Published in the April 2014 issue of Today’s Hospitalist
WHEN MEDICARE LAUNCHED its two-midnight rule last fall, Mary Frances Barthel, MD, thought she had it all figured out.
As director of the Cogent Healthcare hospitalist program at Blessing Hospital in Quincy, Ill., Dr. Barthel spent a great deal of time hammering the point home that under the new rule, doctors’ expectations of how much time patients would need in the hospital would determine whether they would be admitted or placed in observation.
No longer, as Dr. Barthel understood it, would she and her colleagues have to parse out admission criteria in commercial screening tools or have admission decisions second-guessed by the physician advisory company the hospital retained to review claims and help with appeals.
“We did a big blitz around the Oct. 1 kickoff,” says Dr. Barthel. “We had a medical staff meeting, mailings and one-on-one education with physicians who admit a lot of patients. We came up with a really good synopsis of the final rule and advice on what to do.”
But six months later, Dr. Barthel has had to circle back to those same doctors with a different approach.
“The more we heard from the advisory company, the less confident we were saying that time was the most important factor,” says Dr. Barthel. “Lately, we’ve gone back to using InterQual to answer whether the patient’s presenting problems meet medical necessity for inpatient admission, and then we also ask the physician to predict how long he or she expects the patient to be in the hospital.”
Her group now bills many more ICU patients as observation than they did before Oct. 1. As for the rest of the one-midnight inpatient stays, “I get the impression that the advisory company believes such stays should basically never happen,” says Dr. Barthel. “We are applying InterQual to those too and changing many of them back to observation before patients go home.”
RACs: the big unknown
Across the country, physicians are trying to figure out how to interpret the new rule issued by the Centers for Medicare and Medicaid Services (CMS).
They are wondering whether to go with a literal interpretation of the new rule, having physicians determine medical necessity and simply start the clock on an admission. Or should they “like Dr. Barthel and her colleagues ” still rely on admission criteria that may (may!) provide some protection once recovery audit contractors (RACs) start tackling claims?
While RAC auditors can now review admissions of less than two midnights under the new rule, they are supposed to leave claims for admissions spanning two midnights or more alone until Oct. 1, 2014.
Hospitals and physicians say the CMS could certainly issue more clarification. But despite anything the CMS has to say, doctors’ bruised history with RACs makes any interpretation of the new rule even more uncertain.
“The CMS seems to be saying that the benefit of the doubt goes to the docs in determining medical necessity, but we’ve seen this story play out before,” says Bradley Flansbaum, DO, MPH, a member of the Society of Hospital Medicine’s public policy committee and a hospitalist at New York’s Lenox Hill Hospital. “Doctors feel they’re making a sound decision because medical necessity encompasses risk if patients don’t have the wherewithal or knowledge to handle their medical condition in the community. But then the doctors get in trouble.”
While the CMS may be “saying all the right things,” Dr. Flansbaum adds, “we don’t know if that’s how the rule is actually going to be applied. History, at least, contradicts that.”
Any role for InterQual?
Joseph Dawood, MD, MBA, agrees with that assessment. A hospitalist who’s medical director of utilization management at MultiCare Health System, with five hospitals in the greater Seattle area, Dr. Dawood notes that, “The jury is still out. The final arbiter on the rule’s application is how the RACs will treat medical necessity and what the CMS decides regarding appeals that arise from that treatment.”
But when it comes to what the CMS has been saying about the rule, Dr. Dawood has paid close attention. He has sat in on all the national provider conference calls that Medicare has held on the two-midnight rule since last fall.
In terms of InterQual criteria, for instance, “Medicare has said, ‘You do not have to use those now. We don’t even expect you to,'” Dr. Dawood says.
Instead, he and his colleagues first determine whether patients need to be in the hospital, regardless of status, and then consider whether they’ll need a stay of more than two midnights. While the hospital’s goal is to have utilization management RNs review 100% of the cases on the floor every day, “the final decision on whether an admission is appropriate is my agreement with the attending physician,” he says.
In Dr. Dawood’s view, the new rule gives physicians more autonomy in decision-making, and he’s issued very few “code 44s,” reclassifying what had been designated admissions as observation instead. And he believes the CMS spokespersons who’ve said the appropriateness of an admission should be based on doctors’ initial evaluation.
“If the admission decision was initially appropriate, there is no need to switch patients’ status to observation” if patients get better faster than first expected, he notes. “Just indicate why and how they are better.” (See “The new rule and its exceptions,” below.)
A literal interpretation
The hospitalists at the University of Wisconsin Hospital in Madison likewise have tossed aside InterQual when determining admissions, at least for Medicare patients. (Hospitals in the state still use InterQual for admitting Medicaid patients and those with private insurance.)
“We decided to take this rule at face value,” says Bartho Caponi, MD, a hospitalist and one of the medical center’s utilization management physician advisors. “We define medical necessity as needing to be in the hospital, and we’re simply applying two midnights “yes or no ” to determine whether somebody has inpatient status.”
But even that quick up or down application is often a guessing game. “Trying to read the tea leaves and decide how long patients will need to stay is extremely difficult,” says Dr. Caponi. He cites a possible admission of a patient presenting with delirium as an example: While altered mental status, delirium and acute toxic-metabolic encephalopathy are “very different from auditors’ end, they look and are managed the same. It’s very hard to get physician buy-in to carefully determine diagnoses like that “and determining a patient’s status can also feel very arbitrary.”
While the new rule may seem less complicated than using InterQual, a study that Dr. Caponi and several colleagues, including hospitalist and researcher Ann Sheehy, MD, published online in February in the Journal of Hospital Medicine debunked several assumptions on which the two-midnight rule is built.
For one, the CMS has announced that it expects the two-midnight rule to increase the overall number of admissions; that’s why Medicare reduced its inpatient payment rate update to hospitals by 0.2%. But in the study, researchers retrospectively reclassified 14 months of pre-rule inpatient and observation encounter data at the University of Wisconsin according to the new two-midnight time stamp, assuming those patients’ length of stay would remain the same under the new rule.
Across all encounters, reclassification resulted in a net transfer of nearly 15% of admissions to observation. The net transition among Medicare patients across all encounters would have moved 7.4% of admissions to observation.
Distinct patient populations
Moreover, says Dr. Sheehy, “The CMS has stated that there’s a high error rate in assigning impatient status to people staying less than two midnights. Medicare assumes those patients should have been in observation instead.”
But study results did not bear that out. “When we compared the diagnosis codes of inpatients staying less than two midnights to our observation codes, we found they were distinctly different,” she notes. “These short inpatient stays are a different cohort of patients with different clinical problems.”
The study also found that when encounters were reclassified according to the two-midnight rule, a much smaller segment of patients presenting before 8 a.m. (13.6%) would have ultimately been admitted vs. those presenting later in the day (31.2%).
“If you present at 8 a.m., you’re out of luck,” says Dr. Sheehy, referring to observation patients’ higher copays and sparser benefits. “If you present at 8 p.m., your chances of staying two midnights are much greater. Having your insurance status and coverage dictated by the time of day you get sick just doesn’t make sense.”
Dr. Caponi notes that the patients who used to be “the tragedies of observation” in the InterQual era “those who didn’t meet strict admitting criteria and languished in observation for a week “”have totally disappeared with our time-based application of the rule.”
But while the two-midnight rule may help the long observation-stay population, “it hurts a new one: the short inpatient stay population,” Dr. Sheehy says. “The two-midnight rule just shifts the populations that either derive benefits or are disadvantaged.”
She also notes that physicians are keenly aware that inpatients “have smaller bills and better benefits. Now, there’s this subtle impetus to drag our heels a little bit and keep patients in a bit longer. I wonder if we will see a dramatic increase in length of stay across the country.”
More observation patients, or fewer?
At the University of Michigan Medical Center in Ann Arbor, Jason Ham, MD, who directs the adult medical observation unit, doesn’t know yet how “or whether “the two-midnight rule is changing the center’s number of admissions. But he expects the number of observation cases to rise as what were previously short-stay inpatients land in observation.
“That could be difficult,” Dr. Ham says, “because it means that the complexity of patients in observation is going to go up.” His observation unit, which now has 18 beds, is being expanded to 44.
But in California, Wes Chandler, MD, president of Pacific Hospitalist Associates in Newport Beach, expects the new rule to have the opposite effect at the three hospitals he and his colleagues cover.
“I think the two-midnight rule will decrease the number of observation patients,” says Dr. Chandler, “and that’s probably a good first step.” Good, he explains, because his hospitalist group has been dealing with an astronomical rise in the number of observation patients, from 0% in 2008 to 25% of all initial encounters in 2013.
“Internal medicine doctors get paid 10% less on an observation patient than they do on an inpatient,” he says. “But there’s absolutely no difference in the amount of work they provide or in the detailed, comprehensive initial history and physical they need to perform.”
At least, Dr. Chandler points out, his group is in the enviable position of providing coverage for an independent physician association (IPA), which in turn covers patients in Medicare Advantage plans.
“The IPAs don’t have to abide by the three-day qualifying inpatient stay requirement to get into a skilled nursing facility,” says Dr. Chandler, noting that even observation patients insured by one of those plans can receive skilled nursing services if they need them. Not only is that a major plus for patients, but “it is a huge advantage for us in achieving reduced length of stay and appropriate utilization.”
Not fixing the problem
But skilled nursing coverage for observation patients isn’t an option at Munson Medical Center, a regional referral hospital in Traverse City, Mich. Med-peds hospitalist Jacques Burgess, MD, MPH, is the section chief for hospital medicine there and director of the pediatric hospitalist program for Indigo Health Partners, the private group that was formerly known as Hospitalists of Northern Michigan.
According to Dr. Burgess, his hospital now applies a combination of time and admission criteria to admissions. That’s put him, he says, at odds with utilization reviewers on a number of admissions.
And because his hospital still brings admission criteria to bear, he and his colleagues still see the patients the new rule was supposed to help: people who don’t meet inpatient criteria and spend days in observation. Then it’s still up to the hospitalists, case managers and social workers to explain that dilemma to bewildered patients.
“We’ve worked very diligently to educate providers and staff, but the CMS hasn’t educated patients at all about the difference between admissions and observation,” says Dr. Burgess. “Is that something that should be addressed at the bedside? I don’t think that belongs in a therapeutic relationship.”
Despite the two-midnight rule, Dr. Burgess says he keeps having conversations with observation patients who need a higher level of care than being discharged home but can’t pay for it out of pocket.
“I’m left offering a discharge plan that I don’t believe in or support clinically,” says Dr. Burgess. “We often forecast that we will see those patients again when that plan fails and, unfortunately, they’ll meet admission criteria. That’s when we’ll end up with the plan we should have put in place to begin with.”
Given the many unknowns about the two-midnight rule ” how aggressive the RACs will be, how much weight admission criteria actually should have “many hospitals are taking a wait-and-see approach, even though the rule has been in effect for six months.
In New York City, Dr. Flansbaum says he’d give local hospitals a Cin terms of infrastructure around and awareness of the rule. “We don’t know what’s going to happen with the implementation,” he says, “so we’re waiting to put a manageable infrastructure in place.”
Sources do agree that Medicare’s admission and coverage policies are still a long way from where they should be. Getting rid of the three-day inpatient requirement for skilled nursing care would take some onus off observation.
“If the CMS could relax that part and find a way to help lessen acute care, Medicare would benefit in the end from lowered costs,” says Seattle’s Dr. Dawood. “Unfortunately, the hospital has become a de facto nursing home, the place for all the social issues that have to be dealt with.” (Bills introduced in Congress could change that 72-hour requirement.)
Dr. Ham from University of Michigan agrees. “There will continue to be patients who need to be in the hospital for many nights, but aren’t that sick,” he say. “So what do we do with them? Maybe they should get access to rehab but for less time than an inpatient, or be able to lock in the same copays as inpatients. There has to be something more reasonable.”
While the CMS has made no indication that it plans to scrap the new rule, it has done some fine-tuning. Medicare has repeatedly extended (now, through Sept. 30) the period in which Medicare administrative contractors will educate hospitals on how well they’re complying with the rule.
It has also instructed those same contractors to rereview any denials issued so far related to the new rule. And in February, the CMS announced a new rule exception: Patients requiring mechanical ventilation, even if they’re hospitalized for less than two midnights, can be billed as inpatients.
Those adjustments “are a real positive,” says University of Wisconsin’s Dr. Sheehy. “They show that the CMS is paying attention.”
Phyllis Maguire is Executive Editor of Today’s Hospitalist.
ACCORDING TO the Centers for Medicare and Medicaid Services (CMS), the two-midnight rule that took effect Oct. 1, 2013, creates a new yardstick to distinguish inpatient admissions from observation status.
The CMS now says that admissions are “generally appropriate” if patients need hospital services that require a stay spanning at least two midnights and patients are formally admitted based on that expectation. Otherwise, patients should be kept in observation and services should be billed to Medicare Part B.
The CMS has pointed out, however, that there are unforeseen circumstances where inpatients’ stay may not cross two midnights, but their claims will still be paid as admissions. Those circumstances include death, transfer, leaving against medical advice, unforeseen recovery and the election of hospice care. Doctors must document their original expectations for length of stay and the unforeseen circumstance that arose.
Other exceptions apply. For instance, patients receiving procedures on the inpatient-only list may not stay for two midnights, but their care can be billed as inpatients. And since February, patients who need mechanical ventilation, even if they’re in the hospital less than two midnights, are considered inpatients.
Putting the two-midnight rule into practice
WHAT STEPS have hospitals taken to help implement Medicare’s new two-midnight rule?
At Munson Medical Center in Traverse City, Mich., the hospital’s IT department and utilization group put together a set of rules and alerts that pop up in the EMR, says med-peds hospitalist Jacques Burgess, MD, MPH, section chief for hospital medicine and the director of the pediatric hospitalist program for Indigo Health Partners director of hospitalist services for Indigo Health Partners. Those alerts are meant to ensure that the certification needed to admit patients takes place.
“If a physician assistant admits a patient at 11 p.m., when I open that chart the next morning, I get an alert that says ‘This patient needs certification for admission,’ ” he notes.
At University of Wisconsin Hospital in Madison, the EMR is also firing new alerts.
“We were having something like 35 Medicare patients a month being discharged without a cosigned admission order,” says hospitalist Bartho Caponi, MD, referring to admissions first ordered by residents that needed to be cosigned by attendings. “We now have a best practice alert fire when that order is not cosigned. That may move to a hard stop on the discharge order if the admission order hasn’t been cosigned prior to discharge.”
In the hospitals within the MultiCare Health System in Seattle, one immediate change with the rule was that ED physicians no longer make admission decisions. They had been making the lion’s share of status decisions for patients coming in through the ED before the new rule took effect.
“They were very relieved to have that taken away from them because they often got those decisions wrong,” points out Joseph Dawood, MD, MBA, a hospitalist who’s medical director of utilization management. “They continue to request a bed and write holding orders, but only hospitalists now make the status determination.”
At Blessing Hospital in Quincy, Ill., utilization nurses in the ED advise ED personnel on what level of care to assign patients.
But in the wake of the two-midnight rule, the hospital completely redesigned its direct admission process. “It used to be that outpatient physicians who admit their own patients could just fax an order to the admitting office, but we no longer allow that,” says Mary Frances Barthel, MD, director of the Cogent Healthcare hospitalist program at the hospital. Instead, a representative from the physician’s clinic has to call one of the hospital’s utilization nurses to discuss the patient’s status and expected length of stay.
For outpatient physicians covered in the hospital by hospitalists, that’s now a two-step process: The outpatient physician has to call the hospitalist, who then calls a utilization nurse.
“That order used to be a fax before,” says Dr. Barthel. “Now, it has to be a phone call.”
Then there’s this innovation: Dr. Barthel, who’s also the hospital’s utilization management physician advisor, has designed two versions of the letter sent to the attending physician when an admission is downgraded to observation status before discharge.
“One version says, ‘Your patient did not meet medical necessity requirements so was changed to observation,’ ” she notes. “But the second says, ‘Your patient may have met inpatient criteria “if the appropriate documentation had been provided. In the future, please further document severity of illness, comorbid conditions, a possible list of adverse outcomes and your specific treatment plan.’ Either doctors are making the wrong patients inpatient because they’re not sick enough or they’re not documenting appropriately “and missing the opportunity to allow them to be inpatients.”