Inpatient Facility Coding & Compliance Alert

Notify the patients under observation for more than 24 hours, in 2016.

If you thought the two midnight rule was the biggest regulatory hassle surrounding observation patients, guess again. A new law, the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, was signed by President Obama on Aug. 6, 2015, with an effective date of August 2016. This act will require hospitals to fully inform patients who spend more than 24 hours in observation without being admitted as an inpatient.

“This new requirement is something that hospitals should really be performing anyway,” explains Duane C. Abbey, PhD, president of Abbey and Abbey Consultants, Inc., in Ames, IA. “When I go out to hospitals, I will ask clinical (nursing) staff whether the given patient is an inpatient or an outpatient. Often they do not know, because, clinically, it doesn’t make any difference. It does make a difference for coding, billing, and reimbursement for both the hospital and the Medicare beneficiary.”

Know What This Means to You

According to the NOTICE Act, you are required to provide “written notification” to patients under observation in hospitals for more than 24 hours, and adequate oral and written notification within 36 hours of the differences between their status and inpatient status.

“Hospitals will need to take some significant operational steps to meet this new requirement,” says Abbey. “Of particular interest is what must be done when Conditional Code 44 is used and an inpatient admission is changed to an outpatient, observation status.”

Remember: The notification must be in “plain language” and signed by the patient or his or her representative. The notice must be clear about the implications for cost-sharing as an outpatient and for subsequent eligibility for SNF coverage. CMS will probably provide additional guidance for the form, format, and requirements of the notification.

Chime in With the RACs Audit Schedule

Because of the concerns expressed over the two midnight rule, CMS also agreed to a “probe and educate” audit program rather than initially recouping payments for claims found to be in error.

CMS issued a moratorium on RAC reviews of inpatient admissions for dates beginning Oct. 1, 2013. Also, CMS recently proposed incremental changes in the 2016 OPPS proposed rule to improve the two midnight policy through a variety of changes.

Look for Greater Emphasis on Physician Clinical Decisions

CMS has also restored case-by-case assessment for stays expected to require less than two midnights of inpatient hospital care.

Medical necessity: According to the proposed rule, the number of calendar days in the facility will be the key indicator as whether the short admission was inappropriate. Providers must therefore document the medical necessity of the short stay.

Such admissions are still subject to medical review but medical reviewers are instructed to look for documentation including: signs and symptoms of medical severity; medical predictability of adverse consequences; and the need for diagnostic studies that are more appropriately performed in the outpatient setting.

Final takeaway: “Be watchful for further refinement in guidance as to how the over two midnight rule will actually be used,” cautions Abbey. “At least this should forestall huge numbers of short-stay appeals from recoupment attempts of the RACs. Note that medical necessity will continue as an issue even if the physician assesses that the inpatient stay will span more than two midnights.”