Redefining “admission?”: Proposed medicare hospital inpatient prospective payment systems (CMS-1599-P)

CMS Proposed Rule 1599 (PR1599) published in the Federal Register on May 10, 2013 proposes significant changes to hospital bed status determinations.  Although the proposed rule is submitted as a “clarification” of existing policy and not a change, there are significant ramifications as to changing presumptions with respect to the timing of orders and decisions.  The proposed rule will apply to discharges on or after October 1, 2013.  It is important to remember that PR1599 is proposed, and not final.  However, the changes in the proposed rule make it clear that the government will continue to reduce or eliminate inpatient payment for short, medically necessary inpatient stays unless the timing and content of documentation clearly supports the admission decision.   Proper documentation, timely prepared is critical for the hospital to receive appropriate reimbursement.

Although PR1599 does not eliminate the current “anticipated stay of 24 hours” rule as a basis for admission, it shifts the “24 hour” calculation as a “midnight through midnight” calculation. The proposed ruling states “a physician or other practitioner should order admission if he or she expects that the beneficiary’s length of stay will exceed a 2-midnight threshold or if the beneficiary requires a procedure specified as inpatient-only under 42 CFR 419.22.”  Thus, if a patient presents before midnight, the physician should determine whether the patient needs to be in the facility that night and through the following midnight.  If the patient is occupying an inpatient bed for two midnights, there is a presumption that the stay is an inpatient stay.  Conversely, if the patient is only occupying an inpatient bed for one midnight, the presumption is that the stay is an outpatient stay.  The unanswered question is whether there must be both an order AND a movement of the patient into an inpatient bed BY MIDNIGHT in order for the clock to begin.  PR1599 focuses on the location of the patient as determinative, noting “that the starting point for this time-based instruction would be when the beneficiary is moved from any outpatient area to a bed in the hospital in which the additional hospital services will be provided.”  We believe that timing of orders will remain critical.  In addition to the timing of the order, it is going to be important to begin the “inpatient services” immediately (prior to midnight) or facilities may find that they lose not only one day stays, but two day stays because the patient was not in an inpatient bed prior to the FIRST midnight.  Keep in mind that observation units are OUTPATIENT units.  Recovery auditors will undoubtedly argue that any time in an outpatient observation unit is time in an “outpatient area” that is not considered in the “midnight to midnight” calculation.  Hospitals may want to create “short stay” units that are inpatient units rather than calling the units outpatient observation units if both short stay inpatients and outpatients receiving observation services are treated in those beds.  In all cases, bed status decisions must be supported by clear clinical documentation supporting the rationale for the bed status determination.

The ruling explains that the judgment of the physician and the physician’s order for inpatient admission should be based on complex medical factors such as patient history and comorbidities, the severity of the signs and symptoms, current medical needs and the risk of an adverse event.  It goes on to address convenience factors which would not by themselves justify inpatient hospital admission unless the convenience factors affect the beneficiary’s health.  In these cases CMS and /or its contractors would consider the factors in determining whether inpatient hospital admissions were appropriate.

Documentation requirements also seem be more stringent in PR1599, requiring documentation of clinical facts supporting the physician’s choice of bed placement.   The physician is required to “clearly and completely document the clinical facts supporting the inpatient admission.  It is the documentation of the reasonable basis for the expectation of a stay crossing 2 midnights that would justify the medical necessity of the inpatient admission, regardless of the actual duration of the hospital stay whether it ultimately crosses 2 midnights.”  It is important to note that recovery auditors may look to see whether the documentation contains both clinical facts that support the admission AND evidence of the facts relied upon in making the admission determination.

The proposed ruling states that the physician is in a “unique position to incorporate complete medical evidence in beneficiary’s medical records, including his or her opinions and the pertinent medical history of the patient.  In creating the medical assessment, medical history, and discharge notes that become part of the medical record, we believe the physician has ample opportunity to explain in detail why the course of treatment was appropriate in the context of the patient’s acute condition.  In addition, the physician has the opportunity to describe and explain aspects of the beneficiary’s medical history that may not otherwise be apparent. Therefore, the physician would be responsible for ensuring that the beneficiary’s medical record includes complete medical information, and this information would be the basis for determining the medical necessity of the prescribed treatment. The final determination by the Medicare review contractor for payment purposes would not be based solely on the physician’s order and certification, and would reflect equal weight and evaluation of all documentation contained in the medical record.”

The proposed rule acknowledges that there may be times when the beneficiary stays less than the physician’s expected 2 midnights.  It clarifies that CMS expects that the majority of such cases would happen when the hospital admission is appropriately ordered but the stay does not span 2 midnights due to the transfer or death of the patient.

The proposed rule requires hospitals to rethink how they are currently operating.  We will continue to use the same clinical “factors” to determine if a patient should be admitted as an inpatient but the 2 midnight threshold adds another complexity to the analysis.  We are still dependent on clear, concise and thorough documentation by the attending or admitting physician.  Although timing has always been critical it will be even more so if this rule is finalized as is.

Although PR1599 is a proposed and not final rule MedManagement suggests that hospitals consider the following so that timely, appropriate actions can be taken:

1) Review the status of your observation unit.  An inpatient “admission” arguably starts when the patient moves from an outpatient area to an inpatient area; outpatient observation unit stays may not qualify for the first “midnight stay.” If your observation unit is designated for outpatient services only, you may miss the opportunity to appropriately categorize patients as inpatient.

2) If resources or processes prevent your facility from performing a timely first line screening, such as an Interqual® screening, you may lose the opportunity to get the patient in an inpatient bed prior to the first midnight that the patient is in the hospital.  Without 24 hour coverage for the first line screening and bed placement, late afternoon or evening patients may lose the opportunity for an appropriate inpatient admission.

3) Timely decision making is critical.  Any patient that presents before midnight needs an order with the appropriate level of care before midnight.  If the physician believes it is medically necessary for the patient to be in the hospital for twenty four hours (measured from midnight to midnight) then the order needs to be an inpatient order and all processes must be designed to get the appropriate order in the chart timely (before midnight if possible).

4) If the physician believes it is medically necessary for the patient to be there for greater than 24 hours BUT does not believe the patient will be in the facility for two nights, the medical documentation of medical necessity must be extraordinarily strong because there will be a presumption that the service is outpatient.

5) The facts supporting the level of care decision must be in the medical record.  We believe that the recovery auditors may take the position that the basis for the level of care decision must be set forth explicitly.

6) Consider a back end process to look at short stays before the bill is dropped.  If the proposed changes for re-billing are adopted (1455), then the UR department can recommend rebilling the stay as an outpatient stay if the patient stays less than the anticipated time without a Condition Code 44 requirement.

If there are questions, please do not hesitate to contact Ann M. Purdy at 205-314-8859 or email her at

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