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Medicare Rules for Inpatient Admissions Change October 1:
Are You Ready?
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By: Allyson Labban
October 2013  

Effective October 1, 2013, CMS will enforce new rules for Medicare inpatient admissions. Issued as part of the 2014 Inpatient Prospective Payment System ("IPPS") Final Rule, the new rules are designed to eliminate long observation stays and clarify the order requirements for inpatient admissions. Hospitals and physicians must comply with the new rules in order to receive reimbursement for inpatient services provided and to avoid adverse financial impact on patients.

Under the new rules, the physician inpatient admission order is more important than ever. The Medicare Benefit Policy Manual has long contained the statement that a physician should issue an order admitting a patient as an inpatient if she anticipates the patient will require hospital services for 24 hours or more. CMS now says that the relevant 24 hour period crosses two midnights; i.e., the patient will be in the hospital receiving services for at least two midnights. While inpatient billing cannot begin until an inpatient order is entered, a physician can take into account a patient's stay in an outpatient area, such as the emergency department or observation unit, when applying the "two midnight" rule. So, for example, if a patient presents to the ED at 11:50 p.m. on Monday night, and at 5:00 a.m. on Tuesday morning the physician admits the patient to the hospital and believes the patient will require an overnight stay, the physician can admit the patient as an inpatient based on a reasonable expectation that the stay will cross two midnights. CMS has also indicated that patients should not stay in observation status for two midnights or more; if a patient is in observation status and the second midnight is approaching, the physician should admit the patient as an inpatient if she believes the patient will require hospital services for another night or more.

In order for a stay to be reimbursed at the inpatient rate, a physician or other qualified mid-level practitioner who is directly involved in the patient's care must issue an admission order that contains the following elements:

  1. The phrase "admit to inpatient," "admit as an inpatient," "admit for inpatient services," or other phrase that makes clear the physician's intent to admit the patient as an inpatient. (While in subsequent guidance CMS indicated that "admit to [inpatient unit]" might be acceptable, the best course of action is to require the use of the word "inpatient" in the order.)
  2. A statement that the physician has a reasonable expectation, based on her medical judgment, that the patient's stay will cross two midnights, as discussed above.
  3. The clinical factors supporting the physician's expectation that the patient's stay will cross two midnights.

CMS has indicated that the admission order will be reviewed in tandem with the history and physical and admission note, but the safest course of action is to ensure that all required elements are contained in the order. CMS contractors have been instructed to apply the "two midnight" presumption: if an inpatient admission order containing all the requisite elements is in place, contractors are to assume that the inpatient stay was appropriate.

CMS is also extending the certification requirement for inpatient services found at Section 1814(a)(3) of the Social Security Act and 42 C.F.R. § 414.13(a) to all inpatient stays, not just inpatient stays of significant length. The inpatient admission order described above is just one element of that required certification. It is important to note that the certification must be completed, documented in the medical record, and properly authenticated prior to the patient's discharge from the hospital. The admission order itself must be entered at or before the time of admission in order to be valid. Only a physician can complete the required certification.

There are many questions that remain unanswered about the new rules. For example, CMS has stated that it will issue subregulatory guidance concerning how the new inpatient status rule applies to patients who are transferred to the hospital from another provider. In the meantime, hospitals should work closely with their medical staffs to ensure that physicians are aware of the new requirements and the duty they have to clearly and appropriately admit patients as inpatients if they reasonably believe a stay crossing two midnights or more is required and to do the necessary documentation to support the inpatient admission.

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