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FAQs about new CMS rules on inpatient admission orders

December 2013

On Oct. 1, 2013, Medicare implemented several hospital billing rules that heavily impact how hospitals are required to document inpatient admission orders.

Following are some of the FAQs specific to the new rules:

Q: What is the Two-Midnight rule?

A: The Centers for Medicare & Medicaid Services (CMS) has revised its guidance for inpatient admissions by stating that an inpatient admission is likely appropriate if the stay requires a duration of at least two midnights.

Q: Why has CMS revised this guidance?

A: CMS wants to limit the use of observation status to reduce its financial burden on Medicare beneficiaries. Observation stays result in greater out-of-pocket expenses for beneficiaries and do not count toward the three-day eligibility requirement for Medicare skilled nursing facility coverage.

Q: How does this impact Legacy physicians?

A: Physicians who admit patients will be required to complete documentation in the inpatient order that estimates length of stay consistent with the two-midnight guidance. The new order format will go live in Epic before the end of 2013.

Q: When does the clock start for two-midnights?

A: When the patient begins receiving hospital care for inpatient or outpatient services. The admitting physician can include the time spent in the Emergency Department or in observation status when taking into account the total time for two-midnights.

Q: What if the patient goes home sooner than two-midnights?

A: The expectation of a two-midnight stay is sufficient justification for admission, even though there may be unforeseen circumstances such as transfers or self-discharge that result in the eventual length of stay not meeting the physician’s initial expectation. As always, good documentation at the time of admission describing the medical necessity will keep the case defensible from an audit.

Q: What if the patient meets inpatient criteria for Interqual, but is not expected to stay more than two-midnights?

A: Consult with the care management team at your site. Admitting as an inpatient may still be a correct order regardless of the length of stay. The care management team will work with our physician advisor vendor, Executive Health Resources, to appropriately review the case.

Q: What about "inpatient-only" procedures when recovery is not expected to exceed two-midnights?

A: "Inpatient-only" procedures are exempt from the two-midnight rule, however, surgeons can expect to see new order workflows in Legacy’s surgical services departments specific to ensuring an inpatient admission order is documented prior to the procedure being performed in the operating room.

If you have additional questions, you may contact Legacy’s Compliance Department directly at 503-413-5308.


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