Responding to Medicare’s New Short Stay Rules

Responding to Medicare's New Short Stay RulesPosted by Kelly Sauders, Partner, Deloitte & Touche LLP

The issue of short inpatient stays is probably the biggest Medicare challenge that hospitals currently face. This issue has been an ongoing challenge for years, but until now many hospitals didn’t know how to tackle it ¬ or didn’t think they had to. That all changed on October 1, 2013, when the Centers for Medicare & Medicaid Services’ (CMS) new ‘2 midnight rule’ went into effect. Now, it’s clear that a hospital stay must include two midnights in order for associated services to be classified as inpatient. This rule change has tremendous financial and operational implications and should be addressed immediately. Hospitals that continue to ignore the problem are at significant risk of facing more and more Medicare denials. Here are five steps hospitals can consider taking to help address this risk:

  • Improve the admissions process. With patients coming in from many different points of entry, many hospitals need a better process for admitting patients. Case managers — armed with expert input from care providers — can help quickly and accurately determine the appropriate level of patient care.
  • Reach a common understanding of “medical necessity.” Medicare’s definition of “medical necessity” leaves a lot of room for interpretation — and misinterpretation. Hospitals should strive for greater alignment between what physicians deem “reasonable and necessary” for an inpatient level of care and what government regulators and auditors have in mind.
  • Use existing data to establish a baseline. The Program for Evaluating Payment Patterns Electronic Report (PEPPER) provides Medicare claims data on inpatients for each hospital. Although the information is somewhat dated, it can still enable useful comparisons that help hospitals identify and fix problem areas.
  • Work across organizational silos. Hospitals should consider creating a multi¬ disciplinary “short stay work group” to tackle monitoring and compliance issues. Individual departments cannot solve this problem alone.
  • Be more selective about appeals. In the past, many hospitals followed a strategy of appealing all denied Medicare claims. This creates a significant administrative burden and may require more resources than hospitals can spare. Some appeals may not be worth the effort.

Medicare enforcement related to short stays has escalated; meanwhile, other payers are starting to focus on this area in order to reduce costs and improve quality. Every day that healthcare providers wait to tackle this issue exposes them to increasing financial and compliance risks. Hospitals should take steps now to address this challenge, so they can continue to provide quality, cost effective care in the right setting — and increase their chances of being appropriately reimbursed.

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