ANOTHER ATTACK ON #HEALTHCARE PROVIDERS

Earlier this year, CMS distributed “Transmittal” 505 whose purpose was to notify #healthcare providers that as of March, 2014, when a #Medicare (and of course, it will eventually involve #Medicaid as well) patient’s hospital stay is denied as not being medically necessary, the same could happen to all “related” claims. As expected, there was a great hue and cry, and it was rescinded on the day it was supposed to take effect, but with the promise that they were going to revisit it.

As of September, 2014, it was revisited in “Transmittal 541” which does essentially the same thing. Moreover, it requires that all documentation that would make an admission and/or procedure “medically necessary” must be part of the hospital medical record, or it need not be considered. In short, no matter who well a physician has documented their office or clinic notes, and regardless of any “certifications,” if you don’t get those notes into the hospital medical record, both the payment for the admission and for procedure and consultation fees will be denied as well. Moreover, even if the hospital successfully appeals the denial, the other providers may be required to appeal their denials separately, thus unreasonably raising the bar for appeals.

The ability for the #RACs, #MACs, etc., to easily deny #hospital admissions on the basis of medical necessity is premised upon the concept of “#Observation Status.” While the word “Observation” appears nowhere in the statutes, the idea was invented to allow the denial of hospital payments based upon the idea that since an admitting physician may not know how long a patient will need to be in the hospital, they can be monitored in “Observation” for 24 – 48 hours and then, if needed, formally admitted as an inpatient. From a clinical perspective, this is irrelevant since a patient can be in Observation status anywhere from the Emergency Department to the ICU and the care would remain the same. So, what is different?

Observation is considered as an “outpatient” status and not covered under Part A of Medicare. If the patient is discharged after three days in the hospital, during which two days were designated as Observation, they have only been an inpatient for one day. For the first two days as an outpatient, they can even be billed, just as they would for other outpatient services, medications, etc. Moreover, if they transition to an inpatient rehabilitation or long term care facility, it will not be covered by Medicare because even though they were in the hospital for the required three days, only one of them was “inpatient” so the other two don’t count. Thus, they can expect another bill from the Rehab facility.

To add insult to injury, these “audits” are usually conducted months or years after the actual hospitalization, and CMS (as well as the rehab centers) attempt to recoup their payments from providers and patients, thus dumping unexpected liabilities on them with no expectation they would occur, and no ability to plan for them. Now, the same thing will begin to happen to physicians and others who take care of people in hospitals. I doubt many medical practices will survive too many retroactive denials.

Now is the time to act. Hospital associations, medical societies, nursing home associations and large group medical practices need to come together to finance litigation that can remove these payment landmines and stop the cost shifting from payers to providers before there are no financially viable providers left.