claims to Medicare Administrative Contractors (MACs) for inpatient hospital services provided to Medicare beneficiaries. Provider Action Needed This article describes a focused prepayment medical review strategy for MACs to conduct prepayment review of inpatient hospital claims with dates of admission from October 1, 2013, through March 31, See the Background and Additional Information Sections of this article for further details regarding these changes, and make sure that your billing staffs are aware of these changes. Disclaimer This article was prepared as a service to the public and is not intended to grant rights or impose obligations. This article may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations and other interpretive materials for a full and accurate statement of their contents. CPT only copyright 2012 American Medical Association.