CMS has finalized its proposal to require a physician order for hospital inpatient admission as a condition of payment for inpatient services under Medicare Part A.  The formal admission order must be documented in the patient’s medical record (at or before the time of inpatient admission) and must be supported by the physician admission and progress notes.  The order must be signed by a qualified, licensed practitioner with admitting privileges who is responsible for the patient’s care.  CMS states that a verbal admission order is not a substitute for a properly documented and authenticated order for inpatient admission.  A verbal order must be properly countersigned by the practitioner who gave the order.  CMS has stated that it will further develop its requirements regarding verbal orders for inpatient admission in subregulatory guidance.

CMS has also clarified that the statutory certification requirement, which requires a physician to certify that services must be furnished on an inpatient basis, applies to all inpatient admissions (not just extended stays).  In addition to the inpatient admission order, the reason(s) for continued hospitalization must be documented in the medical record in order for inpatient services to be paid under Medicare Part A.  Certification statements must be signed and documented in the medical record prior to discharge (except for recertifications of extended stays, which are required earlier).

CMS has finalized its proposed “2-midnight” benchmark for the medical necessity of an inpatient stay.  Under the modified inpatient admission guidelines adopted in the Final Rule, Part A payment is “generally inappropriate” unless the patient is admitted based on the physician’s expectation that the patient will require a hospital stay that crosses at least 2 midnights (or the planned procedure is on the inpatient-only list).  The physician’s expectation of time and determination of need for inpatient care must be supported by “complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event.”  If the physician cannot reliably predict that the beneficiary will require a stay that transcends 2 midnights, CMS states that the physician should continue to treat the beneficiary as an outpatient until such time as a 2-midnight stay is anticipated.  Under the Final Rule, the starting point for the 2-midnight estimate begins with the patient’s initial outpatient service.  If the patient has already passed 1 midnight as an outpatient, admission would be considered appropriate if the physician expects the patient to require at least 1 additional midnight in the hospital.  (This is a change from the Proposed Rule, which would have started the “2-midnight” clock beginning with the time the beneficiary is moved from an outpatient area to an inpatient bed.)

Situations in which the admitting physician properly includes prior outpatient time in the 2-midnight assessment may nevertheless be scrutinized by Medicare review contractors.  CMS has finalized a “2-midnight presumption” for purposes of medical review of inpatient admissions.  Inpatient hospital stays are presumed to be generally appropriate for Part A payment if they cross 2 midnights after the formal admission order.  Review efforts by Medicare review contractors will focus on inpatient stays that cross only 1 midnight or less after the formal admission order is written.  In these situations, review contractors will evaluate (a) the physician admission order and physician certification; (b) documentation supporting the physician’s expectation that care would span at least 2 midnights; and (c) documentation supporting the decision that it was reasonable and necessary to keep the patient at the hospital to receive such care.  In evaluating claims, Medicare review contractors will “apply the 2-midnight benchmark to all time spent within the hospital receiving medically necessary services.”

CMS estimated that 360,000 cases would move from inpatient to outpatient status as a result of the “two midnight” presumption, but that 400,000 cases would move from outpatient to inpatient status, with a net cost to the Medicare program.  This is why CMS reduced the IPPS update by 0.2 percent.  Commenters had pointed out that CMS’s estimate of cases moving from inpatient to outpatient status does not match the data it reported in the Proposed Rule regarding the number of one-day stays.  CMS continued, however, with its proposal to reduce the IPPS rate to reflect what it continued to claim would be a net cost to the Medicare program.

The Final Rule is available from the Office of the Federal Register website by clicking here.  The Final Rule is scheduled to be published in the August 19, 2013 Federal Register.