Wiki Is this fraud, abuse or common practice?

[alwilkinson@herzing.edu]

I am a new Charge Capture Specialist for the Emergency Department (ED), responsible for processing patient encounters, including observation services. I have a question regarding billing compliance for patients who transition through multiple statuses.

My understanding is that when a patient is sent from the ED to Observation and is subsequently admitted as an Inpatient, the facility cannot bill for any services performed on the day the inpatient admission began.

My specific concern involves post-discharge status changes:

A patient is admitted as an Inpatient and later discharged. Subsequently, Utilization Management (UM) reviews the case and determines the patient did not meet the medical necessity criteria for an Inpatient stay.

• Question: Is it appropriate and compliant for the facility to retroactively change the patient's status from Inpatient back to Observation after the patient has already been discharged?
• Implication: This change allows the facility to bill for the Observation services that would otherwise be non-billable due to the prior Inpatient admission.

 

[sls314]

I am a new Charge Capture Specialist for the Emergency Department (ED), responsible for processing patient encounters, including observation services. I have a question regarding billing compliance for patients who transition through multiple statuses.

My understanding is that when a patient is sent from the ED to Observation and is subsequently admitted as an Inpatient, the facility cannot bill for any services performed on the day the inpatient admission began.

My specific concern involves post-discharge status changes:

A patient is admitted as an Inpatient and later discharged. Subsequently, Utilization Management (UM) reviews the case and determines the patient did not meet the medical necessity criteria for an Inpatient stay.

• Question: Is it appropriate and compliant for the facility to retroactively change the patient's status from Inpatient back to Observation after the patient has already been discharged?
• Implication: This change allows the facility to bill for the Observation services that would otherwise be non-billable due to the prior Inpatient admission.

That’s not unusual.

If the patient did not meet medical necessity criteria for an inpatient admission, then the encounter should not be billed as an inpatient stay.

In those cases, the facility’s Utilization Management or Case Management team may retroactively change the status to Observation, even after discharge, so that billing reflects the correct level of care. This is part of the utilization review process and is intended to ensure billing compliance and accuracy.

The key is that the change must be supported by documentation and medical necessity criteria. It’s not about “downcoding” for payment, but about aligning the status with the actual level of care supported in the record.

 

[sls314]

Remember too that this isn’t about reimbursement—it’s about ensuring the level of care is billed correctly.

In fact, converting an inpatient stay to observation can sometimes result in lower reimbursement for the facility compared to the DRG payment. But status needs to match the medical necessity supported in the record, regardless of the impact on reimbursement.