Medicare reimbursement experts were surprised OIG found Medicare paid $2.9 billion for inappropriate short inpatient stays and expected the result will garner attention from lawmakers and regulators, alike.

Dec. 22—Medicare reimbursement experts predict that the Centers for Medicare & Medicaid Services (CMS) will escalate its use of audits after a report by the U.S. Department of Health and Human Services’ Office of the Inspector General (OIG) found widespread alleged violations of the 2014 “two-midnight rule” governing short hospital stays.

The Dec. 19 report found that the number of inpatient stays decreased by 262,794, (2.8 percent) while the number of outpatient stays increased by 259,908 (8.1 percent) since introduction of the  “two-midnight” policy.

However, hospitals are inappropriately billing for nearly 40 percent of short inpatient stays, OIG concluded, and Medicare paid almost $2.9 billion for such inappropriate stays in FY14.

Medicare pays on average three times as much for short inpatient stays as it does for short hospital outpatient stays, even though the stays are for similar reasons and use comparable services, the report noted.

The report recommends that CMS “should routinely conduct analysis to identify hospitals that have high or increasing numbers of short inpatient stays that are potentially inappropriate under the 2-midnight policy.”

The OIG also suggested CMS consider counting the time spent as a hospitalized outpatient toward the three-night Medicare requirement for skilled nursing facility services “so that beneficiaries receiving similar hospital care have similar access to these services.”

The inspector general also urged CMS to find ways to protect beneficiaries, who typically pay twice as much for short inpatient stays as short outpatient stays. CMS agreed with all four recommendations.

More Audits

Colleen Faddick, an attorney specializing in Medicare reimbursement with Polsinelli, said the OIG report’s message can be boiled down to six words: hospitals should prepare for more audits.

“We are in a situation where CMS’ prior guidance has changed a lot in recent years,” Faddick said in an interview. “If hospitals are already meeting the rules, the report and its recommendations will be little more than an annoyance to them.”

But Faddick cautioned that “while past efforts have leaned towards education, now they’re moving more towards recoupment.”

 “The OIG is saying that they still think that some 40 percent of those stays don’t meet the rule and are wrong. And the way to answer that is to audit more,” Faddick said.

Faddick urged hospitals to improve their documentation processes and involve physicians in that effort.

“It can be very labor intensive, but I’ve seen some hospitals chase every admission,” Faddick said. “Someone from coding and billing or utilization review follows that admitting physician immediately and asks the requisite questions and makes sure the admission meets the standards before anything happens. The hospitals doing this say it can be time consuming, but saves headaches on the back end.”

The OIG reported hospitals were paid for 1,074,267 short inpatient stays in FY14, down 10 percent from FY13. The short inpatient stays averaged $3,790, with Medicare paying a total of $2.9 billion.

Continued Struggle

Emily Evans, managing director for health care policy for Hedgeye Risk Management, said hospitals continue to struggle with implementation of the two-midnight rule.

“The most significant thing for hospitals to come out of this report is that scrutiny of these short stays is not abating,” Evans said in an interview. “And when they don’t implement this rule properly, they will face the consequences of quality improvement organizations’ (QIOs) and recovery audit contractors’ (RACs) audits.”

Evans said that hospitals must document on the front end the doctor’s expectations of the patient length of stay.

“If you don’t document properly, then you open yourself up to audits,” Evans said. “You may still receive some scrutiny because this is an area of intense inquiry by QIOs and RACs.”

She pointed out that if hospitals contract with independent hospitalist groups, they may lack leverage over those physicians if they fail to complete the required documentation.

“Physicians are already so overwhelmed by documentation requests anyway,” Evans said.

One side effect of the short stay scrutiny is that other admitting practices have come under the microscope, Evans said.

“Patients are supposed to spend three nights in a hospital stay before discharge before Medicare will pay for skilled nursing facility admissions. But if you come into a hospital for observation or are only kept for one to two days, that affects your Medicare benefit in a nursing home,” Evans said.

She said another spinoff from the report is the realization among members of Congress that the amount of money that Medicare pays for outpatient versus inpatient services may vary considerably and that may fuel a growing movement to equalize how Medicare pays for similar services in two different settings.

Day Egusquiza, president of AR Systems, said it’s not known how the current QIO audits will interact with the renewed OIG focus. However, “utilization management/case management must beef up their game and continue to partner with clinical documentation improvement (CDI) in reviewing all the documentation at first point of contact,” Egusquiza wrote in an email.

Egusquiza said many hospitals are still not accurately documenting short stay admissions entering on weekends or through the emergency department. 

“The Monday morning quarterbacking and clean-up are still occurring after many years of audit risk identified through these practices,” Egusquiza wrote.

CMS Scrutiny

Ronald Hirsch, MD, vice president of regulations education for Accretive PAS Clinical Solutions, said the biggest surprise to him was the estimated $2.9 billion in improper payments.

“That number is much larger than anyone would have expected and will certainly raise eyebrows at CMS,” said Hirsch in an interview. “And it will suggest that auditing each hospital through only 20 charts per year will not be adequate in defining this problem.”

But Hirsch said OIG may be incorrectly assessing the size and scope of the problem.

“They’re basing it purely on an analysis of the patients’ length of stay and nothing in the medical records to determine whether these short stays were appropriate,” Hirsch said.

Hirsch said today RACs are limited to auditing short stay admissions to hospitals referred to them after failing QIO audits.

“In the old days, RACs could audit short stays all the time and would ask for hundreds of charts,” Hirsch said. “The advent of the two-midnight rule greatly reduced those RAC audits. I think this OIG report will lead to greater pressure on CMS to loosen restrictions, so RACs can audit more hospitals.”

Hirsch advised hospitals “to ‘hard-wire’ their processes so no patient gets into a bed without a visit from a utilization review specialist and a physician to determine whether that admission has proper status.”

Mark Taylor is a freelance writer based in Chicago.


Publication Date: Thursday, December 22, 2016