EDITOR’S NOTE: The Centers for Medicare & Medicaid Services will hold an open door forum today to discuss the two-midnight rule and audits. This article is a preview of topics expected to be covered.

As 2016 began, hospitals around the country were (and remain) anxious about several upcoming changes to Medicare regulations. The comment period has closed on the new proposed discharge planning conditions of participation from the Centers for Medicare & Medicaid Services (CMS). Now we have to wait to see if CMS listens to the many commenters who asked for significant changes, including the American Hospital Association (AHA), which asked for a two-year delay in implementation of whatever changes CMS ultimately adopts. The agency also held a listening session on the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, which requires written and oral notification of observation services, and got an earful from many callers. And of course, Jan. 1 marked the date that hospitals became eligible for referral to the Recovery Auditors (RAs) if they performed poorly on the short-stay audits being conducted by the Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIOs). Unfortunately, the rollout of these audits was marked by some CMS sleight of hand.

When the “two-midnight rule” was rolled out, CMS instructed the Medicare Administrative Contractors (MACs) to perform probe-and-educate audits on a small number of charts for each hospital. These audits were supposed to be educational, but as reported on RACmonitor in the past, in many cases it was the hospital educating the MAC. The MACs were to have done three rounds of probe-and-educate audits, unless a hospital had few errors on the initial audits. Via an act of Congress, the start date for resumption of the RA audits was delayed, then the issues with contracting provided additional delay. Then CMS set Oct. 1, 2015 as the first date a hospital could be referred for a RA audit. 

But that was not the end of the story. In July, CMS released the 2016 Outpatient Prospective Payment System Rule, which announced that the BFCC-QIOs would be taking over short-stay audits from the MACs staring Oct. 1, 2015 (later this was pushed back to Jan. 1, 2016. On Aug. 12, CMS posted a chart to the inpatient hospital review page of its website with a table (Table 1) titled “Summary of Inpatient Status Reviews,” indicating the pertinent dates. This table clearly indicates that the BFCC-QIO reviews would encompass admissions occurring from Oct. 1, 2015 on, with all prior admissions remaining under the MACs’ jurisdiction. This page was updated on Oct. 26, with no change to the dates.In November, hospitals began receiving record requests from the BFCC-QIOs for records from May and June 2015. The CMS page remained unchanged, yet the chart requests kept coming, with no explanation other than an indication that CMS was sending the QIOs a list of charts to audit (and they did as they were told). Hospitals had no choice but to send the records to avoid a denial for non-submission of records.

Then, at some point on Dec. 31, CMS updated the inpatient hospital reviews Web page to add sub-regulatory guidance on short-stay audits. But with that change, CMS also changed the “Summary of Inpatient Status Reviews” table (Table 2), removing the heading that indicated “date of admission” and leaving that column without a heading. The removal of these three words changed the meaning of the table completely; it suddenly would be interpreted to indicate that the BFCC-QIOs will start their audits as of Oct. 1, 2015. They also added the word “begin” to once again remove any reference to the date of admission as a determining factor. With these small changes, the BFCC-QIOs now were completely justified in requesting those charts from mid-2015.To confuse things more, the sub-regulatory guidance issued with that change lists two different date ranges for claims that are eligible for audit, with one section indicating “for dates of admission within the previous six months” and another section indicating “from claims paid within the previous six months.” While that may seem like a minor point, it must be remembered that hospitals continue to face a one-year timely filing deadline if they choose to accept the denial and rebill under inpatient Part B.  

Days matter when hospitals are waiting for audit results, reviewing them, and determining if an appeal is feasible. Depending on a hospital’s internal audit and revenue cycle procedures, a claim may not be billed for a few weeks after discharge. The claim must then be processed by the MAC, and then it is paid. The BFCC-QIO then can request the chart, and the hospital has 30-45 days to send it. The BFCC-QIO then has 30 days to produce the audit results and another 90 days to arrange the one-on-one educational session with the hospital. If there are claims that are denied even after this session, the BFCC-QIO must notify the MAC of the denial, and at that point formal denial and recoupment of payment is performed. It is only after recoupment that a hospital can submit a rebilled inpatient Part B claim. If either the MAC or the BFCC-QIO misses one deadline, as commonly has occurred in the past, the rebilling time frame may have passed.

And finally, both of the BFCC-QIOs noted in their presentations on the new audit program that small hospitals will have 10 claims audited every six months, with large hospitals having 25 claims audited. But the sub-regulatory guidance indicates that “BFCC-QIOs will request a minimum of 10 records in a 30-45-day time period from hospitals. The maximum number of record requests per 30 days will be 30 records.”

With 10 or 25 claims every six months, there cannot possibly be a situation in which a hospital would be required to submit 30 records. Does this indicate an oversight by CMS or a sign that the audit scope may increase as time goes by?

The Outpatient Prospective Payment System (OPPS) rule also included the adoption of a new exception to the two-midnight rule, allowing physician judgment that a patient with an expectation of under two midnights warranted inpatient admission. Many providers, in comments to the OPPS rule and on open door forum calls, asked CMS to provide examples of when this new exception can be applied, and once again CMS disappointed the providers by merely repeating the same vague guidance from the rule itself, stating that “the QIOs will consider complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event to determine whether the medical record supports the need for inpatient hospital care.” 

In CMS’s defense, it did offer one potential point of clarity. The guidance notes that “at the direction of CMS, the BFCC-QIO will refer providers with inpatient status claims identified as having ‘major concerns” to the Recovery Auditor (RA) to implement provider-specific audits.” During the MAC audits, a major concern was seven or more denials if 10 records are audited, or 14 or more if 25 are audited. But then again, will CMS define “major concern” with these same parameters?

Most (if not all) hospitals have had excellent, collegial interactions with the BFCC-QIOs once the initial program implementation hiccups cleared and were very hopeful that the short-stay audit process would be as positive. Unfortunately, CMS’s ambiguity, as outlined above, has thrown that into question. Time will tell if CMS clarifies these many issues or allows hospitals to once again become the victims of regulations gone amok.

About the Author

Ronald Hirsch, MD, FACP, CHCQM is vice president of the Regulations and Education Group at Accretive Physician Advisory Services at Accretive Health. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians.

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