CMS Moves The Inpatient Benchmark to 48 Hours

CMS redefined the benchmark used to determine medical necessity for an inpatient claim typically filed by acute care hospitals for Medicare reimbursement, moving the mark from 24 hours, the long-standing instruction in the Medicare Benefits Policy Manual, to 48 hours, including new language meant to clarify their audit/review policies, in an obvious move to decrease inpatient payment rates. The explanation and justification for the move is given in a document posted on their site, late on Friday, April 26, 2013.

The document, [CMS-1599-P], entitled “Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2014 Rates; Quality Reporting Requirements for Specific Providers; Hospital Conditions of Participation” was posted on a page with the title “PROPOSED POLICY AND PAYMENT CHANGES FOR INPATIENT STAYS IN ACUTE-CARE HOSPITALS AND LONG-TERM CARE HOSPITALS” and lists” Admission and Medical Review Criteria for Inpatient Services” as one of the “CHANGES IN POLICIES AFFECTING ACUTE-CARE HOSPITALS” included in the proposal.

Why This Move to 48 hours?

In a thinly veiled attempt to justify reducing costs, a poorly planned attempt to offer clarity, and what could be seen as a feeble reaction to the recent civil action filed by the AHA and some hospitals, CMS chose to try to redefine, not what matters for patient safety or outcomes, but what matters for lowering reimbursements — the definition of when someone becomes an inpatient — for payment purposes alone. While the use of benchmarks is often used in a continuous process of measured performance improvement, the only performance being affected here is a decrease in the payments made by CMS for the exact same level of care already delivered by the hospitals, in good faith of being reimbursed for care provided.

This move gives the agency and its reviewers yet another weapon to second-guess physicians after the fact, and take back 100% of the reimbursements, despite the fact that CMS’s own manuals, and even the Recovery Audit Contractor Statement of Work specifically define and speak to “partial denials” where auditors simply disagree with the level of service provided, rather than the clinical basis of the care provided.

In the proposed rule, CMS proposes that inpatient admissions spanning at least two midnights will be presumed to qualify for Part A payment. Alternatively, inpatient admissions spanning fewer than two midnights will be presumed to qualify only for Part B payment. The admitting physician is required to document their expectation of the supposed need for at least a 48-hour stay (crossing the two midnights) and the evidence used to make said decision, to clearly and completely support their order for admission.

Of course, CMS contractors may decide that whatever an attending physician puts in the record, it does not pass whatever benchmark they decide to use to measure that documentation of “expectation.” Of course, there IS no benchmark provided by CMS for that kind of measure and consequent decision.

CMS attempts to explain in the proposed rule that part of their motivation for this new benchmark is to “help beneficiaries who in recent years have been having longer stays as outpatients because of hospital uncertainties about payment if they admit the patient to the hospital,” citing the rise in recent years of Medicare beneficiaries receiving observation services for more than 48 hours — approximately 3 percent in 2006, rising to approximately 8 percent in 2011, according to CMS. Those treated for extended periods of time in observation status are outpatients, and as such may incur greater financial liability than they would if they were treated as inpatients, and admitted to the hospital as such.

How Will Physician Documentation Change?

Clinical documentation in the medical record is still the basis of everything, as always. Documentation MUST support, not only the underlying medical necessity of an inpatient level of service, but must ALSO support an admitting physician’s “expectation” that the patient would need care spanning at least two midnights, notwithstanding any unforeseen circumstance that might result in a shorter stay than expected. (So far, it seems that only death or transfer will qualify as acceptable exceptions.)

Physicians must support their “expectation” and their order for admission, through “clear and complete medical documentation.” According to CMS, this proposed policy would “address longstanding concerns from hospitals that they need more guidance on when a patient is appropriately treated and paid by Medicare as an inpatient.” Or so they claim. At the same time, again according to CMS, the proposed change would “help beneficiaries who in recent years have been having longer stays as outpatients because of hospital uncertainties about payment if they admit the patient to the hospital.”

What Is The Basis For This Change?

One might argue that CMS’s evidence in support of this move is compelling. Below is part of the justification by CMS for the change in the benchmark and the payment adjustment:

In 2012, 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 decreases significantly for 2-day or 3-day stays, which had improper payment rates of 13.2 percent and 13.1 percent, respectively. We believe the magnitude of these national figures demonstrates that the appropriate determination of a beneficiary’s patient status is a systemic and widespread issue and is not isolated to a few hospitals. We also note that the RAs have recovered more than $1.6 billion in improper payments because of inappropriate beneficiary patient status. [see pg 679]

It is almost compelling, I should say. I say that because, upon examination of the CERT report mentioned (2011 Medicare FFS Improper Payment Report [PDF, 671KB]) I was unable to find the rates that CMS had quoted.

I found this, instead:

The frequency of claim errors was positively correlated with decreasing lengths of stay of inpatient hospital PPS claims. Stays of one day or less had an improper payment rate of 34.2 percent, resulting in projected improper payments of approximately $4.1 billion. Two day stays had a projected improper payment rate of 17.3 percent, resulting in projected improper payments of approximately $2 billion. Three day stays had an improper payment rate 11.8 percent, resulting in projected improper payments of approximately $2 billion. [see pg 21]

Where’s The Beef?

While those are not huge differences, it is rather disconcerting to find errors in important reports authored by the people who are measuring, compiling and reporting error rates, plus subsequently making coverage and payment policy decisions based on these same erroneous data and reports. Doesn’t that bother You? It bothered me, so at that point I decided to dig further into the CERT report, looking for more detailed information.

Unfortunately, such data is not to be found, at least not in the currently published data. Only cursory or summary information appear in the report and its appendices (Appendices – November 2011 Medicare FFS Improper Payment Rate Report [PDF, 1MB]).

Also, almost as a side note, I found some – let’s call it – “puzzling data” in the Appendices.

Are there Errors in the Error Report?

For example, I find it difficult to understand how one can justify a sample of exactly two (2) claims for a DRG ( AICD or Automatic Implantable Cardioverter Defibrillator Generator Procedures), and then reach a reasonably valid error rate for such cases, which might number over 65,000 annually (there were 67,000 in 2004, according to one report I found). The CERT report (see pg 45 of the Appendices, Table I4) lists just “2” claims in their sample, with an Overpayment Rate of 88.7% reported, and 100% of those errors as a result of “Medical Necessity” — meaning the reviewers disagreed with the need for the procedure to be done under inpatient status.

How does one get an 87% error rate from a sample of just two cases?

Well, perhaps they were referring to the dollars involved, I thought. Those numbers made no more sense, however: the two claims in the sample paid $69,413, of which the report says $33,406 was an overpayment. That still doesn’t compute to be 88.7% in error, at least not with my calculator.

Does It Matter If Their Numbers Are a Little Off?

Is this a big deal? Is the error really significant? Perhaps not, in the scheme of things. Except for the fact that the total Projected Dollars Overpaid for the DRG was then calculated to be $416,274,353. (Look on that same page in the Appendices, pg 45, 3rd data line down, 5th column from the left.)

That’s $416 Million in overpayments, estimated and based upon exactly 2 sample claims — with an error rate that looks… what to call it… bogus?

I started to look at a few other figures and found even more things I struggle to understand and accept as real. It was a thoroughly disturbing journey, considering this is the report that the whole government relies upon to at least partly “justify” their audit and review programs.

Now, I do admit that I’m not an “expert” in statistics, but I do know some basics from my past training as an Archaeologist. (Don’t ask.) Anyway, I called an expert, my friend and colleague, Frank Cohen, of The Frank Cohen Group. If you’re not familiar with Frank, he was one of the statisticians who helped build New York Attorney General Andrew Cuomo’s case against insurers who used the flawed Ingenix database to calculate payments for out-of-network care. Frank’s work helped them win a huge settlement for physicians.

I showed Frank what I was seeing, and he was equally bothered by the figures. So, now he’s looking into it with an experienced statistician’s eye — and trust me when I say that Frank is no fan of payers in general. Frank and I will report on all that at a later date.

Meanwhile, back to the IPPS Proposed Rule and the moving benchmark…

The New Benchmark: Interviews & Webinars Scheduled

The comment period for this new IPPS Proposed Rule runs through June 25, 2013. While one truly wonders if CMS would bother with such tedium if not for the laws requiring them to do so, all providers really should avail themselves of the opportunity to at least voice your concerns, suggestions and criticisms of the proposed changes.

To that end, in support of getting good advice from multiple experts, Appeal Academy will be offering a complete series of webinars, discussing these subjects:

4 Critical Revenue Cycle Subject Areas:

  1. Legal Impact and Precautions — what to expect, watch out for, do, from a legal viewpoint;
  2. Physician Documentation — what changes if this rule is finalized as written;
  3. UR & CM Involvement — what to do to help your UR & Case Managers help your MDs;
  4. Appeal Strategy & Tactics — what might need to change, especially at ALJ level appeals.

In a few days, I will publish who the expert speakers will be, but I can assure you that they are all well-known experts in their respective subjects, and you’ll likely recognize the names.

I’ll also then publish the schedule, for later in May, beginning the week of May 20.

For Appeal Academy members, these webinars will be free of charge, included in their membership, as are all our webinars.

Stay tuned! More coming your way, very soon…

Ernie de los Santos

Faculty Chair & Founder

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