Hospitalized, but Not Admitted: Admission Status

Hospitalized, but Not
Admitted:
Admission Status and Medical Necessity
Bart Caponi, MD
Division of Hospital Medicine
Department of Medicine
University of Wisconsin

Disclaimers
• I have no disclosures to report
• Medicare calls the tune, and all others
follow
• Any number of agencies reviewing
things…

What do these people have in
common
• An 85yo man found in a hoarder-type situation, with mild
confusion
• A 73yo woman with COPD, new SOB, and diffuse
wheezes, satting 91% on room air
• A 79yo man with a low-trauma pubic ramus fracture to
be managed non-operatively
• None of them meet inpatient criteria!

Why This is Important…
• Patients strongly affected by all of this
– Access to benefits
– Disposition options
– Disposition pressures
– Changes in billing
• Financial issues are large and permanent
• Clinical and financial bottom lines matter
– Institutions need to be healthy to help patients!
• This is a general medical problem!
– ~25% of all FM/GMED patients are OBS; 25% stay >48hrs
– Costs hospital $33/hr per patient

Objectives
• Introduction and Definitions:
– Inpatient
– Observation (OBS)
– Interqual
• Recovery Audit Contractors (RAC) and Medical
Necessity (MN)
• How to Navigate Observation Status in 2012

Inpatient versus Observation
and Interqual

Medicare 101
• Medicare for Inpatients:
– Part A pays for inpatient services with one annual
deductible ($1156 in 2012), further “coinsurance”
– Part B pays for “doctor services”, some meds, DME,
with an annual deductible and an episodic 20% copay
– SNF benefit after 3 day prequalifying stay
• Medicare for Outpatients:
– No Part A benefit
– Part B pays as above
– No SNF benefit

Medicare 102
• Diagnosis-related group (DRG) is how we get paid
• Established in early 1980s, to reward systems caring for
sicker, more complex patients
• Diagnosis and comorbidities considered
• Facility gets a lump sum for all care based on the DRG
• DRG determined by diagnosis, documentation
• Note: Medicare sets the course, everyone else follows

Inpatient versus Observation
• Observation status created in early 1980s as a
temporizing, money-saving measure
• Definition: “a well-defined set of specific…appropriate
services…include ongoing short term treatment,
assessment, and reassessment…furnished while a
decision is being made…”
• Timing: “In the majority of cases…decision…to
discharge…or to admit…can be made in less than 48
hours…in only rare and exceptional cases do reasonable
and necessary outpatient observation services span
more than 48 hours.”

Inpatient versus Observation
• Intended for patients who probably need monitoring
rather than a full admission
– Initially only CP, CHF, asthma; extended to any
diagnosis in 2008
– Includes OSS patients
• Nothing to do with physical location--OBS is outpatient!
• Criteria somewhat arbitrary and don’t necessarily fit best
medical practice
• At UWHC, 67.5% of OBS stay over 24hrs; 26.4% over
48hrs

Inpatient versus Observation: InterQual
• “The Gold Standard in Evidence-Based Clinical Decision
Support”
• Used by CMS, 3700 Hospitals, 300 Health Plans, the
military, others
• Originated due to demands created by birth of Medicare
and Medicaid; these programs led to guidelines, which
were very subjective and not evenly applied
• InterQual is a checklist…
• Physician judgment can trump guidelines if the judgment
portion/documentation is clear

Inpatient versus Observation:
Checklist
• UGIB: observation if:
– Has melena or positive gastric lavage
– HGB >8.3, PLT >60K, gets PPI, EGD confirms
– No blood/fluids administered
• UGIB: inpatient if:
– Has hematemesis, melena, or positive lavage and…
– Either HGB

Inpatient versus Observation: Practical
Points
• In practical use, some conditions are almost always
“observation”
• Examples: syncope, any pain, failure to thrive, “rule outs”,
outpatient surgeries, etc
• Reviewers are paying particularly close attention to:
– These diagnoses/mismatches
– Extremes of LOS, short or long
– Status changes

Inpatient versus Observation: Practical
Points
• Days do matter, and a proper status needs to be in place
as soon as possible
• We can’t bill for services until the proper status order is
written
• Changes patient’s bill and benefits dramatically
• Early management of patient expectations
• This all plays into the bottom line, financially and in terms
of clinical ratings
• The “23-hour rule” is irrelevant

Recovery Audit Contractors (RAC) and
Medical Necessity

On the RAC
• A limited Medicare audit intended to prevent fraud for
inappropriate inpatient billings was performed from 2005-
08
• Identified $1.03 billion in improper payments
• 96% were overpayments recollected from providers
• Audits permanent in 2006, nationwide in 2010
• “Recovery Audit Contractors”—private companies paid
on contingency
• 10/2009-9/2012: $3.16 billion in overpayments collected

RAC Audits
• UW Policy: all charts reviewed at admission for
appropriate status (utilization review or UR)
• RAC gets ~400 closed charts every ~45 days; we prescreen
submissions
• Submitted charts are reviewed/possibly denied by RAC
• Some charts reviewed for coding (correct DRG), some
for medical necessity of services provided (MN)
• Vast majority of our denials are for MN
• Denials can be appealed; multiple levels with strict
deadlines
• No reimbursement collected on final denials

Medical Necessity
• Medicare pays for “reasonable and necessary”
interventions, which they define…
– Meets standard of care, is clinically appropriate, and
not for benefit or convenience of payer, patient,
provider
– Does not have to pay for interventions deemed
neither reasonable nor necessary
– Establishes policies that determine payment status
– Reviews individual cases after the fact

Medical Necessity
• A test may be appropriate, but not “necessary”
• MN relates more to setting of service than to need for
service
• Common denial reasons:
– Lack of supporting documentation
– Pre-existing conditions
– Lack of preauthorization
– Interventions deemed experimental

Medical Necessity
• Example: transplant workup in a stable person with
cirrhosis admitted for chest pain evaluation
• Example: diagnostic guaiac in a GI bleed coded as
“colon CA screening”
• Example: any lab “fishing expeditions”
• Outpatient clinics are liable to MN denials too; focus is
on inpatient as largest fraction/easy target

How to Navigate Observation
Status

Document, document, document!
• Make your rationale clear to auditors
• Document what you have tried, what you’re worried
about, what’s going on
• Appropriate diagnoses and documentation significantly
effect the patient’s and the hospital’s clinical and
financial bottom lines (CMI, SOI, mortality)
• Never embellish, exaggerate, or document something
you didn’t do!

Medicare Benefit Policy Manual, 1:10
• “The decision to admit a patient is a complex medical
judgment which can only be made after the physician
has considered a number of factors…admissions…are
not covered or noncovered solely on the basis of the
length of time the patient actually spends in the hospital.

Examples
• If you don’t explicitly state something, it can’t be inferred
• Document things like:
– Short-term risk of death
– Complexity of decision-making
– Patient’s comorbidities
– Tolerances for specific fluid rates, med doses, etc
– Why this can’t be done in an ideal clinic setting
• Auditors are looking at H&P, DC summary—so make
these documents comprehensive!

Examples
• S: Knee pain O: Knee pain A: Knee pain P: Knee
replacement: denied!
• Patient established care for knee pain due to OA 18
months ago. At that time, a trial of NSAIDS and APAP for
6 months produced no benefit. Three intraarticular
steroid injections produced no relief, nor did six months
of physical therapy. Thus, arthroplasty is indicated.
• “Admit to OBS for rule out MI”: a nightmare!
• While the ECG and biomarkers are normal, her risk
factors of smoking and diabetes suggest a high risk of
cardiac chest pain. I am concerned about the short-term
risk of death from ACS. Thus, further urgent evaluation
is warranted.

Examples
• Identify all the diseases patient has on arrival…NOT
“chronic issues, per home management”
• Don’t say “rule out”, “non-cardiac”, “ACS” as diagnoses
• Attribute when you can!
• SIRS + (suspected/likely) infection = sepsis
• Urosepsis = UTI, so DO NOT say urosepsis
• Avoid abbreviations AMAP
• It is OK to be wrong as long as you’re reasonable!

Same patient, different documentation
• 75yom with CHF presents with pneumonia: MS-DRG
195, simple pneumonia without CC/MCC; $3757
• 75yom with CHF presents with aspiration PNA: MS-DRG
179, complex PNA w/o CC/MCC; $6173
• 75yom with aspiration PNA, secondary systolic HF: MS-
DRG 178, complex PNA with CC; $9241
• 75yom with aspiration PNA, acute on chronic systolic
heart failure: MS-DRG 177, complex PNA with MCC;
$13,359

So, what now
• I always “err” on patient’s side…
• Observation status here to stay…for now
• OIG looking at abuse of OBS status
• If you aren’t sure, it is probably observation
• Document all the details!
• Will complexity arguments hold up TBD
• The rules (or at least interpretation and enforcement) will
change again…
• Lawsuits about OBS, change in 3-day stay rules,
Congress starting to hear more about it

References
• www.medicare.gov
• InterQual criteria
• www.mckesson.com
• Wikipedia
• Edelberg, C. Getting Paid for ED Services: Keys to Documenting Medical Necessity.
PowerPoint presentation, Progressive Healthcare Conferences, Jan 6, 2010.
• Mitus, J. The Birth of InterQual: Evidence-Based Decision Support Criteria That
Helped Change Healthcare. Professional Case Management. Vol. 13, No. 4, 228–
233.
• Genensway, D. How observation care is complicating life for you and your patients.
Today’s Hospitalist. Feb 2012, 26-30.
• http://www.medicare.gov/publications/pubs/pdf/11435.pdf
• http://www.aha.org/advocacy-issues/rac/index.shtml
• 9 th World Congress—Physician Advisor; various presentations
• Feng et al. Health Affairs 2012