Observation Status Is Issue in Claims Denials
If an ED patient cannot be discharged safely, does the patient need to be admitted, or is observation the better choice?
“This is very fact-oriented, highly clinical, and individual to every patient. Insurers might, in hindsight, dispute the judgment of the physician who is actually treating the patient,” says Kurt Hopfensperger, MD, JD, vice president of medical solutions at Optum.
Health plans are going to review the medical record days or weeks after the visit. Sometimes, it looks like admission was not needed; instead, the patient should have been observed for a period. “In general, the reimbursement for an inpatient stay is about three to four times [that of] an observation visit,” Hopfensperger notes.
The health plan’s decision on whether to pay the claim is based on what the ED chart shows. Specifically, the focus is on the severity of illness and the intensity of services provided. “However, there are other considerations that treating physicians weigh when making the decision to admit an inpatient,” says Hopfensperger, including comorbid conditions (heart or lung disease, cancer, or use of certain medications) that put patients at high risk for poor outcomes. “A high-risk patient often requires more intensive diagnostic testing, monitoring, or treatment. That justifies inpatient, rather than observation, level of care.”
But even if a patient should be in an observation setting, “just as often, the physician documentation does not capture information that would meet the payor’s inpatient criteria,” says Kathy White, assistant vice president of virtual utilization review/bedded insurance authorization processing at Ensemble Health Partners. It all hinges on the clinicals that are submitted. Timing may be the real problem. Payors usually require hospitals to notify them of admission within 24 hours. “Often, that is not enough time for doctors and providers to capture the true nature of the patient’s illness and a reliable diagnosis code,” White says.
A patient may be admitted for a vague complaint like “chest pain.” After two days of testing, the patient is diagnosed with severe coronary artery disease, necessitating coronary artery bypass graft surgery. The health plan denies the admission for “chest pain” since that is all that was known at the time the patient was admitted.
To stop these unfair denials, White says patient access should be documenting the true severity of a patient’s illness on day two or three of hospitalization. By that time, there is an actual diagnosis to support the need for admission. “Payors only want to pay for services that are medically necessary and reasonable,” White says.
Payors need data, such as daily progress notes, that support the need for treatment in a particular setting (whether observation or inpatient). “The agreed-upon criteria are the rules of the game,” White says. “Anytime the rules are not met, there will be a denial.”
Patient access should be documenting the true severity of a patient’s illness on day two or three of hospitalization. By that time, there is an actual diagnosis to support the need for admission.
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