On August 2, the Centers for Medicare & Medicaid Services (CMS) published CMS-1599-F, the final rule updating Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for the 2014 fiscal year.

The final rule also included language addressing the CMS policy on Medicare contractor reviews of short-stay inpatient hospital admissions. Although CMS insisted that the final rule’s language regarding standards for evaluating the medical necessity and reasonableness of short-stay inpatient hospital admissions merely “modifies and clarifies CMS’s longstanding policy,” the changes announced in the final rule required significant alterations to hospitals’ internal documenting and billing procedures. 

In order to monitor and assist in hospitals’ implementation of the new requirements, CMS announced that it will conduct “probe-and-educate” patient status reviews of short-stay inpatient admissions with dates of services of on and after Oct. 1, 2013 but before March 31, 2014. These reviews will be conducted by Medicare Administrative Contractors (MACs) on a pre-payment basis to assess hospitals’ compliance with the a) admission order requirements, b) certification requirements, and c) the two-midnight benchmark. Claims that are not in compliance with the new requirements will be denied by the MACs, which will outline the reason for each denial. Specifically, CMS will instruct MACs to select samples of 10 claims for prepayment review from most hospitals (large hospitals will have 25 claims selected for prepayment review). The claims MACs will select will be stays spanning zero to one midnight after the beneficiary is formally admitted as an inpatient. Inpatient stays of this duration are not subject to the two-midnight presumption, and the MACs will be directed to deny any claim identified as being noncompliant with the final rule. However, if the total time receiving care in the hospital spans two or more midnights, then the two-midnight benchmark will be met and the MACs will initiate payment for such claims upon medical review. CMS has instructed that providers with moderate, significant or major concerns will receive individualized educational calls from MACs to discuss the reasons for the denials, to provide education and reference materials, and to answer any questions the hospitals may have. CMS defined “moderate to significant” concerns as 2-6 denials per a 10-claim sample and “major” concerns as seven or more denials per a 10-claim sample.[1] 

These initial probe-and-educate reviews will be conducted for hospital stays with admission dates of Oct. 1, 2013 through Dec. 31, 2013. Hospitals that have moderate, significant or major concerns, as identified by the MACs, will receive additional probe reviews with dates of service between January and March 2014. The sample size for these reviews will be the same as the probe reviews conducted previously: 10 claims selected for most hospitals, and 25 claims selected for larger hospitals. During all of the probe reviews, MACs will monitor billing trends for any evidence of abuse, gaming, or systematic delays in the submission of claims. In addition, MACs will submit reports to CMS in order to track the type and frequency of errors.

During its Nov. 12, 2013 open door forum (ODF), CMS explained more details regarding the probe-and-educate reviews and answered hospitals’ questions regarding the implementation of the new documentation requirements and the two-midnight rule. One participant asked whether claims that are reviewed during the probe-and-educate reviews may be audited or reviewed by Recovery Audit Contractors (RACs) at a later time. CMS confirmed that if the inpatient admission date is between Oct. 1, 2013 and March 31, 2014, the claim is “off the table” for patient status reviews by RACs. CMS also indicated that a FAQs feature addressing this and other matters would be available on the CMS website. Another participant inquired about the level of care that must be provided in a hospital’s emergency department to be considered “initiation of care” for the purposes of measuring the two-midnight benchmark. CMS representatives stated that more guidance regarding this issue will be forthcoming.

The implementation of CMS-1599-F will impact hospitals’ documentation and inpatient admission protocols. Hospitals should initiate education regarding these changes for their staffs to integrate the new documentation and admission policies and ensure that these policies are compliant with the final rule.

In addition, hospitals should be alert regarding the probe-and-educate reviews that are underway, and should stay tuned for any further guidance from CMS. 

About the Authors

Jessica Forster is an associate at Wachler & Associates, P.C.  Ms. Lange dedicates a considerable portion of her practice to defending healthcare providers and suppliers in the defense of RAC, Medicare, Medicaid and third party payer audits.  Her practice also includes the representation of clients in Stark, anti-kickback, and fraud and abuse matters.

Kevin Miserez is an associate at Wachler & Associates, P.C.  Mr. Miserez dedicates a substantial portion of his practice to representing healthcare providers and suppliers in the defense of RAC, Medicare, Medicaid and third party payer audits.

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[1] For large hospitals subject to 25 claim samples, 3-13 claims denials will be considered moderate to significant concerns and 14 or more denials will be considered major concerns.

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