LOS could soar for patients in observation status
LOS could soar for patients in observation status
Proposed rule could create utilization nightmare
Lengths-of-stay for patients under observation status who subsequently are admitted would jump by one to two days under a proposed Medicare rule.
That is one of the ways the Baltimore-based Health Care Financing Administration (HCFA) is cracking down after what it considers overuse and abuse of patient observation status by hospitals.
In the existing HCFA rules, the first day of a hospital admission begins when a physician admits the patient. That admission cannot be retroactive to when the patient was given a bed for observational purposes. If the current draft is finalized, however, the date of admission can be moved back to the day when a patient was placed under observation.
"This is going to be an issue not only for utilization managers but for medical records people," says Sharon Baschon, RN, a utilization resource management consultant and owner of the Durham, NC-based Baschon Group. "Your length of stay can go up by one to two days for every observation patient that converts to inpatient."
Another critical change in the current draft of proposed changes to the Medicare Hospital and Intermediary manuals would limit Medicare coverage for observational services to 48 hours.
Claims exceeding 48 hours will require a formal request for an exception and "We expect these situations to be very rare," say the authors of the proposed rules. The final version of the expanded observation rules should come in October.
The basic definition of observational services basically stays the same: observation to determine whether a patient needs inpatient services or another treatment. This should take no longer than 24 hours, HCFA says.
One of the key additions in the proposed revisions is the 48-hour cap.
"In the past, the rule was that it was not expressly limited," says Jeffrey Royer, JD, a managing shareholder in the Boca Raton, FL, law firm Buckingham, Doolittle & Burroughs. Some hospitals commonly keep patients in observation for days and sometimes weeks, providing good reason for HCFA's response, he says. Royer practices health care law and is a frequent speaker on HCFA issues.
"Many patients who are borderline as far as meeting criteria for inpatient admission are placed in observation status and never emerge from it," Royer says. "They never meet criteria but remain sick enough to stay in an observation bed."
What a difference admission makes
Many times, physicians and discharge planners do not even realize that misusing observation status can put patients and their families in difficult situations, Royer points out.
For example, he recalls an elderly woman who came to a hospital with ankle and wrist fractures. After treatment she was placed in a bed at the hospital for three or four days. The family then placed her in a skilled nursing facility (SNF) after her hospital stay, and it cost them dearly.
"It turns out she wasn't admitted and that during her entire hospital stay she was under observational status," Royer says. "The family had to shell out all the money to put the patient in a SNF." Medicare only covers SNF charges if the admission follows an inpatient hospital stay.
Looks can be deceiving. Often observation patients may have an intravenous line and be treated much like an inpatient, even sharing a room with an inpatient. "No one ever explains to them that their doctor has recommended that they remain in an observational status," Royer says.
Hospitals have been remiss about explaining what observational status means and that it is not covered under Part A of Medicare, Royer says. "No Part A deductible will be used up; no inpatient days will be used," Royer says. Medicare covers the observational stay as an outpatient procedure.
Instructions less vague
For utilization managers, the proposed regulation brings both good news and bad news. Art Kutner, MBA, reimbursement manager, St. Joseph's Hospital in Atlanta, says he looks forward to seeing exactly what is and is not covered. "The old regulations were vague," he says. "What they are covering [in the proposed rules] is pretty specific. They even give examples. It's pretty straightforward."
Unfortunately, utilization managers are caught in the middle when physicians order extended observational stays. "We're stuck in a loop," Kutner says. "If the physicians says that the patient has to remain there for more than 48 hours, we will get denied, and we'll have to appeal for it."
If a facility has a high number of observational stays exceeding the new cap, utilization personnel may face more paper shuffling to handle appeals, he notes.
St. Joseph's has very few observational stays longer than two days, Kutner says. But if the appeal process is too burdensome, the hospital will likely forego a request for an exception to the 48-hour cap. "We might just lose that reimbursement and forget the appeal because it is not worth it."
"Over the past five or six years, hospitals have developed some bad habits with how they handle observation," he says. "It has almost become a default mechanism. 'Don't know what to do with him? Put him in observation.'"
Hospitals must create new mechanisms to assess the technical requirements for observational and admission status to comply with the proposed rules, which are much more detailed than existing instructions. (See suggested observation protocol, p. 120.)
For example, the existing definition of services not covered under outpatient observational services only has two points. Under the proposed rules, these two points have been expanded, and six more definitions have been added.
In the draft of the proposed changes, HCFA clearly spells out that coverage of observational services provided for the convenience of the family, patient, or physician will be denied. This area of noncoverage now includes specific examples, such as observation periods following an uncomplicated treatment, extended observation periods when the physician is too busy to authorize the patient's discharge, or observation periods ordered while the patient awaits placement in a long-term care facility.
Royer sees surgical services facing the highest degree of scrutiny. "There is a tendency on the part of physicians to put a patient in observation status following a particular procedure," he says.
Royer points out that when Medicare reimburses for a surgery or a procedure, it is also reimbursing for a limited amount of recovery time, not observational time.
Keep HCFA scrutiny at bay
Royer has already seen increased review activity concerning observation issues. To avoid unnecessary HCFA scrutiny, Royer offers three keys to manage under the proposed observational rules:
* Get information on new patients under observation to utilization management as soon as possible.
Utilization managers should understand the new stricter rules for service coverage and educate staff on the implications. They should assist or alert floor nurses and physicians to Medicare's heightened awareness of claims for observational stays and that treatment decisions must be expedited. For instance, caregivers must understand that an observational patient cannot wait eight hours for the physician to make rounds if he or she is ready to be discharged now.
* Do not assume that each observational patient has an automatic 48 hours.
"One of the things that utilization managers must understand is that just because the Medicare program says that observational services can go to 48 hours, it is not a ticket to keep every patient for 48 hours," Royer says. "The rule still is that 24 hours is the expected period for an observation stay and that even the care given during the first 24 hours is subject to review for medical necessity."
* Take extra steps to ensure observation time is not confused with recovery time after a procedure or a surgery.
"[HCFA] is going to make sure there is something unique about a [surgical] record, such as a complication, that indicates that the patient needed an extended stay and needed more than the standard recovery time," Royer says.
"You have to emphasize that it is not OK for doctors to write pre-op orders that say 'observation post surgery,'" Baschon adds. "I have seen face sheets [informational admission forms] for inguinal hernia that has said 'observation post-op.' That is definitely not acceptable."
Gray rules invite abuse
HCFA previously has not reviewed many observational cases for inappropriate billing because the existing rules have been somewhat vague, Royer says. This will likely end when the expanded rules are enacted. "We are already seeing some denial activity with regard to observational services," Royer says.
While HCFA crafted the revisions to prevent abuses, the end result of these expanded rules may be an unintentional increase in Medicare admissions, predicts Elgin Kennedy, MD, president of the Mage Corp., a utilization management consulting firm based in San Mateo, CA. "HCFA crafted these revisions because of evidence of abuse of Medicare observation," says Kennedy, who also is an associate clinical professor of medicine at the University of California, San Francisco.
These revisions may, however, increase inappropriate Medicare admissions by physicians who want to hold patients longer than 48 hours but do not want to face denials or make appeals.
"If a physician or facility is intent on not discharging a patient, they may choose to simply admit the patient," Kennedy says. "An inappropriate admission is nowadays unlikely to be discovered by a state [peer review organization], since PRO resources are now being spent in other endeavors."
[Editor's note: For copies of the final Medicare Intermediary and Hospital manuals, contact HCFA Division of Outpatient Surgery and Services, C4-11-16, 7500 Security Blvd., Baltimore, MD 21244; (410) 786-8450. Final regulations are expected to be published in October 1996. Hospital Peer Review will keep you updated when the regulations are approved.] *
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