OIG to Resume Audits of Short Stay Admissions

The OIG has updated their Work Plan and announced they will resume audits of short stay admissions to determine hospital compliance with the “two-midnight rule”.  The OIG will audit inpatient claims with short lengths of stays to determine if they were incorrectly billed as inpatient and should have been billed as outpatient.  
Historically, both the OIG and CMS identified high error rates related to short stay admissions.  The current regulations assume inpatient admission is appropriate for those patients who are expected to require an inpatient level of care for at least two midnights as well as those patients undergoing inpatient only (IPO) procedures.  Patients who do not meet one of these criteria are generally considered appropriate to be treated on an outpatient basis, including observation.

In an effort to avoid scrutiny under the “two-midnight” rule, some hospitals faced action after their average length of stay for observation increased significantly.  Hospitals who do not appropriately admit patients to inpatient status and keep patients in an outpatient or observation status for more than 2 days also face increased compliance risk as well as lost revenue.  The out of pocket cost for beneficiaries is often significantly higher in the outpatient setting and the outpatient reimbursement rates are typically considerably less than the inpatient reimbursement rates.
In addition to the “two-midnight” rule, the conditions of participation for hospitals outline specific requirements regarding utilization review of inpatient admissions including the medical necessity of the admission and length of stay.

We recommend you conduct an assessment of your short stay admissions, observation stays exceeding 48 hours, and outpatient claims reported with condition code 44.  These assessments should ideally be conducted by someone with clinical expertise who is knowledgeable about the regulatory requirements governing hospital billing of services.  Based on the findings of these reviews, we recommend you provide customized education to your clinicians, utilization management and coding and billing staff.  Additionally, you may need to make revisions to your policies and procedures regarding patient status and utilization management.

The HBE team has served as subject matter experts on behalf of multiple hospital organizations facing short stay admission enforcement actions.  We have also conducted numerous reviews of short stay admissions as the independent review organization (IRO) for hospitals subject to corporate integrity agreements.  We have the experience and expertise to assist you with proactive reviews of your admissions and processes.

We have provided the links to additional information and guidance.
OIG Work Plan announcement: https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000538.asp

Current regulation:  https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-412/subpart-A/section-412.3
2022 CMS Fact Sheet Two-Midnight Rule Medical Review Activities Exemptions:  https://www.cms.gov/newsroom/fact-sheets/cy-2022-medicare-hospital-outpatient-prospective-payment-system-and-ambulatory-surgical-center-0

Conditions of Participation:  https://www.govinfo.gov/content/pkg/CFR-2017-title42-vol5/xml/CFR-2017-title42-vol5-part482.xml#seqnum482.30

HBE’s team of experts is also available to assist you with risk assessments, routine auditing and monitoring, policy and procedure development as well as customized education and training for your clinical and administrative staff.

DISCLAIMER:  This newsletter contains only summary information and highlights; it should be read in conjunction with the full article or document provided as a link.  Any advice or recommendations are general and specific questions should be directed to professional counsel.


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