Is the new observation two midnight rule leaving you feeling angry? Do you feel like a major injustice has been placed upon your organization with potentially calamitous consequences? Trying to decide how to explain to a beneficiary that anything from a 24 hour and 1 minute stay to a 48 hour stay may be inpatient depending upon the time of day they came to the hospital? Guess what … you are not alone! The Center for Medicare and Medicaid Services (CMS) is facing law suits and questions from Congress and has elected to delay enforcement of the rule.

 

Historically, outpatient observation was created to help the attending physician determine the appropriate treatment setting for a patient. When initially conceived, many in the medical community considered 8 hours to be sufficient to determine the need for inpatient care. However, with the advent of cardiac enzymes testing to differentiate myocardial infarction versus other causes of chest pain and less invasive surgical approaches, the need to address stays that were 16-24 hours became important to payers.

 

Currently, observation is considered appropriate for 8-48 hours and CMS provides payment via two composite APCs that may be billed for 8-24 hours of care, with numerous services, documentation and time requirements. CMS has also stated that observation status is not a substitute for an inpatient admission. In the 2014 IPPS Final Rule (in an effort to simplify the determination process) CMS indicated that hospital visits that cross two midnights would be presumed inpatient if they include adequate physician notes validating medical necessity. Alternately, they indicated that a physician must “certify” the expectation of at least a 2 midnight course of hospital stay. As the AHA stated in their Friend of the Court Brief, “Hospitals are left in an untenable position. On the one hand, they risk loss of reimbursement, monetary damages, and penalties from auditors and prosecutors when they admit patients for short, medically necessary, inpatient stays. On the other hand, they face criticism from patients and CMS over the perceived use of observation services as a substitute for inpatient admission. Hospitals cannot win no matter how they handle the situation.”

 

Regardless of the outcome of this controversy, accurate and specific documentation is the common denominator. This means that CDI programs need to move beyond an inpatient financial driven focus and become more holistic. CDS staff may need to review observation cases to ensure documentation supports the most specific ICD-10 diagnoses that accurately reflect the severity of illness and risk of mortality. Staff should have tools that include information (by I-10 code) of the associated patient risk, quality, HAC, and denials information, along with strategies to assure accurate documentation. Staff can then communicate their concerns with case management/utilization or quality staff in an effort to address the issues concurrently. With the continued pressure on hospitals to do more with less and improve quality; CDI programs and tools must evolve to the next level.