Public Policy

As Medicare Auditors Seek to Rein in Costs, Hospital Admission Decisions Are Under Microscope

Financial Facts

The AHA collects data and anecdotal evidence from member hospitals regarding the RAC program and its effects. Those data show the following:

  • More than 95% of the general medical-surgical hospitals that provided information to the AHA have been targeted by RACs;
  • RACs have demanded more than a half-million medical records to audit;
  • Many audits result in RAC determinations of “overpayment”; and
  • Of those overpayment determinations, more than 60% relate to one- or two-day inpatient admissions that RACs deem medically unnecessary.

Hospitals thus have been required to give back hundreds of millions of dollars per year due to RAC determinations that services should have been provided in an outpatient, rather than inpatient, setting. In the first quarter of 2012 alone, information provided to the AHA by hospitals shows that they were forced to repay $236 million for medically necessary items and services that RACs deemed should have been provided on an outpatient, rather than inpatient, basis. And this amount does not include the millions of dollars recovered from hospitals that did not report data to the AHA.

The RAC program has been a continued financial success for CMS and the auditors: RACs collected $1.86 billion in overpayments from October 2009 through March 2012. Over that same time period, RACs identified only $245.2 million in underpayments.7

The government, no doubt, is on a mission to rein in health-care costs. All stakeholders in the system, including hospitalists and administrations, need extensive education to document appropriate patient status to ensure accurate reimbursement and prevent the fallout of future repayments.

Dr. Pahuja is founder and CEO of Aerolib Healthcare Solutions (aerolib.com). He is pursuing his MBA in health-care administration from the Isenberg School of Management at the University of Massachusetts in Amherst.

Medicare Proposes Two-Midnight Rule

On May 10, CMS proposed the two-midnight rule (CMS 1599-P).8 Under this rule, CMS proposes that hospital inpatient admissions involving at least two consecutive midnights will qualify for appropriate payment under Medicare Part A. It also means that if the hospital stay is less than two midnights, it will be inappropriate for payment under Medicare Part A.

Admitting physicians will be required to document in the medical record their recommendation that the patient will need medical care spanning at least two midnights, with supporting notes in their admission orders. The message sent from CMS is that length of treatment in the hospital will determine whether patients will be inpatient or observation.

References

  1. PR Web. Medicare anti-fraud recovered $19 billion, how much for private self-insured plans? Fiduciary overpayment recovery programs announced from ERISAclaim.com. PR Web website. Available at: http://www.prweb.com/releases/2013/3/prweb10501376.htm. Accessed April 4, 2013.
  2. Viebeck E. GAO reports billions in overpayments to private Medicare plans. The Hill website. Available at: http://thehill.com/blogs/healthwatch/medicare/286041-gao-reports-billions-in-overpayments-to-private-medicare-plans#ixzz2NASaVVIK. Accessed April 4, 2013.
  3. Centers for Medicare & Medicare Services. Cost reports. Centers for Medicare & Medicare Services website. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/CostReports/index.html. Accessed April 4, 2013.
  4. Whelan D. America’s most profitable hospitals. Forbes website. Available at: http://www.forbes.com/2010/08/30/profitable-hospitals-hca-healthcare-business-mayo-clinic.html. Accessed April 4, 2013.
  5. American Medical Association. Recovery Audit Contractors. American Medical Association website. Available at: http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/medicare/recovery-audit-contractors.page. Accessed April 4, 2013.
  6. American Hospital Association, Missouri Baptist Sullivan Hospital, Munson Medical Center, Lancaster General Hospital, and Trinity Health Corporation v. Kathleen Sebelius. American Hospital Association website. Available at: http://www.aha.org/content/12/121101-aha-hhs-medicare-com.pdf. Accessed March 12, 2013.
  7. Centers for Medicare & Medicare Services. Medicare fee-for-service Recovery Audit Program, May 2012. Centers for Medicare & Medicare Services website. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Recovery-Audit-Program/Downloads/National-Program-Corrections-FY-2012-2nd-Qtr.pdf. Accessed April 4, 2013.
  8. Centers for Medicare & Medicaid Services. FY 2014 IPPS proposed rule home page items. Centers for Medicare & Medicaid Services website. Available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Proposed-Rule-Home-Page-Items/FY-2014-IPPS-Proposed-Rule-CMS-1599-P-Regulations.html. Accessed June 10, 2013.
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