“Two-midnight” scrutiny may change, but the need for documentation remains

Low-angle view of hospital sign

Posted by Nancy Perilstein, on October 22, 2015.

Regulators are poised to change the ways they police short-stay requirements, and those changes will make a difference – but they should not give provider organizations a false sense of security.

Under Medicare’s “two-midnight rule,” quality improvement organizations (QIOs) affiliated with the Centers for Medicare and Medicaid Services (CMS) will not take over the job of reviewing short inpatient hospital stay claims until January 1, 2016, more than two months later than earlier planned.

And when the QIOs begin their review, they are likely to examine far fewer short-stay claims than the Recovery auditors did under the previous contracts. Each year, QIOs will audit only 50 records from each large hospital and 20 from medium and smaller hospitals – a tally that previously ran into the hundreds, or for some hospitals more than a thousand.1

However, inpatient claims for periods of less than two midnights remain a focus for CMS, and remain a specific target of the US Department of Health and Human Services (HHS) Office of Inspector General (OIG).  Once again, in the Work Plan for fiscal year (FY) 2015, the OIG has included a focus on short-stays.  That means that QIOs are not the only contracted entities that wield delegated authority from CMS to examine short-stay claims, and some of the others – including Medicare administrative contractors (MACs), Zone Program Integrity Contractors (ZPICs,) and Comprehensive Error Rate Testing providers (CERTs) – will not operate under the same constraints. Every case that any auditing body reclassifies from an inpatient admission to outpatient or observation status can cost the provider approximately 70 percent of the initial claimed reimbursement.  Further, having a large percentage of these claims denied can raise red flags and put a provider “on the radar screen”.

Even though the QIOs will not begin their review work until January, their reviews will encompass claims submitted beginning in October 2015. The new annual limits won’t prevent QIOs from referring cases of “persistent non-compliance” to the Recovery Auditors for more aggressive enforcement.

So what can hospitals do to prepare?  Even as hospitals continue to monitor the newly emerging enforcement initiatives coming, they should focus on documentation. It’s one thing if the provider and the regulator have a substantial disagreement about the nature of a claim, but the potential for claim denial is even more pronounced if the documentation is scant or contradictory. This is an area hospitals can and should control.  If hospitals create or refine their revenue cycle and compliance monitoring and auditing protocols such that that zero- or one-day patient stays are flagged and must pass a manual review by a clinician  before submitting a claim, the number of claims at risk is likely to decrease as the number of external pre-billing reviews increases.  Providers who do not have these internal processes and controls may continue to face significant risk, even with the shift from RACs to QIOs.

1 source: http://oig.hhs.gov/reports-and-publications/archives/workplan/2015/FY15-Work-Plan.pdf

Nancy Perilstein
Deloitte Advisory Senior Manager
Deloitte & Touche LLP

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