Had enough of the Inpatient Prospective Payment System (IPPS) yet? Everyone has an opinion. Everyone wants to help clarify. And there is no shortage of rumors.

But some of the most prevalent rumors are the ones that have fooled many of us, leading us into a false sense of security in thinking that we don’t have to be as thorough in our compliance measures as we have been in the past.

Don’t be fooled! Below are four of the most common myths I have heard stemming from the recent IPPS changes, and your best practices for getting through an audit.

Myth No. 1: The attending physician order and documentation are all that is really needed.

If you believe this myth, then you believe that, essentially, the attending physician writes the order and he or she will document all certification elements with little to no assistance. Even if this was the case and the documentation was great, how is your hospital meeting the requirements of the conditions of participation? And from a fraud-and-abuse perspective, what controls does the hospital have in place to prevent inappropriate billing?

The Social Security Act requires that, in order for a hospital to participate in the Medicare program, it must have a utilization review plan with the following elements:

–     A utilization review plan of a hospital or skilled nursing facility (SNF) shall be considered sufficient if it is applicable to services furnished by the institution to individuals entitled to insurance benefits under this title and if it provides:

For the review, on a sample or other basis, of admissions to the institution, the duration of stays therein, and the professional services (including drugs and biologicals) furnished, a) with respect to the medical necessity of the services and b) for the purpose of promoting the most efficient use of available health facilities and services.

The conditions of participation still require hospitals to perform utilization management to validate physician documentation. Unfortunately, most physicians don’t sit on their hospital’s utilization review committees, so they are often not as familiar with the conditions of participation as they should be (and therefore, they don’t fully understand the requirements). I would go a step further and say most physicians do not understand or consider the requirements of the different payors (i.e., Medicare FFS versus Medicare managed care versus Medicaid versus private commercial payers, etc.)

Add to this a potential Office of Inspector General (OIG) audit, which involves not only reviewing cases but also seeing what controls you have in place to prevent inappropriate billing, and you could have a lot of headaches down the road – especially if your physicians are not aware of the role and authority of the OIG.

Simply trusting that the attending physician is following the correct procedures in patient admission is not recommended. The education of all physicians in the conditions of participation and proper documentation is critical to the success of your compliance program. The most effective education is provided on a day-by-day and case-by-case basis with your UR staff and attending physicians.

Myth No. 2: Time (and certification elements) is all that matters. If the patient is in the hospital for two midnights, then they are inpatients.

Although it is true that length of stay is important when determining inpatient or observation, for those who believe that medical necessity no longer matters, guess again.

Audits are a grim reality in our industry. From a practical perspective, you cannot believe that the Centers for Medicare & Medicaid Services (CMS) is going to be satisfied paying an inpatient DRG simply because a patient stays in the hospital for two midnights. Now more than ever, CMS wants to ensure it is getting value for its healthcare dollar. Value means the right patient receiving the correct care in the correct setting at the correct time. A delay in care that results in a two-midnight stay or admission only for SNF placement violates this tenet.

Establishing medical necessity is essentially ensuring that this tenet holds true. How does a hospital ensure that medically necessary hospital services are provided? And even more so, how does a hospital prevent custodial, delay, and/or convenience admissions?

CMS specifically points out that care that is custodial in which there is a delay (and/or care of convenience) does not count toward a two-midnight stay. Determining the presence of such admissions goes beyond a question of time. It is determined by time and medical necessity. This is the primary role of UR in establishing medical necessity.

Myth No. 3: Concurrent admission review to determine medical necessity is no longer important.

Do you now have more patients in observation than you did prior to 2014? Are these patients designated with the appropriate status? Is your hospital increasing its audit risk? Isn’t the beneficiary financially responsible for a greater share of their care? If you answered “yes” to at least three of the four questions (and there is always room for debate on the appropriate patient status question) then you can go to the head of the class.

A concurrent review – while the patient is still in the hospital or as close to the time of admission as possible – represents a win-win scenario for both the hospital and the patient.

Getting it right at the time of admission will help the patient understand his or her financial responsibilities early on, so they will not be surprised down the road to learn that they now have out-of-pocket expenses (depending on the reason for the stay). Frequently, a patient’s Part B out-of-pocket costs are more than the Part A deductible of $1,216 for 2014.  

Consider this for cases with a change from inpatient to observation: An inpatient DRG pays more than an outpatient APC, and an outpatient APC pays more than a Condition Code 44 with less than eight hours of observation time (which pays more than a post-discharge rebill, which pays more than a denial one year after the time of service and no ability to rebill).

Performing concurrent reviews and getting the status correct as early as possible pay off in many ways!


Myth No. 4: There will be no audits until April 1, 2015, and maybe even beyond then.

The MACs currently are conducting so-called “probe-and-educate” audits. Each facility will have a claim sample of between 10 and 25 claims, and the results of those samples will be placed in one of three categories:

  • None or minor concerns
  • Moderate to significant concerns
  • Major concerns

Depending on which category the facility falls into after the review is completed will determine whether further audits are needed, whether the audit process will be repeated by looking at an additional 10 to 25 claims, or whether the probe-and-educate portion of the audit will be repeated by multiplying the claim sample by 10. This last scenario would mean a review of 100 to 250 claims.

What’s interesting about these audits is that the average denial rate that we have been seeing from the MACs is roughly 65 percent. This number throws the average facility just below the line for major concern, meaning an additional 100-250 cases are to be reviewed.

Finally, do not be fooled by misinformation in the press regarding the “doc fix” bill. It should come as no surprise that when President Obama signed into law the Protecting Access to Medicare Act of 2014 last month, more delays were introduced into the system. H.R. 4302 was introduced, passed through both the U.S. House of Representatives and Senate, and signed into law in record time (less than one week). Among the notable sections of this Act:

  • Sec. 101: One-year sustainable growth rate payment formula fix
  • Sec. 212: Delay in ICD-10 transition –
    “The Secretary of Health and Human Services may not, prior to October 1, 2015, adopt ICD-10 code sets under section 1173(c) of the Social Security Act (42 U.S.C. 1320d–2(c)) and section 162.1002 of title 45, Code of Federal Regulations.”
  • Sec. 111.Extension of two-midnight rule –
    • Continuation of certain medical review activities
  • The Secretary of Health and Human Services may continue medical review activities described in the notice entitled Selecting Hospital Claims for Patient Status Reviews: Admissions On or After October 1, 2013.
    • Limitation
  • The Secretary of Health and Human Services shall not conduct patient status reviews (as described in such notice) on a post-payment review basis through recovery audit contractors.

The bill inadvertently created a false sense of security among hospitals in convincing some that there would be no more audits. Nothing could be farther from the truth. The bill may have delayed Recovery Auditors from performing more audits in the short term, but it has extended the probe-and-educate program.

Ongoing Education

IPPS has introduced some subtle (and a few extreme) changes to the way hospitals run their compliance programs. I think that there are few people who would disagree that these regulations can be somewhat confusing. Don’t worry, though, as the simple answer to this plethora of regulations is to educate yourself – and continue to do so, as the rules are constantly evolving.

As I noted in the beginning of this article, everyone has an opinion, but unfortunately, there is more misinformation circulating out there than there is accurate information. Don’t be afraid to ask questions and to get clarification on anything you don’t understand from a legitimate and expert source.

You’ll be doing yourself and your facility a great service by getting it right from the start.

About the Author

Dr. Ralph Wuebker serves as chief medical officer of Executive Health Resources (EHR). In this role, Dr. Wuebker provides clinical leadership within EHR and works closely with hospital leaders to ensure strong utilization review and compliance programs. Additionally, Dr. Wuebker oversees EHR’s Audit, Compliance and Education (ACE) physician team, which is focused on providing on-site education for physicians, case managers, and hospital administrative personnel and on helping hospitals identify potential compliance vulnerabilities through ongoing internal audit.

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