On July 6, 2012, CMS released the Hospital Outpatient Prospective Payment Proposed Rule (CMS-1589-P).  In the preamble discussion of the proposed rule, CMS acknowledges the multifaceted issues associated with a beneficiary’s patient status and Medicare hospital payment.  In particular, CMS discusses concerns regarding how it can make changes to help reduce the error rate with respect to the medical necessity of inpatient hospital stays, reduce the amount of time that patients spend in observation, and reduce the impact on hospitals of subsequent inpatient denials. CMS is soliciting public comments on the following topics, among others:

  • “Whether it may be appropriate and useful to establish a point in time after which the encounter becomes an inpatient stay if the beneficiary is still receiving medically necessary care to treat or evaluate his or her condition;”
  • Whether the agency should “establish more specific criteria for patient status in terms of how many hours the beneficiary is in the hospital, or to provide a limit on how long a beneficiary receives observation services as an outpatient;”
  • Whether the agency should provide additional clarity in the definition of an inpatient; and
  • Whether the agency should establish “more specific clinical criteria for admission and payment, such as adopting specific clinical measures or requiring prior authorization for payment of an admission.”

CMS also notes that it is currently accepting hospital applications to participate in the 3-year Medicare Part A to Part B Rebilling (AB Rebilling) Demonstration which began on January 1, 2012.  This demonstration allows the hospital participants to rebill outside of the usual timely filing requirements for services relating to all inpatient short-stay claims that are denied for lack of medical necessity.  Under the demonstration, participating hospitals will waive any appeal rights associated with the denied inpatient claims eligible for rebilling.  Additional information regarding this demonstration is available by clicking here

The unpublished proposed rule is available here.  The proposed rule is scheduled to be published in the July 30, 2012 Federal Register.