EDITOR’S NOTE: This is the first installment in series of articles, detailing a set of proposals submitted to CMS by Steven J. Meyerson, MD, to revise hospital admission regulations.

The Outpatient Prospective Payment System (OPPS) Proposed Rule for the 2013 calendar year (Federal Register /Vol. 77, No. 146) solicited “suggestions regarding whether and how we might improve our current instructions and clarify the application of Medicare payment policies for both hospitals and physicians.”

This call for input underscored that the Centers for Medicare & Medicaid Services (CMS) recognized the need for reform of the complex regulations governing hospital admission and billing. While the OPPS Final Rule reported submission of a variety of ideas focusing largely on the definition of “inpatient,” CMS did not commit to any changes of current regulations. This review is written in response to the OPPS Final Rule, and in accordance with the comment period (U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services, 42 CFR Parts 416, 419, 476, 478, 480, and 495, [CMS-1589-FC], RIN 0938-AR10).

CERT (Comprehensive Error Rate Testing) and other Medicare audits of short inpatient stays revealing extremely high error rates – often in the 80 to 100 percent range – indicate that there is a systemic problem with the current regulatory paradigm; these high error rates can’t just be blamed on poor compliance on the part of hospitals when facilities are highly motivated to comply and have been devoting significant resources in order to do so.

Persistently high error rates rather appear to indicate a clear disconnect between Medicare hospital regulations and the reality of the practice of medicine in hospitals. The issue lies in the attempt to fit a treating physician’s clinical judgment of a patient’s needs into a framework of regulations that define clinical decision-making in terms that can be converted into a billing status.

This very process is inherently problematic, since it relies on subjective interpretation of regulatory standards and a retrospective opinion on the urgency of the patient’s clinical condition (an opinion sometimes based on an imperfect medical record). Attempting to codify a physician’s clinical judgment – which typically is based on many years of training and experience – into a few sentences of regulations can be a near-impossible task. There often is simply no way to describe this complex process in terms that can be interpreted by anyone other than another physician. Yet current Medicare guidance for contractors advises that they should use their “clinical judgment,” pitting the opinion of a RAC-employed nurse or therapist retrospectively reviewing a clinical record against that of a physician who was face-to-face with the patient. Given this hurdle and the need for appropriate use of inpatient hospital beds, CMS needs to find a better way to differentiate between those who need inpatient hospital care and those that do not.

Despite loss of revenue resulting from both retrospective and concurrent audits as well as serious threats from compliance reviews and fraud investigators, hospitals are finding it extremely difficult to understand these complex regulations and to implement systems to ensure compliance. There is clearly a need for broad-based reform.

In formulating the following comments, we have examined and attempted to identify and address a myriad of concerns affecting the beneficiaries, the providers and the integrity of the Medicare Trust Funds. We felt it was necessary to be expansive in our analysis of the many facets of admission regulations on this topic that are addressed in Medicare guidance. Examining regulations in a piecemeal fashion or with a narrow focus on, for example, short inpatient stays, will not correct the myriad regulatory challenges sufficiently or establish procedures that can be applied consistently across the many sets of circumstances physicians face when determining the appropriate level of care for their patients. In each case, we have attempted to demonstrate the reason change is needed and have suggested ideas that can be implemented in order to make the regulatory environment simpler (and thus, more easily understood and followed). It also is our belief that the recommended reforms could be implemented in a revenue-neutral manner. Simplification and clarity – coupled with elimination or modification of regulations that lead to frequent billing errors, yet appear to serve no useful purpose in and of themselves – would allow hospitals to reduce the cost of their compliance-oriented programs and CMS would have less need for audit contractors. Hospitals and physicians could spend less time worrying about compliance and turn more of their attention and resources to their real purpose: the provision of quality medical care to their patients.

It is important to respect the role of the physician when it comes to developing or enforcing any regulations affecting patient care. The current regulations state that an admission decision is “a complex medical judgment made by a physician,” and while it is true that physicians are trained to make complex medical judgments about patient care, they are not trained about interpretation of complex Medicare admission regulations. Hence, the treating physician’s role should rightly be to determine the need for care delivered in a hospital bed, and to order and/or provide that care in an efficient and cost-effective manner – not to determine how the hospital should bill for it. Hospitals universally assist clinicians in determining correct level of care for billing purposes by providing case managers and physician advisors trained in Medicare regulations but often, despite their best efforts, the ambiguity of some of these regulations and the inherent challenges in implementing complex compliance programs contribute to persistently high error rates.

It is clear, then, that based on the high error rates and the huge financial loses hospitals have endured from RAC recoveries (amounting $3.4 billion recovered since 2010 according to the latest CMS report) we must return to the contention that there are fundamental problems with the regulatory environment itself. That being said, there is no reason that many of the unproductive regulations referred to in this series of articles could not be modified or even eliminated in a relatively short period of time.

This series, published by RACmonitor, addresses the broad range of such regulations. It is beyond the scope of this analysis to address whether these various recommendations would require legislative action, formal rulemaking, national coverage determinations or simple clarifications of existing regulations, but the status quo is not an acceptable alternative.

CMS could implement a demonstration project that examines the impact of at least some of the ideas presented in this paper, for the benefit of the Medicare Trust Funds, beneficiaries and providers nationwide.

EDITOR’S NOTE: In the next article, to be published Tuesday, Jan. 29, 2013, Dr. Meyerson delves into his proposal for revisions to inpatient and outpatient observation registration and billing rules.

About the Author

Steven J. Meyerson, MD, is vice president of the Regulations and Education Group (“the REGs group”) for AccretivePAS®. He is Board Certified in Internal Medicine and Geriatrics. Before joining Accretive Physician Advisory Services in 2010 he served as the medical director of care management at Baptist Hospital in Miami, Florida. He has distinguished himself by contributing to the development of innovative service lines and managing education on Medicare regulatory compliance for AccretivePAS®.

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