Understand the CMS background & regulatory requirements Difference between the 2-Midnight presumption vs. benchmark Physician certification requirements for inpatient hospital services IPPS and OPPS 2015 Best Practices for financial and operational performance

1. 38th Annual Institute, NJ PA Chapter of HFMA
October 8, 2014
Appropriate Level of Care and the
2-Midnight Rule
Edward J. Niewiadomski, MD
Senior Medical Advisor
Laureen A. Rimmer, RHIA, CPHQ, CPC
Director, Coding, Accreditation & Clinical Services

2. Objectives
• Understand the CMS background & regulatory requirements
• Difference between the 2-Midnight presumption vs. benchmark
• Physician certification requirements for inpatient hospital services
• IPPS and OPPS 2015
• Best Practices for financial and operational performance

3. CMS Background & Regulatory Requirements
• October 1, 2013, 2-Midnight Rule, 2014 IPPS
• “Midnight”- point in time to determine inpatient length of stay
• “CMS”- Observation care as short term, generally not to exceed 24
hours, rare cases up to 48 hours
• “NJ Department of Health & Senior Services,” N.J.A.C. title 8, Chapter
43G-32.21, observation < 24 hours

4. 2-Midnight Rule Documentation
• Medical necessity and presumption of length of stay documented in
the medical record
• Inpatient admission order
• Physician or qualified practitioner licensed by state to admit and
admitting privileges
• Physician certification
• MACs continue “probe and educate”

5. 2-Midnight Rule Exceptions
• Procedures defined as “Inpatient-Only”
• Unforeseen beneficiary death
• Unforeseen transfer
• Unforeseen departure against medical advice
• Unforeseen clinical improvement
• Election of hospice in lieu of continued treatment in the hospital
• Mechanical ventilation initiated during present visit

6. 2-Midnight Presumption
CMS-1599-F
• Hospital stay, 2 or more midnights after admission
• Inpatient admission order
• “Presumed” reasonable and necessary for inpatient with medical
necessity
• MACs not to focus reviews on stays spanning at least 2 midnights
after admission, BUT
• MACs may review these claims as part of routine monitoring, i.e.
possible system gaming

7. 2-Midnight Benchmark
CMS-1599-F
• Inpatient admission, generally appropriate Part A inpatient payment
• MACs to consider time beneficiary spent receiving outpatient services
• Examples: ED, Observation, other treatment areas
• Occurrence span code 72 redefined (MLN Matters MM8586, 1/24/14)

8. Medical Necessity
2 Midnight
+
Medical Necessity Documentation
=
COMPLIANCE

9. Medical Necessity for Admission
• “In our existing guidance, we stated that the decision to admit a
patient as an inpatient is a complex medical decision based on many
factors, including the risk of an adverse event during the period
considered for hospitalization, and an assessment of the services that
the beneficiary will need during the hospital stay.
• The crux of the medical decision is the choice to keep the beneficiary
at the hospital in order to receive services or reduce risk, or discharge
the beneficiary home because they may be safely treated through
intermittent outpatient visits or some other care.”
IPPS Final Rule CMS-1599-F, Federal Register, p. 50944-50945

10. Physician Certification of Medical Necessity
• No specific forms or procedures required
• Inpatient admission order
• Order signed/authenticated before discharge
• Order dated
• Estimated length of stay of at least 2 midnights

11. Physician Certification of Medical Necessity
• Reason for inpatient services includes:
• Diagnosis
• History
• Comorbidities
• Severity of signs and symptoms
• Risk of adverse events
• Current medical needs requiring inpatient care
• Plan of care
• Plans for post hospital care

12. “Reasonable and Necessary Rule”
• Satisfying the requirements regarding the physician order and
certification alone does not guarantee Medicare payment. Rather, in
order for payment to be provided under Medicare Part A, the care
must also be ‘‘reasonable and necessary…”
• CMS Transmittal 534, Effective 9/8/14, “Claims that are Related”

13. Observation Stays Got Longer

14. Two Midnights Billed as “Inpatient” Helps
Prevent Denials
Day 1 Day 2 Final Bill Denial/Audit Risk
IP IP IP LOW*
IP Discharge IP HIGH
OBS IP IP VERY HIGH
OBS OBS IP EXTREMELY HIGH
OBS OBS OBS LOW* *with appropriate
documentation

15. “Probe and Educate”
• Physician Attestation Statements without Supporting Medical Record
Documentation: The physician’s order contained a checkbox with pre-printed
text stating “The beneficiary is expected to require 2 or more
midnights of hospital care.” The physician’s plan of care, however,
stated that the beneficiary was to have diagnostics performed post-operatively,
with a plan to discharge in the morning if stable. The
beneficiary was discharged the following day as planned, after a 1-
midnight stay. Upon review of the claim, the MAC denied Medicare
Part A payment because the medical record failed to support an
expectation of a 2-midnight stay when the order was written.

16. “Probe and Educate”
• Short Stays for Medical Conditions: The beneficiary presented to the
ED with recent onset of dizziness and denied any additional
complaints. The beneficiary reported a recent adjustment to his blood
pressure medication. The physician’s notes stated that the beneficiary
was stable and that his blood pressure medication was to be held and
dosage adjusted. The notes also indicated that the physician intended
to observe the beneficiary overnight. The beneficiary was discharged
the next day. The hospital submitted a claim for a 1-day inpatient stay.
Upon review of the claim, the MAC denied Medicare Part A payment
because the medical record failed to support an expectation of a 2-
midnight stay.

17. 2015 IPPS and Proposed OPPS
• IPPS Final Rule CMS 1607-F, FY 2015
• CMS welcomes additional suggestions to add to the rare and unusual
exception to the 2-Midnight Rule
• Public comment to design an alternate payment methodology for
short inpatient hospital stays

18. 2015 IPPS and Proposed OPPS
• OPPS Proposed Rule, CMS 1613-P, FY 2015
• “Physician certification” for long-stay and outliers
• Revise to specify certifications must be furnished no later than 20
days into the hospital stay
• Admission order, medical record and progress notes will continue to
be required to support medical necessity of an inpatient admission

19. Summary
Date Guidance Comments
8/19/13 IPPS Final Rule CMS-1599-F for FY 2014 2 Midnight Rule effective with admissions on or after 10/1/13.
9/26/13 CMS Special Open Door Forum Conference call and transcript of call outlining responses to provider questions and probe &
educate by the MACs for dates of admission 10/1/13 to 12/31/13. MAC to focus on one inpatient
midnight claims. Recovery Auditors not to review claims for this issue for same dates of admission.
(exception for pre-payment reviews of therapy in pre-payment demonstration states).
1/24/14 CR # 8586 Occurrence Span Code 72 Identification
of Outpatient Time Associate with an Inpatient
Hospital Admission and Inpatient Claim for Payment
Guidance to account for total hospital time, including outpatient time that directly precedes the
inpatient admission when determining if an inpatient order should be written, based upon the
expectation that the beneficiary will stay in the hospital for 2 or more midnights receiving medically
necessary care.
1/30/14 CMS guidance to clarify physician order &
certification for Hospital inpatient admission
Content of physician certification outlined, timing, authorization to sign the certification, inpatient
order and specificity of orders.
10/1/13 to 1/31/14 MAC Probe & Educate Probe & educate time period 10/1/13 to 9/30/14. MAC requested to re-review claims to ensure
claim decision and subsequent education consistent with most recent clarifications. Appeal
timelines clarified.

20. Summary
Date Guidance Comments
4/1/14 President signed the Protecting Access
to Medicare Act of 2014
Extends MAC probe & educate to 3/31/15. Recovery Auditors prohibited to conduct inpatient status review of
claims 10/1/13 to 3/31/15.
5/12/14 CMS UPDATE: MACs completed most
of first round probe reviews (10 or 25
claims, volume dependent) and
beginning provider education
CMS conduct pre-payment patient status probe reviews for dates of admission 10/1/13 to 3/31/15. MACs conduct
patient status reviews using probe & educate strategy for claims 10/1/13 to 3/31/15. MAC education and repeat
process, when necessary.
5/15/14 CMS, HHS Proposed IPPS Rule for FY
2015. Final Rule to be published
8/22/14.
Suggested Exceptions for the 2 Midnight Benchmark; inviting further feedback in rare and unusual circumstances
that were not identified to justify inpatient admission for Part A payment, absent an expectation of care spanning at
least 2 midnights.
7/14/14 CMS, HHS Proposed OPPS rule for CY
2015
Inpatient admission order is necessary for all inpatient admissions and proposing to require such orders as a
condition of payment, rather than as an element of the physician certification. Medical necessity documentation for
inpatient stay still required. Proposing, for non-outlier cases, 20 days as the appropriate minimum threshold for
physician certification and define long stay cases as cases with stays 20 days or longer.

21. Best Practices
• Collaboration of Revenue Cycle team, Case Management, Patient
Access, Health Information Management, Clinical Documentation
Improvement, Patient Financial Services
• Understand clinical documentation process and educate physicians

22. Best Practices
• Case management model to support concurrent physician decision
making inpatient vs. observation
• Case managers in the ED and role to support patient placement in the
appropriate service
• Strong physician leadership with observation services for timely
decision making
• Role of Utilization Review Committee and Physician Advisors

23. Best Practices
• Physician tools, evidence based medicine to support clinical decisions
• Clinical and financial metrics to measure performance
• Policies for observation billing, inpatient only list, use of occurrence
span code 72
• Auditing for compliance
• Aggressive and appropriate appeals strategy

24. Closing
• 2-Midnight Rule compliance is required
• Monitor CMS “probe and educate” with your organization
• Stay tuned for OPPS comments and Final Rule for FY 2015
• Questions?

25. References
• CMS: Selecting Hospital Claims for Patient Status Reviews:
Admissions on or after 10/1/13 (last update: 2/24/14)
• CMS: Inpatient Hospital Reviews, Update 3/12/14
• CMS FAQs, Update 3/12/14
• CMS: MLN Matters Number MM8586, 1/24/14; revised 4/8/14
• CMS Fact Sheets: FY 2015 Policy & Payment Changes for Inpatient
Stays in Acute Care Hospitals and Long Term Care Hospitals, 8/4/14
• New Jersey Department of Health and Senior Services, N.J.A.C., Title
8, Chapter 43G-32.21

26. Edward J. Niewiadomski, MD
Senior Medical Advisor
BESLER Consulting
Three Independence Way, Suite 201
Princeton, NJ 08540
Direct Phone: (609) 514-1400
e-mail: doctored.com@gmail.com
Jeff Lampman
Vice President of Client Development
BESLER Consulting
Three Independence Way, Suite 201
Princeton, NJ 08540
Direct Phone: (732) 392-8223
e-mail: jlampman@besler.com
Laureen A. Rimmer
Director
BESLER Consulting
Three Independence Way, Suite 201
Princeton, NJ 08540
Direct Phone: (732) 392-8226
e-mail: lrimmer@besler.com