CMS Provides Guidance to Hospitals on the Physician Certification and Inpatient Admission Order Requirements Under the New Inpatient Rule

Andrew B. Wachler, Esq.

Jessica C. Forster, Esq.

Kevin R. Miserez, Esq.

On August 2, 2013, the Centers for Medicare & Medicaid Services (“CMS”) released CMS-1455-F and CMS-1599-F (“Final Rule”), finalizing proposed changes to CMS’ policies regarding payment of hospital inpatient services under Part B, Medicare’s inpatient admission policies and medical review criteria for inpatient stays. The effective date for the finalized changes is October 1, 2013. On August 15, 2013, CMS held an Open Door Forum (“ODF”) to present the finalized changes to the hospital community and provide stakeholders an opportunity to ask questions regarding CMS’ newly finalized policies. Despite many hospitals’ questions seeking clarification regarding the new policies, the ODF revealed that CMS intends to utilize sub-regulatory guidance to reveal more details regarding implementation of the policies. This causes some concern among stakeholders since the new policies will require changes to hospital admission protocol and the implementation date of October 1 is quickly approaching.

Payment of Medicare Part B Inpatient Services

The Final Rule included CMS’ decision to implement the policy proposed in CMS-1455-P (“Proposed Rule”) to allow hospitals to obtain Part B payment if an inpatient admission is determined to not be medically necessary and reasonable after the patient is discharged, provided that the beneficiary is enrolled in Medicare Part B. The Part B payment, however, excludes services that require an outpatient status, including observation services, outpatient diabetes self-management training (DSMT), and hospital outpatient services such as emergency department visits. CMS announced in the Final Rule that it would not exclude therapy services from Part B inpatient reimbursement, as previously proposed.

In addition, despite the October 1 effective date, hospitals will be permitted to follow the Part B rebilling timeframes that CMS outlined in the Administrator’s Ruling, CMS-1455-R, that was released on the same day as the Proposed Rule. Specifically, hospitals may resubmit claims for Part B reimbursement for a claim that was originally billed as a Part A inpatient claim and denied because the inpatient admission was not medically necessary and reasonable, provided: (1) the Part A inpatient claim denial was one to which the Administrator’s Ruling originally applied or (2) the Part A inpatient claim has a date of admission before October 1 and is denied after September 30 on the basis that the inpatient admission was not medically necessary and reasonable.

CMS announced in the Final Rule that it finalized its proposal to apply the one-calendar year time limit from the date of services to the billing of Part B inpatient services. Despite receiving over 300 comments on the proposed rule objecting to this policy, CMS declined to create an exception to the timely filing limitations. Many of the commenters accurately noted that recovery audit contractors (“RACs”) may audit claims with dates of services within the prior three years and claims typically reviewed by a RAC are more than one year old. CMS’ application of the timely filing limitations effectively prohibits hospitals from rebilling for Part B inpatient services for claims that were subject to a RAC audit. CMS stated in the Final Rule that it believes that an exception is not necessary, explaining that the changes to the inpatient admission guidelines and the definition of “inpatient” will provide more clarity which will lead to more accurate billing by hospitals moving forward.

Also discussed in the Final Rule is CMS’ position that the Part B inpatient billing process will encourage hospital self-auditing and the rebilling of Part B inpatient services closer to the dates of service. The Final Rule, and as confirmed during the August 15 ODF, states that hospitals’ self-audit process must conform with the utilization review rules under the Conditions of Participation (“CoPs”). These rules include attempting to obtain physician concurrence, beneficiary notification, and other aspects related to continuation of an inpatient stay. Although many hospitals often conduct internal reviews, the implications of CMS’ Final Rule are that in order to submit a bill for Part B inpatient services, hospitals must follow the requirements for utilization review under the CoPs.

Revisions to Admission and Medical Review Criteria for Payment of Hospital Medicare Part A Inpatient Services

In the Final Rule, CMS also finalized its proposed changes to the definition of an appropriate inpatient admission and its medical review criteria for payment of hospital inpatient services under Medicare Part A. CMS’ proposal for the new inpatient definition and medical review criteria originally appeared in the 2014 proposed inpatient prospective payment systems (“IPPS”) rule.

The Final Rule established inpatient admission criteria that will guide both admitting physicians when determining whether to admit a patient as an inpatient and also Medicare review contractors while conducting post-payment review of inpatient admissions. CMS finalized implementation of 42 CFR 412.3(e)(1) which includes the following language, “[S]urgical procedures, diagnostic tests, and other treatment are generally appropriate for inpatient admission and inpatient hospital payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights. The expectation of the physician should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs and the risk of an adverse event.” The definition continues to state that these clinical factors must be documented in the medical record. In the Final Rule, CMS identifies this definition as the “benchmark” for evaluating whether an inpatient admission is medically necessary and reasonable. The physician’s expectation that the patient will “…require a stay that crosses at least 2 midnights” may take into account a midnight that the patient spent in the hospital prior to the formal inpatient admission. Based on the definition, if an inpatient admission meets this “benchmark” then the inpatient admission is “generally” appropriate. Thus, it could still be scrutinized by Medicare review contractors, and clinical factors to support the physician’s expectation must be documented in the record.

However, in the Final Rule, CMS also discussed the existence of a “presumption” of medical necessity for inpatient stays with lengths of stay greater than two midnights after the formal inpatient admission order is issued. CMS stated that these stays are generally presumed to be medically necessary and reasonable and will not be subject to medical review efforts absent evidence of systematic gaming, abuse or delays in the provision of care in order to qualify for the presumption.

The Final Rule also addressed revised requirements for physicians’ orders, physicians’ certifications, verbal admission orders and the authorization to admit as inpatient. CMS clarified that the physician’s inpatient admission order must be in the medical record and that the documentation in the medical record must support the physician’s decision that the services must be rendered on an inpatient basis. With regard to verbal orders, CMS stated that a verbal order is a “temporary administrative convenience” but that it is not a substitute for a properly documented and authenticated order for inpatient admission. Thus, the verbal order must be properly countersigned by the practitioner who gave the verbal order. CMS stated that it would provide more information in sub-regulatory guidance. The Final Rule also requires physicians to certify that their services were provided in accordance with the applicable law and there is documentation in the record supporting the reason for the continued hospitalization. Furthermore, the certification must be signed and documented in the medical record prior to the hospital discharge. CMS instructs that the certification, and where necessary recertification, statements may be entered on forms, notes or records that the appropriate individual signs. Finally, CMS stated that a practitioner who is knowledgeable about the patient’s hospital course, medical plan of care and current condition may admit a patient as inpatient. However the practitioner must be permitted to admit patients under relevant State law and have admitting privileges at the hospital.