CMS, SHM, and the Two-Midnight Rule

We ended the chat and we all felt lost.

I am referring to SHM’s recent CMS conference call concerning the two-midnight rule.  We wanted to clarify the vague nature in how CMS defines medical necessity—the linchpin of how the rule operates.  Estimating a greater than two-midnight stay may be challenging enough in a minority of cases, but defining medical necessity defies explanation when patients have a weak support system to return to at home; or they have inadequate insight into their discharge instructions; or they have tenuous access to medications; or they resist the shelter because of safety and want to hit the streets.

In the old days, docs shot from the hip.  If folks needed more than 24-hours in house, you made them an inpatient.  If they stayed less, you classified them under observation status and billed as such.  No one questioned your judgment.

However, we now have a more complicated universe: readmissions, an ambulatory world with the capacity to manage what we once called “quickie admits,” legitimate claims of inpatient service over and misuse, and financial penalties.  We also have RACs.  The sticking point for much of our conversation and where we believe the rule has the most pernicious effects.

The tension between our decision making—and CMS seems content to leave control in our court—and the marching orders of RACs, makes us all nervous.  Simply, we don’t trust the process.

Again, vague definitions leave too much open for us to interpret.  We have seen this play before and don’t want a rerun.  For a smart take on the RAC situation, read Ann Sheehy (SHM and Public Policy member) in a terrific JAMA Internal Medicine post.

Thankfully, CMS heard our message on the call (along with the AHA and others), and delayed the rule until October 1, 2014.  Stay tuned.

Additionally, I also want to illustrate how the machinations of observation status impacts us, hospitals, CMS, and beneficiaries.  If you wish to read national coverage on the provision, and it has gotten a lot, pick your venue: WaPo, WSJ, NYT, Kaiser Health News, NEJM, or the ACP.  You will want to bone up on how the directive influences your practice.  Otherwise, below you will find a shortlist of intangibles and untoward effects stemming from the rule.  Not exclusive by any means, just my quick take:

CMS view:

–Beneficiary protection.  Despite a flawed rule, they don’t want patients lingering without decisions beyond 2- midnights.

–They wish to provide time boundaries to providers.

–They worry about 24-48 hour, inappropriately billed stays, i.e., waste.

–Hospitals will bill more, not less, short inpatient stays.  Pay reductions and penalties will level the field.

Hospital view:

–Wasted manpower to oversee OBS, audit, and documentation enterprise

–Prospective and retrospective changes in designation (obs vs inpt) with no clear blueprint

–Angering patients and HCAHPS scores

–Readmissions—how to utilize rule to best assist patients and hospitals (under readmit scrutiny)

–Revenue loss—some justified, some not.  Note: CMS feels rule will increase hospital revenue. Hospitals see things differently.

Physicians view:

–Mental burden: expected stay–need vs. appropriate–and status on admission orders.  CLEAR documentation!

–Advocate for hospital or patient, i.e., pressure at MN or “48-hr” mark?

–Coding and fraud—mindful of inpatient and observation billing

–Intrusion of work flow

Beneficiary view:

–Confusion and perceptions of care

–Quality: care on the clock and does service suffer (lower value care)?

–Advanced beneficiary notice (ABN): patients need to know their status.

–If OBS, the sooner patient out, less cost to them (Part B FFS)…

–Bills for longer OBS stays however.  More costly than short inpatient stay (Part A FFS).

–72-hour SNF rule.  No bridge to post-acute care if inpatient status not declared.

SHM will continue to work with CMS and congress to assist in contouring an effective rule for our members.  The public policy committee has made the fix a top advocacy item.