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CMS, Members of Congress and others have been expressing concerns about observation stays and short inpatient stays for Medicare beneficiaries. Three main concerns being voiced include:

• Beneficiaries paying more for long observation stays than if they had been an inpatient,
• Beneficiaries not meeting the three day qualifying inpatient stay requirement for skilled nursing facility care; and
• Improper payment for short inpatient stays when the beneficiaries could have been treated in a lesser level of care such as outpatient.

The Office of Inspector General (OIG) recently released a report in response to these concerns based on 2012 claims data. To help our clients better understand the potential payment differenced in patient status we have provided the following comparison of outpatient stays and short inpatient stays.

‍Report Drill Down:

Observation Stays:

• Medicare paid $2.6 billion which averages $1,741 per stay.
• Beneficiaries paid $606 million which averages $410 per stay.
• The top 10 most common reasons for observation stays should not be a surprise to anyone and include chest pain, digestive disorders, fainting, signs & symptoms, nutritional disorders, dizziness, irregular heartbeat, circulatory disorders, respiratory signs & symptoms and medical back problems.
• Observation stays typically begin with treatment in the emergency department.
• The most common operating procedure was coronary stent insertion.

Long Outpatient Stays (stays lasting at least 1 night but had no observation services coded):

• Some of these stays did include observation services that were not coded by the hospital as they are not always paid a separate amount for coding claims as observation stays.
• This set of beneficiaries had similar characteristics to the observation stays i.e. most stays began in the emergency department and beneficiaries were most commonly treated for chest pain and digestive disorders.

Short Inpatient Stays (stays lasting less than 2 nights):

• This group of beneficiaries on average was more costly to Medicare and the Beneficiary.

1. Medicare paid $5.9 billion which averages to $5,142 per stay.
2. Beneficiaries paid $831 million which averages to $725 per stay.

• Ninety percent of this group spent 1 night in the hospital while the remaining 10% spent less than 1 night in the hospital.
• Similar to the other two stay types, these stays began in the emergency department, were most commonly treated for chest pain and 6 of the 10 most common reasons for a short inpatient stay were also among the 10 most common reasons for observation stays (chest pain, digestive disorders, fainting, nutritional disorders, irregular heartbeat and circulatory disorders).

Concerns and Report Conclusions:

Concern: Beneficiaries paying more for long observation stays than if they had been an inpatient

• Short Inpatient Stays in 2012 were more costly to the beneficiary when being treated for the same reason.
• Two exceptions where the cost was more for an observation stay were for coronary stent insertions and circulatory disorders.
• Six percent of all observation stays paid more than the inpatient deductible with a smaller subset paying more than two times the inpatient deductible.

Concern: Beneficiaries not meeting the three day qualifying inpatient stay requirement for skilled nursing facility care

• There were 617,702 hospital stays that lasted at least 3 nights that did not include 3 inpatient nights and therefore did not qualify for SNF services.
• While not mentioned in this report, a point of interest is that similar legislation has recently been introduced in the House (H.R. 1179) and the Senate (S.569) which would amend the law to allow for time beneficiaries spent in the hospital under observation services to count toward the required three-day hospital stay for coverage of skilled nursing facility (SNF) care.

Concern: Improper payment for short inpatient stays when the beneficiaries could have been treated in a lesser level of care such as outpatient.

• Short inpatient stays in 2012 were more costly to Medicare than observation stays. This validates the concern that there is improper payment for short inpatient stays when the beneficiaries could have been treated in a lesser level of care such as outpatient.
• Use of short inpatient stays varied widely among hospitals.

Moving Forward:

Proposed Changes to Payment Policies for Inpatient and Outpatient Stays

This report touches on two payment issues that occurred earlier this year. The first issue was announced in April when CMS made a proposal through a Notice of Proposed Rulemaking (NPRM) that would have a tremendous effect on how hospitals bill for observation and short inpatient stays. If implemented, “CMS contractors would presume that inpatient hospital stays lasting 2 nights or longer were reasonable and necessary and would qualify for patient as inpatient stays. Conversely, CMS contractors would presume that stays lasting less than 2 nights would not qualify for payment as inpatient stays and instead would be paid for as outpatient stays.” The OIG believes that their report findings may be useful as “our results further indicated that, under the policies proposed in the NPRM, some hospitals would likely follow the previsions and continue to bill these as outpatient stays; other hospitals – given strong financial incentives and few barriers – would likely not follow the provision and would admit beneficiaries as inpatients as soon as possible to meet the 2-night presumption.”

In March the second issue announced was that “CMS revised its Part B inpatient billing policy to allow for all hospital services that were provided and would have been reasonable and necessary if the beneficiary had been treated as an outpatient.”

Since the release of this OIG report, CMS released the fiscal year 2014 IPPS Final Rule last Friday August 2nd. Both proposals are now implemented in the Final Rule. We will be addressing the IPPS changes in the coming weeks

The findings in this report also “raise concerns about SNF services” and the OIG advises that “CMS should consider how to ensure that beneficiaries with similar post-hospital care needs have the same access to and cost-sharing for SNF services.”

On a final note, you should be aware that the OIG plans to “refer to CMS in a separate memorandum the SNFs that received $255 million in inappropriate payments so that CMS can look into recoupment.” Unfortunately, beneficiaries could be receiving unexpected bills for SNF services at some point in the not too distant future. The entire report can be accessed at http://oig.hhs.gov/oei/reports/oei-02-12-00040.pdf.

One of the frustrations of dealing with the overwhelming volume of reviews by Medicare contractors is often the lack of guidance from Medicare on how to handle a particular issue. In June, CMS released several MLN Matters SE articles concerning some of the findings of CERT and Recovery Auditors. These articles describe the issue and the corrective actions necessary for providers to resolve the issue. Although some of these are obvious resolutions – such as, only one cataract removal per eye – I wanted to point out the information on Mohs surgery and also make you aware of some of the other issues that are addressed.

The correct billing of Mohs Micrographic Surgical (MMS) services affects both hospitals and physicians and recent Recovery Auditor reviews have revealed errors in the billing of MMS. Medicare will only reimburse for MMS services when the Mohs surgeon acts as both surgeon and pathologist. Providers should not bill Medicare for these procedures if preparation or interpretation of pathology slides is performed by a physician other than the Mohs surgeon.

Mohs surgery is a two-step process where the tumor is removed in stages with histologic evaluation after each stage until all margins are clear. The performing physician serves as both surgeon and pathologist, performing both the excision and histologic evaluation of the specimen. The CPT codes for MMS (CPTs 17311-17315) should not be billed with separate CPT codes for the histologic evaluation of the tumor tissue removed. If the histology is performed by another physician, the excision should be billed with the standard malignant tissue excision codes (CPT 11600-11646) and the histologic evaluation with the surgical pathology code (CPT 88305).

Other Medicare requirements for coverage of Mohs surgery include:

• The surgery must be of a higher degree of complexity that most skin cancers, such as poorly defined borders, possible deep invasion, prior irradiation or when maximum conservation of tumor-free tissue is important.
• Only physicians (MDs or DOs) specifically trained and highly skilled in MMS techniques and pathological identification may perform Mohs surgery.
• Medical record documentation should support the medical necessity of the procedure including the location, number and size of the lesions; the number of stages; the number of specimens per stage; and a detailed description of the histology of the specimens.

For complete information, please read MLN Matters Article SE1318.

Issues addressed by other MLN Matters SE articles include:

• Appending modifiers to duplicate services billed for the same patient on the same date – SE1314.
• Billing the correct drug units by converting dosage of drugs given (such as milligrams) to units based on HCPCS description – SE1316.
• Billing cataract removal only once per eye – SE1319.
• Being sure to include the code for the primary service when billing add-on codes – SE1320.
• Appropriate bundling of outpatient services onto the inpatient claim under the 3-day window billing rule – SE3124.

Medicare’s Recovery Audit program affords a variety of ways for hospitals to lose money. But it makes it harder to accept when you don’t have a process to deal with the issues. In this article we look at an inpatient issue that offers such challenges.

When we think of Recovery Auditor reviews of hospital inpatient records, we normally think of DRG Validation reviews and the ever-so-popular Medical Necessity reviews. But the Recovery Auditors also review inpatient records for other issues.

The topic addressed here is actually several different issues, all dealing with the correct assignment of the patient’s discharge disposition status. These include:

• reviews of acute care hospital to hospital transfers receiving an overpayment due to the assignment of an incorrect discharge status code,
• reviews of overpayments when a patient receives post-acute care but is coded as a discharge to home, and
• underpayment reviews for patients coded as a transfer to a post-acute care setting who never actually receive post-acute care.

Some of the errors may be the result of an error in code assignment, but a lot of these are due to either incomplete documentation concerning the patient’s post-discharge plans or circumstances that change after the patient is discharged.

So what can a hospital do to prevent receiving an improper payment, either over or under? First make sure physicians, case managers and discharge planners document clearly in the medical record the plans for the patient post-discharge. Also develop an avenue for coders to follow up on discharge status if the documentation in the record is unclear or conflicting. Now the harder part is how to address those patients that do not end up where they were planned to go. Some hospitals have implemented systems to verify the actual post-discharge care the patient receives. Examples of this would be contacting patients scheduled to begin home health care after discharge to see if this actually occurred or contacting skilled nursing facility to see if the patient was actually admitted. Medicare recently addressed post-acute care transfer underpayments in an MLN Matters article, SE1317.

This can be a difficult issue and contains financial risks for hospitals. Hopefully, being aware of what the issues are, understanding the regulations and having a plan in place will help reduce risks for hospitals.

This material was compiled to share information. MMP, Inc. is not offering legal advice. Every reasonable effort has been taken to ensure the information is accurate and useful.

CMS has released the April 2013 Medicare Quarterly Provider Compliance Newsletter. As a reminder, this newsletter is an educational product to assist providers in understanding audit findings identified by Contractors such as Medicare Administrative Contractors (MACs), Recovery Auditors (RAs), Comprehensive Error Rate Testing (CERT) contractors and the Office of Inspector General (OIG).

This edition of the newsletter addressed several findings related to the review of Inpatient hospital claims. Specifically, findings are provided for review of the following MS-DRGs:

• Neoplasm Surgery (MS-DRGs 826, 827, 828, 829, 830, 834, 835 and 836)
• Pancreas, Liver & Shunt Procedures (MS-DRGs 405, 406 and 407)
• Medical Necessity for respiratory neoplasms with a complication or co-morbidity (CC) (MS-DRG 181),
• Esophagitis, Gastroenteritis, and Miscellaneous Digestive Disorders with MCC (MS-DRG 391); and
• Acute Inpatient Hospitalization – Signs and Symptoms without MCC (MS-DRG 948)

Examples of review findings include:

• Incorrect selection of the Principal Diagnosis, reminding providers that “the circumstances of inpatient admission always govern the selection of principal diagnosis” and “is defined in the Uniform Hospital Discharge Data Set (UHDDS) as that condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.”
• High percentage of coding errors, reminding providers that “DRG validation requires that diagnostic and procedural information and the discharge status of the beneficiary, as coded and reported by the hospital on its claim, match both the attending physician description and the information contained in the beneficiary’s medical record.”
• Medically unnecessary inpatient hospitalizations, reminding providers that:

1. “Medicare pays for inpatient hospital services that are medically necessary for the setting billed. The Medicare Benefit Policy Manual, Chapter 1, Section 10, states that the physician or other practitioner responsible for a patient’s care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient.”
2. “The Medicare Integrity Program Manual, Chapter 6, Section 6.5.2.A, states that inpatient care is required only if the patient’s medical condition, safety or health would be significantly and directly threatened if care were provided in a less intense setting.”

The following table is being provided to help you identify which MACs and RAs have currently targeted the MS-DRGs from this newsletter. A review of the specific examples and findings can afford you the proactive opportunity to ensure your records are coded accurately and that the hospitalizations were medically necessary.

CMS’s Medicare Learning Network publishes quarterly Medicare Compliance Newsletters to address the findings from reviews by Medicare contractors such as MACs, RAs (formerly RACs), ZPICs, CERT and the OIG. The January 2013 edition addresses several findings related to review of inpatient hospital claims.

Lack of Medical Necessity for Inpatient Admission always seems to be a big topic and this quarter is no exception. Three different DRGs are discussed with examples of services that should have been provided in a lower level of care setting. Patients did not meet criteria for an inpatient admission for the following DRGs for the reasons noted.

• MS-DRG 491, Back & Neck Procedures excluding Spinal Fusion
• Patient did not experience any intraoperative or post-op complications; and
• Recovery phase was within expectations for this procedure.
• MS-DRG 312, Syncope and Collapse
• Signs and symptoms documented were not significant or severe enough to warrant the need for medical care at the intensity of an inpatient admission.
• Evaluation and treatment could have been rendered as observation services
• The medical record does not establish the need for acute care hospitalization at an inpatient level.
• MS-DRG 516, Other musculoskeletal system & connective tissue operating room (O.R.) procedures with complicating conditions (CC).
• Elective, scheduled, non emergent kyphoplasties for compression fractures in patients with pre-operative medical clearance and a low probability of complications can be performed at an outpatient level of care.

Also, Coding Errors were found for Other OR Procedures for Injuries (DRGs 907, 908, and 909). In the examples given, a procedure or acute injury from a prior admission was coded as occurring during or being the cause of the current admission. Coders should only code procedures performed during the current inpatient admission. Subsequent encounters require the use of an orthopedic after care code.

Refer to the Compliance Newsletter to see the specific examples and the complete discussions.