It appears that National Government Services (NGS) intends to publish a policy outlining a two-step process for determining whether a patient should be considered a hospital inpatient or outpatient. 

A draft of the policy claims that NGS medical directors “have worked closely with the Centers for Medicare & Medicaid Services in formulating” the process. However, the draft appears to disregard the CMS policy articulated in the agency’s Benefit Policy Manual. The NGS policy uses a 48-hour benchmark, disregarding the 24-hour benchmark described in that publication.

Specifically, the draft policy states that:

“Generally speaking, care in which the expected length of stay (LOS) is less than 24 hours should rarely be rendered in inpatient status, unless associated with specific inpatient-only procedures. Conversely, stays with expected LOS greater than 48 hours should rarely be designated as outpatient, unless medically (necessary) issues exist.”

If that were the only observation contained in the document, it would be noncontroversial.  However, the document continues:

“Stays with expected LOS between 24 and 48 hours should be closely examined by the physician in terms of CMS manual instructions. A specific case may fit either inpatient or outpatient manual instructions. But if the patient clinically fits outpatient/observation instructions, he/she should initially be referred to outpatient/observation status.”

The document also creates a defined term, “definitive diagnosis.” NGS asserts that a definitive diagnosis occurs when “the practitioner understands that the patient will need ongoing inpatient service with a high degree of certitude or assesses the likelihood that care may be safely rendered within a 48-hour time frame.” The policy indicates that inpatient status is appropriate if a) A definitive diagnosis is established and is associated with diagnostic studies or therapeutic management requiring greater than 48 hours of care; or b) the patient remains unstable and the diagnosis is unclear at the 48-hour mark. Outpatient or observation status is appropriate if a) the patient is stabilized and/or treatment proves to be effective within 48 hours, allowing for discharge; or b) during the rule-out phase, in which diagnosis is uncertain and a diagnostic and therapeutic plan has not been fully ascertained.

This instruction, again, is completely contrary to the guidance found in the Benefit Policy Manual. The manual indicates that “generally, a patient is considered an inpatient if formally admitted as an inpatient with the expectation that he or she will remain overnight.” It adds that “physicians should use a 24-hour period as a benchmark, i.e., they should order admission for patients who are expected to need hospital care for 24 hours or more and treat other patients on an outpatient basis.”

I am not aware of any authority that would permit NGS to contradict the CMS manual. Any organization that receives a denial based on the NGS policy would be well-advised to appeal. The totality of guidance available from Medicare makes it clear that the determination of patient status is made prospectively, not retrospectively. The actual length of time the patient is in the hospital is immaterial. Physicians should make the admission decision based on expectation. The CMS manuals also make it clear that when a 24-hour stay is expected, inpatient admission is reasonable. Whether NGS truly consulted with CMS in the development of this policy or not, as long as the Benefit Policy Manual remains unchanged, hospitals should aggressively fight the NGS guidance.

About the Author

David Glaser is a shareholder in Fredrikson & Byron’s Health Law Group and helped establish its Health Care Fraud & Compliance Group. David helps healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes 

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