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Admission Disposition: Inpatient or Outpatient Observation

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This was a staff presentation for Rio Grande Hospital staff in 2012 regarding the correct admission status for patients, billing, and the impact that RACs auditors have on the hospital

This was a staff presentation for Rio Grande Hospital staff in 2012 regarding the correct admission status for patients, billing, and the impact that RACs auditors have on the hospital


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  • The Centers for Medicare and Medicaid Services (CMS) is facing increasing pressure from the President and Congress to reduce improper provider payments in Medicare and Medicaid. Hospitals are now facing more scrutiny by government auditors. (American Hospital Association, 2012)
  • Congress established the Medicare Recovery Audit Contractor (RAC) program as a 3 year demonstration in the Medicare Modernization Act of 2003. The demonstration began in three states in 2007 and expanded to six states ending on March 27, 2008. CMS reported collecting $1.03 Billion in improper payments from Medicare providers during this demonstration. (Department of Health and Human Services, 2010)RACs were given $317 Billion in claims paidRACs found $1 Billion in improper paymentsMost were overpayments collected from providers$37 Million were underpayments repaid to providers(Centers for Medicare & Medicaid Services, 2008)
  • I worked for Colorado Choice Health Plan –If a patient did not meet inpatient criteria and was billed as an inpatient, the admission was denied. If the hospital was contracted with Colorado Choice Health Plan there were two options: Correct the admission status Bill incorrectly billing denied appealed by provider reviewed by insurance carrier usually then approved if medical necessity criteria met and rebilled correctly Waste of resourcesRACs auditors are motivated!
  • Let’s get our billings to both private insurance carriers and Medicare right the first time.
  • If a RACs deems an admission as medically unnecessary, the hospital will be responsible for the cost of the admissionIf billed inpatient, and the patient only met outpatient criteria, the hospital will have to refund the money of the entire admission back to Medicare. The auditors will not allow the hospital to keep what the observation charges. In another words, we refund the entire cost of the admission back to Medicare(Health Services Advisory Group, n.d.)
  • As healthcare is changing, we must use our resources wisely.Save the billing staff frustrationsSave the insurance company money Insurance companies in Colorado are under strict guidelines on the percentage of premiums charged can go towards administrative expenses. If an insurance company’s administrative expenses are too high compared to premiums collected, you run the risk of raising members premiums
  • Watch out! Those RACs auditors are motivated…..They get a percentage of what they recover from incorrect billings to Medicare.
  • RACs auditors have recovered $1.45 Billion in 14 months of work…..good for the government and good for the RACs pocketbook.
  • Most acute evaluation and treatment episodes in an outpatient setting (eg, emergency department evaluation) are completed in less than 3 hours. Some treatment settings (eg, infusion center) may provide care for up to 8 hours.Observation should be undertaken with the anticipation that it will generally last about 12 hours (average length) and not more than 24 hours (although in some situations it may be appropriate to continue for a longer period of time).
  • What type of interventions are we doing for our patient? Are we observing the patient? Are we actively doing interventions? Therapeutic lovenox IV antibiotics Breathing treatments every 4 hours IV Lasix? Are these interventions that cannot be done at home by the patient?
  • Where do you look for the log on information to Milliman Care Guidelines? Answer – in the Milliman notebook at the ED nurses’ station
  • Transcript

    • 1. Ann-Marie Peterson, RN Nursing Management
    • 2. Situation: Medical and Nursing staff at Rio Grande Hospital need increased recognition of a patient’s admit disposition Inpatient admission vs. outpatient observation Background: Commercial insurance payers, Medicaid, and Medicare are demanding that hospitals bill correctly for services rendered
    • 3. Assessment Private health insurance carriers deny payment for services rendered if the patient is admitted to wrong status Insurance carrier is billed for inpatient services when the patient’s criteria met an for an outpatient admission Insurance carrier is billed for outpatient services when the patient is admitted > 23 hours Medicare Recovery Audit Contractors are working to recover funds that are billed inappropriately (American Hospital Association, 2012)
    • 4. Recommendation Initiate procedures to ensure correct admit disposition of admitted patients to Rio Grande Hospital Goal Correctly bill for services rendered while admitted to Rio Grande Hospital with the initial billing Reduce incorrect billings that are corrected and rebilled to private insurance carriers Decrease vulnerabilities in RACs charts audits. Minimize refunds back to Medicare
    • 5. Reimbursement for services provided at Rio Grande Hospital are affected when the patient’s admit disposition is incorrect
    • 6. Cost Effectiveness for the billing staff Get it right the first time Saves man hours for reprocessing with the correct disposition Saves the private insurance companies money and time in their claims processing department and medical review staff We receive our funds in a more timely manner
    • 7. Medicare Recovery Audit Contractors Tax Relief and Healthcare ACT of 2006, Section 302: required a permanent and nationwide RAC program to be in place by 2010 Medicare Modernization Act, Section 306 Required RAC demonstration Both of the above statues give authority for RACs to be paid on a contingency basis (CMS, 2008)
    • 8. RACs began reviewing Medicare payments to providers in October, 2010. According to CMS, RACs “corrected” $1.45 Billion of improper payments by December, 2011 (American Hospital Association, 2012)
    • 9. Observation may be appropriate for a patient with ALL of the following. Observation care is appropriate as indicated by care requirements that are ALL of the following per Milliman’s Care Guidelines© Beyond the scope of a usual outpatient care episode Expected to be short term Appropriate for observation care as indicated by 1 or more of the following: Diagnostic evaluation needed (eg, rule out MI) Acute treatment and response evaluation needed (eg, drug reaction) Monitoring for event (eg, arrhythmia) or recovery (eg, from drug ingestion)
    • 10. Furnished by a hospital on premises use of a bed Periodic monitoring by nursing and/or other staff Any other services reasonable and necessary to evaluate a patient’s condition or to determine the need for a possible inpatient admission Admission is usually based on a symptom Chest pain Abdominal pain TIA symptoms (Milliman Care Guidelines)
    • 11. Rule out = Remember Observation Length of Observation Stay Medicare patient < 48 hours Private insurance < 24 hours
    • 12. Quality of care and treatment remains unchanged regardless if the patient is admitted to inpatient status or placed into outpatient observation Severity of Illness These are the criteria for Intensity of Service inpt vs. outpt observation
    • 13. RACS look at “Severity of Illness” and “Intensity of Service” to determine if a patient meets criteria for an inpatient admission. (AEGIS Compliance & Ethics Center, 2009 Severity of Illness How sick is the patient Symptoms Lab values Vital signs
    • 14. Intensity of Service Monitoring the patient Serial CPK and troponins Monitoring oxygen saturations for several hours What are our interventions? Prophylactic DVT prevention vs. treatment with therapeutic goal IV antibiotics for an infection IV Lasix ≥ twice daily Systemic steroid administration IV or po administration
    • 15. www.careguidelines.com
    • 16. Works Cited Americian Hospital Association. (2012). AHA Audit Education Series: Reducing Vulnerabilities to Payment Denials. Center for Medicare and Medicaid, Division of Recovery Audit Operations. (2008). Medicare Audit Contractors (RACs) An Intorduction to the RAC Process. Center for Medicare and Medicaid. Department of Health and Human Services. (2010). Recovery Audit Contractors' Fraud Referrals. Office of the Inspector General. Retrieved September 24, 2012, from https://oig.hhs.gov/oei/reports/oei-03-09-00130.pdf Health Services Advisory Group. (n.d.). Guidelines - Medicare Decisions: Observation or Inpatient? Arizona. Retrieved September 25, 2012, from http://acute.hsag.com/HOW/041207/09_Medicare-INPvOBV- DecisionsGUIDELINES_April2007.pdf Milliman Care Guidelines. (2012). General Criteria: Observation Care (16 ed.).