Observation or inpatient? Correct patient status more critical than ever
RAC program makes it even more important to get it right
Deciding whether patients should be in observation or inpatient status always has been a challenge for hospitals and now that the Centers for Medicare & Medicaid Services (CMS) has embarked on a nationwide program to audit for overpayment, placing patients in the correct status is more critical than ever.
"The Recovery Audit Contractor [RAC] program is creating a strong incentive for hospitals to make sure they get it right," says Kathleen A. Bower, DNSc, RN, FAAN, principal and co-owner of The Center for Case Management, a South Natick, MA, consulting firm.
RACs are independent contractors who use proprietary software to analyze Medicare claims data and review records to identify overpayments and underpayments for Medicare claims. If the RACs determine that an overpayment has been made, the hospital must return the reimbursement or go through the appeals process.
Following a three-year demonstration project in three states, CMS is rolling out the process nationwide by 2010.
During the demonstration project, one of the areas on which the RACs focused was auditing one-day and short-stay admissions to determine if the patients met the criteria for inpatient admissions or should have been admitted in observation status.
The auditors from the RACs are nurses and can look only at whether the admission meets InterQual criteria for admission, says Deborah Hale, CCS, president of Administrative Consultant Service LLC, a Shawnee, OK, consulting firm.
That's why the documentation for patients admitted in inpatient status should clearly state that the signs and symptoms are significant enough to require a treatment plan that can be provided only in the acute care setting, she adds.
In the past, CMS would provide separate payments for observation services only for patients with congestive heart failure, asthma, or chest pain. Effective Jan. 1, CMS instituted new composite Ambulatory Payment Classifications (APCs) that reimburse hospitals for any diagnosis requiring eight or more hours of observation. The payment amount is based on whether the patient is admitted directly from the physician's office or from the emergency department with an evaluation and management code service of Levels 4, 5, or critical care, in which case the observation and emergency department payments are combined.
"Hospitals can receive reimbursement for observation for any diagnosis but it is packaged into a composite APC that includes both the emergency department payment and the observation payment. The observation services must be properly documented to support the medical necessity of the claim," Hale explains.
The distinction between an inpatient admission and extended outpatient observation represents a difference in billing and not a difference to medical treatment and is irrelevant to the admitting physician who is concerned only with the medical treatment, Hale points out.
"Admission status is not a high priority for physicians and the rules keep changing. Hospitals need people within the organization who understand the rules and can help the physicians and others apply them," Bower says.
Clinical decision unit one solution?
One solution is to create a clinical decision unit where observation patients are housed so they can be fast-tracked, Hale suggests.
"Opening up a clinical decision unit is a big move. Hospitals that previously determined that the benefit didn't measure up to the cost may revisit it because of the RAC audits and other CMS crackdowns," she says.
Medicare has a very solid definition of observation status. It should be the foundation of an organization's observation status process, Bower adds.
However, Medicare rules for observation may be different from the rule established by third-party payers and different from Medicaid or managed Medicare rules, she adds.
"This means that case management departments must have clear observation guidelines for all their payers," she adds.
"If admission status is sometimes confusing to case managers, it's very confusing to people who don't live in that world, and that includes physicians. Ensuring that patients are admitted in the right status is a case for emergency department case management and it's also a case for access case management," Bower says.
The distinguishing factor that influences an inpatient admission as opposed to observation is that it is reasonable and medically necessary to believe that the patient will require more than 24 hours of care that can be provided only in the inpatient setting, Hale says.
Patients who are appropriate for observation need short-term treatment, assessment, and reassessment before a decision can be made about whether they need inpatient treatment, or those who need a longer-than-typical recovery period following outpatient surgery to manage a complication, Hale says.
Observation is not appropriate for care that can be provided only in the inpatient setting; that is expected to require more than 24 hours; or for services provided for the convenience of the physician, patient, or family member, she adds.
The rules are not necessarily logical to a physician or other clinician, Bower points out.
"Hospitals need someone who is knowledgeable about the rules and regulations to review admission status. The financial implication is that patients need to be in the appropriate type of level so that the hospital can get paid and the financial impact to the patient is minimized," she says.
CMs should review documentation
The optimal way to handle admission status questions would be for a case manager to review the physician's documentation from the emergency department, including the treatment plan. If that documentation meets InterQual criteria, an inpatient admission can be ordered.
If admission criteria are not clearly met but there are extenuating circumstances — such as patient safety issues, previous experience with this patient's complex medical treatment, or failed outpatient management — the physician should be asked whether the treatment plan is expected to take more than 24 hours for the patient's condition to turn around, Hale says.
"If the physician indicates that more than 24 hours will likely be required, consideration should be given to admitting the patient as an inpatient and proceeding with the utilization review process to verify admission necessity. Educating the emergency department physicians on observation vs. admission decision making would go a long way toward correcting the problem," Hale says.
Here's a scenario that sometimes causes problems for hospitals, according to Hale:
An ED physician calls an attending physician about admitting a patient but doesn't mention inpatient or observation status. The ED physician admits the patient to observation status. When the attending physician visits the patient, he or she is looking at clinical matters not admission status and the fact that the patient is in observation gets overlooked for several days and the hospital doesn't get paid for an appropriate inpatient stay.
"Many emergency physicians have gotten tired of being accused of doing the wrong thing when it comes to admission status so they just admit everybody to observation. The problem is that the admission status can't easily be changed retroactively. It's important to have checks and balances in the process so this doesn't happen," Hale says.
Educate the ED staff to document all of the interventions in the emergency department and everything that the patient has tried in the community, suggests Cheryl Warren, MS, RN, director of care management at Boston Medical Center and an associated consultant for The Center for Case Management.
For instance, if a patient's treatment has failed in the community or outpatient setting, the patient may meet criteria for an inpatient admission, she points out. If the previous treatment in the community isn't documented, the patient doesn't meet inpatient criteria and must be placed in observation.
For instance, a patient develops an infected wound, which is treated with oral antibiotics. When the wound doesn't heal and the patient develops a fever, he goes to the ED and is admitted for intravenous antibiotics.
If the documentation shows that previous treatment failed, the patient qualifies as an inpatient admission. If it's not documented, the patient must be admitted overnight to observation, Warren says.
"It's very tricky, and it can lead to money left on the table if the patient meets inpatient criteria and is admitted for observation care. It takes an expert to assure that the admission status is correct, and consistent," she says.
Documentation by the emergency department should be very clear, she points out.
"Even small things like peak flow measures for asthma or specific EKG changes for chest pain patients can make a big difference," she says.
Case managers should review the cases in real-time, before the physician has written the order to admit, Hale says.
"It can't happen in 100% of cases, but hospitals will see a lot of improvement in admission status if they have someone to screen at the emergency department level before the bed is assigned," she says.
In order to change admission status after the order is written, the case manager has to have a physician advisor look at the case and determine that in his or her medical judgment, the admitting physician made the wrong decision and the patient should be in observation status. Then the case manager must go back to the admitting physician and ask for his or her concurrence.
"If the admission status process is out of control, a case manager can spend as much as 60% of his or her time going back and correcting the wrong level of care," Hale says.
Her firm has audited hospitals in which case managers were not proficient with criteria and mistakenly determined that the patient's condition didn't meet admission criteria when it did.
"Sometimes case managers don't have much training. Having a physician reviewer is a safety valve for hospitals. They have medical judgment as well as knowledge about criteria," she says.
If one nurse is responsible for reviewing all patients for admission status, he or she becomes an expert in InterQual criteria and can keep up with the criteria changes and rules and regulations issued by Medicare, Medicaid, and commercial payers, Warren points out.
"Having each individual case manager make the determination about his or her patients leads to a lot of different interpretation of rules. Having a nurse responsible leads to uniform judgment," she adds.
Many hospitals have found that about 25% of their inpatient admissions that don't appear to meet criteria can be approved by a physician advisor, Hale says.
"The Medicare Benefit Policy Manual lists safety of the patient as one factor to consider when deciding whether to admit a patient. There are times that a physician advisor can take the complexity of the patient's condition and patient safety and other factors into account, particularly with the geriatric population, and approve an inpatient admission," she says.
If your case managers are the ones making the decision about admission status, they should always consult a physician advisor when patients don't meet inpatient criteria, Hale suggests.
"The only thing a case manager can determine is if the case appears to meet criteria. It completely takes medical judgment out of the mix," she says.
(For more information contact: Deborah Hale, president, Administrative Consultant Services, e-mail: [email protected]; Kathleen A. Bower, principal and co-owner, The Center for Case Management, e-mail: [email protected].)
Deciding whether patients should be in observation or inpatient status always has been a challenge for hospitals and now that the Centers for Medicare & Medicaid Services (CMS) has embarked on a nationwide program to audit for overpayment, placing patients in the correct status is more critical than ever.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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