Inpatient Hospital Reviews
On July 1, 2015, CMS released proposed updates to the “Two Midnight” rule regarding when inpatient admissions are appropriate for payment under Medicare Part A. The fact sheet detailing the proposed changes can be located at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-07-01-2.html.
At the same time, CMS notified the public of upcoming changes in our education and enforcement strategies. Those changes are detailed below:
Quality Improvement Organizations (QIOs)
Beginning on October 1, 2015, the QIOs will assume responsibility for conducting initial patient status reviews of providers to determine the appropriateness of Part A payment for short stay inpatient hospital claims. These reviews were previously conducted by the Medicare Administrative Contractors (MACs). From October 1, 2015 through December 31, 2015, short stay inpatient hospital reviews conducted by the QIOs will be based on Medicare’s current payment policies. Beginning on January 1, 2016, QIOs and Recovery Auditors will conduct patient status reviews in accordance with any policy changes finalized in the OPPS rule and effective in calendar year 2016.
Medicare Administrative Contractors (MACs)
MACs are currently conducting the third round of Inpatient Probe and Educate reviews, with an anticipated completion date of September 30, 2015 (although some provider education may continue beyond this date). After October 1, 2015, MACs may continue to conduct CMS-approved claim reviews unrelated to patient status (e.g., coding reviews, reviews to determine the medical necessity of the procedure conducted, etc.).
The congressionally-imposed moratorium on Recovery Auditor patient status reviews will expire on October 1, 2015 (Section 521 of the Medicare Access and CHIP Reauthorization Act of 2015, (Pub. L. 114-10)). However, CMS will not approve Recovery Auditors to conduct patient status reviews for dates of admission of October 1, 2015 through December 31, 2015.
Beginning in January 2016, Recovery Auditors may conduct patient status reviews only for those providers that have been referred by the QIO as exhibiting persistent noncompliance with Medicare payment policies, including, but not limited to: having high denial rates and consistently failing to adhere to the Two Midnight rule (including repeatedly submitting inappropriate inpatient claims for stays that do not span one midnight), or failing to improve their performance after QIO educational intervention. Recovery Auditors may continue to conduct reviews of short stay inpatient claims for other reasons, including CMS-approved claim reviews unrelated to patient status (e.g., coding reviews, reviews to determine the medical necessity of the procedure conducted, etc.).
Note: These changes in enforcement and education strategies will not affect the reviews conducted by the Comprehensive Error Rate Testing (CERT) contractor or those reviews conducted for the purpose of identifying fraudulent behaviors, such as Zone Program Integrity Contractor reviews.
Summary of Inpatient Status Reviews
Date of Admission
Through September 30, 2015
MACs conducting probe and educate.
October 1, 2015 through December 31, 2015
QIOs conducting reviews. MACs completing some remaining provider education.
January 1, 2016 and beyond
QIOs conducting initial reviews. RACs conducting further reviews upon referral by QIOs.
Probe & Educate Updated 4/30/2015
In accordance with the Medicare Access and CHIP Reauthorization Act of 2015, (Pub. L. 114-10), the Centers for Medicare & Medicaid Services (CMS) will continue the Inpatient Probe and Educate process until September 30, 2015, and will continue to prohibit Recovery Auditor inpatient hospital patient status reviews for dates of admission occurring between October 1, 2013 and September 30, 2015. CMS believes the Inpatient Probe and Educate process has improved provider understanding of the Two Midnight policy. CMS believes this extension will allow for continued education and promote further understanding of the policy.
Hospital Appeals Settlement Updated 6/11/2015
What's New: As of June 1, 2015, CMS has executed settlements with more than 1,900 hospitals, representing approximately 300,000 claims. CMS has paid approximately $1.3 billion to providers.
March 26, 2015- The Centers for Medicare & Medicaid Services (CMS) is in the process of completing Round 1 of the settlement process. Round 2 validations have begun. Settlement participants are encouraged to see the revised "Critical Steps for Providers in the Appeals Settlement Process" found in the Downloads section below for additional Round 2 instructions.
February 25, 2015- CMS hosted an informational call with Hospital Appeals Settlement Participants. The call provided information on the Round 2 process and allowed for a question and answer session. The transcript from this call can be found in the Downloads section below.
As noted in a Federal Register Notice released by the Office of Medicare Hearings and Appeals (OMHA) in January 2014, “the unprecedented growth in claim appeals continues to exceed the available adjudication resources to address [such] appeals…” CMS supports OMHA’s efforts to bring efficiencies to the OMHA appeals process.
CMS believes that the changes in Final Rule 1599-F (published in August 2013) will not only reduce improper payments under Part A, but will also reduce the administrative costs of appeals for both hospitals and the Medicare program.
To more quickly reduce the volume of inpatient status claims currently pending in the appeals process, CMS offered an administrative agreement to any hospital willing to withdraw their pending appeals in exchange for timely partial payment (68% of the net allowable amount). The deadline for hospitals to request settlement was October 31, 2014. CMS encouraged hospitals with inpatient status claims currently in the appeals process or within the timeframe to request an appeal to make use of this administrative agreement mechanism to alleviate the administrative burden of current appeals on both the hospital and Medicare system.
The following facility types were ELIGIBLE to submit a settlement request:
- Acute Care Hospitals, including those paid via Prospective Payment System (PPS), Periodic Interim Payments (PIP), and Maryland waiver; and
- Critical Access Hospitals.
The following facility types were NOT eligible to submit a settlement request:
- Psychiatric hospitals paid under the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS);
- Inpatient Rehabilitation Facilities (IRFs);
- Long-Term Care Hospitals (LTCHs);
- Cancer hospitals; and
- Children’s hospitals.
A full definition of each of these facility types can be found at §1886(d) or §1820(c) of the Social Security Act. This agreement applies to all eligible claims from eligible providers. Eligible claims are those denied by a Medicare contractor on the basis that services may have been reasonable and necessary but treatment on an inpatient basis was not, that are either under appeal or within their administrative timeframe to request an appeal review, with dates of admissions prior to October 1, 2013, and where the patient was not a Part C enrollee. The hospital could not choose to settle some claims and continue to appeal others. Certain hospitals could be excluded from this settlement opportunity based on pending False Claims Act litigation or investigations.
To request such an agreement, hospitals followed the process in the Downloads section below "Hospital Participant Settlement Instructions".
Round 1: Hospital submits their proposed spreadsheet of eligible claims/appeals for CMS review, along with a signed Administrative Agreement. CMS validates the information and notifies the hospital if there are any discrepancies from the contractor eligible claims list. Proceedings on all eligible pending appeals will be stayed.
- If CMS has identical information to that submitted, the original agreement is countersigned by CMS, and payment will be provided. The impacted appeals will be dismissed.
- If discrepancies are identified, the subset of agreed upon claims are made the subject of an initial agreement signed by both parties, payment is provided, and the impacted appeals will be dismissed. The subset of claims in which there is disagreement regarding eligibility will continue on to the second round of review. Appeals will continue to be suspended as the settlement is reviewed.
Round 2: Hospital will review the discrepancies from the first round validation process and resubmit a revised spreadsheet and Administrative Agreement for CMS validation within 2 weeks of receipt.
- If CMS has identical information to that submitted, the original agreement will be countersigned by CMS, and payment will be provided within 60 days. The included appeals will be dismissed.
- If discrepancies are identified, CMS and the hospital will conduct Round 2 discussions until both parties are in agreement, and a new agreement will be signed for payment. The impacted appeals will be dismissed.
All Settled claims are subject to additional review at a later date to verify eligibility to be included in this settlement. As stated in the Administrative Agreement, CMS retains the right to recoup any duplicate or incorrect payments made for claims that were, but should not have been, included under this Agreement.
Hospitals seeking general information regarding the process can listen to a recording of a teleconference held on September 9. The recording is posted here.
See the downloads section below for the most recent frequently asked questions. Email any questions to MedicareSettlementFAQs@cms.hhs.gov.
CMS posted a REVISED Eligible Claim Spreadsheet on September 9.
CMS posted a REVISED Administrative Agreement on September 19, which resolved an issue with the fillable hospital name field being too short for some hospital names.
Effective 10/15/2014, if a hospital was unable to produce a list of all eligible claims in a timely manner, the hospital could submit a request for a "Potentials List". For more information on this process, see "Hospital Participant Settlement Instructions" in the Downloads section below.
Probe & Educate Updated 4/1/2015
On April 1, 2014, The President signed the Protecting Access to Medicare Act of 2014. Section 111 of this law:
- Permits CMS to continue medical review activities under the MAC Probe & Educate process through March 31, 2015, and
- Prohibits CMS from allowing the Recovery Auditors to conduct inpatient hospital patient status reviews on claims with dates of admission October 1, 2013 through March 31, 2015.
Prior to the passage of this law:
- CMS had planned to operate the MAC Probe and Educate process until at least September 30, 2014, and
- CMS had prohibited the Recovery Auditors from conducting inpatient hospital patient status reviews on claims with dates of admission October 1, 2013 through September 30, 2014.
CMS will continue the Probe & Educate process through March 31, 2015, and will continue to prohibit Recovery Auditor inpatient hospital patient status reviews for dates of admission occurring between October 1, 2013 and March 31, 2015.
All MACs have completed the first probe reviews and associated education. ALL MACs have begun their second probe reviews with some providers having already completed the second probe.
CMS recently instructed MACs that, time permitting and prior to the March 31, 2015 end of the Probe and Educate period, any provider who has completed the second probe and is identified as being of major concern may be subject to an additional follow up probe. The follow up probe will include a claim sample of the same size (10 or 25 claims) as probe 1 and probe 2.
The remainder of this website and related content will continue to be updated to reflect this extension.
1. Additional Clarification of Guidance on the Physician Order and Physician Certification for Hospital Inpatient Admissions
CMS has released additional clarification on the provisions of the final rule regarding the physician order and physician certification of hospital inpatient services. This guidance can be found on the CMS Hospital Center website, http://www.cms.gov/Center/Provider-Type/Hospital-Center.html.
2. Reopenings and Appeals of Inpatient Probe and Educate Claims
On August 2, 2013 the Centers for Medicare & Medicaid Services (CMS) issued a final rule, CMS-1599-F, updating fiscal year FY 2014 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital Prospective Payment System (LTCH PPS). The final rule modifies and clarifies CMS’s longstanding policy on how Medicare contractors review inpatient hospital and critical access hospital (CAH) admissions for payment purposes. CMS subsequently released guidance on September 5, 2013 and January 30, 2014 that clarified the physician order and physician certification requirements for hospital inpatient admissions.
CMS requested that the Medicare Administrative Contractors (MACs) re-review all claim denials made under the Probe & Educate process between October 1, 2013 and January 31, 2014 to ensure the claim decision and subsequent education is consistent with the most recent clarifications. The MAC may reverse their decision and issue payment outside of the appeals process if the MAC determines that a claim is payable upon re-review. Therefore, CMS urged providers to work with their MACs to determine if a claim has undergone final adjustment (in other words, was re-reviewed) prior to submitting an appeal request. To ensure that the re-review process does not affect the ability of a provider to file a timely appeal of a denied claim, CMS will waive the 120 day timeframe for filing redetermination requests received before September 30, 2014 for claim denials under the Probe & Educate process that occurred on or before January 30, 2014.
Claim denials under the Probe & Educate process that occurred on or before January 30, 2014 for which an appeal has been filed will also be subject to re-review. Claims determined payable following re-review will be adjusted accordingly. Claims for which the denial is affirmed following re-review will be transferred to appeals automatically for a redetermination.
Providers can access the September 5, 2013 and January 30, 2014 documents here.
On August 2, 2013 the Centers for Medicare & Medicaid Services (CMS) issued a final rule, CMS-1599-F, updating fiscal year FY 2014 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital Prospective Payment System (LTCH PPS). The final rule modifies and clarifies CMS’s longstanding policy on how Medicare contractors review inpatient hospital and critical access hospital (CAH) admissions for payment purposes. Under this final rule, surgical procedures, diagnostic tests and other treatments (in addition to services designated as inpatient-only), are generally appropriate for inpatient hospital admission and payment under Medicare Part A when (1) the physician expects the beneficiary to require a stay that crosses at least two midnights and (2) admits the beneficiary to the hospital based upon that expectation. This policy responds to both hospital calls for more guidance about when a beneficiary is appropriately treated—and paid by Medicare—as an inpatient, and beneficiaries’ concerns about increasingly long stays as outpatients due to hospital uncertainties about payment.
The final rule clarifies that the timeframe used in determining the expectation of a stay surpassing two midnights begins when care in the hospital begins. This will include outpatient observation services or services in an emergency department, operating room or other treatment area at the hospital. While the final rule emphasizes that the time a beneficiary spends as an outpatient before the formal inpatient admission order is not inpatient time, the physician—and the Medicare review contractor—may consider this period when determining if it is reasonable to expect the patient to require hospital care spanning two or more midnights as part of an admission decision. Except in cases involving services on the inpatient-only list and in certain other rare and unusual circumstances (See Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013), documentation in the medical record must support a reasonable expectation of the need for the beneficiary to require a medically necessary stay lasting at least two midnights. If the inpatient admission lasts fewer than two midnights due to an unforeseen circumstance, this must also be clearly documented in the medical record.
Please refer to the Related Links section below to access the final rule "FY2014 Hospital IPPS Final Rule CMS-1599-F".
Please refer to the Downloads section below to access "Questions and Answers Relating to Patient Status Reviews." This document has been updated, and includes any updates to previously released questions and responses.
Inpatient Hospital Reviews
CMS is issuing guidance about how we will review 1) inpatient hospital claims impacted by the Final Rule and 2) inpatient hospital claims not impacted by the Final Rule.
1. Reviews Impacted by CMS-1599-F
CMS will conduct prepayment patient status probe reviews for dates of admission on or after October 1, 2013 but before March 31, 2015.
Medicare Administrative Contractors (MACs) will conduct patient status reviews using a probe and educate strategy for claims submitted by acute care inpatient hospital facilities, Long Term Care Hospitals (LTCHs) and Inpatient Psychiatric Facilities (IPFs) for dates of admission on or after October 1, 2013 but before March 31, 2015.
- MACs will select a sample of 10 claims for prepayment review for most hospitals (25 claims for large hospitals).
- Based on the results of these initial reviews, MACs will conduct educational outreach efforts and repeat the process where necessary
For more information please see “Selecting Hospital Claims for Patient Status Reviews" in the Downloads section below and “Reviewing Hospital Claims for Patient Status" in the Downloads section below.
In general, CMS will not conduct post-payment patient status reviews for claims with dates of admission October 1, 2013 through March 31, 2015.
Recovery Audit Prepayment Demonstration Reviews
Recovery Auditors will not conduct pre-payment patient status reviews for claims with dates of admission October 1, 2013 through March 31, 2015. Recovery Auditors may continue to conduct CMS-approved claim reviews, unrelated to the appropriateness of the inpatient admission (i.e. patient status).
2. Reviews Not Impacted by CMS-1599-F
Other Inpatient Hospital Reviews
MACs, Recovery Auditors and the Supplemental Medical Review Contractor will continue other types of inpatient hospital reviews, including, but not limited to:
- Coding reviews
- Reviews for the medical necessity of a surgical procedure provided to a hospitalized beneficiary
- Inpatient hospital patient status reviews for dates of admission prior to October 1, 2013 (based on the applicable policy at the time of admission)
Recovery Audit Reviews
- Recovery Auditors may conduct automated reviews or complex reviews, for previously approved issues unrelated to CMS-1599-F for dates of services prior to October 1 2013, which may continue through June 1 2014.
Other Circumstances Supporting Short Inpatient Stays
CMS identified in the final rule and provider outreach circumstances in which the physician’s expectation of a required hospital stay spanning two or more midnights was reasonable, and Part A payment would be generally appropriate, despite an unforeseen circumstance that result in the beneficiary’s length of the stay being shorter (i.e., unforeseen beneficiary death, unforeseen transfer, unforeseen departure against medical advice, and unforeseen clinical improvement). CMS also provided that procedures defined as “Inpatient-Only” are exceptions to the 2-midnight benchmark, and may be appropriately furnished on an inpatient basis regardless of the beneficiary’s length of stay, but do not constitute an all-inclusive list.
Other circumstances where an inpatient admission would be reasonable in the absence of an expectation of a 2 midnight stay should be rare and unusual. To date, CMS has identified “Mechanical Ventilation Initiated during Present Visit” as the only rare and unusual circumstance in which the 2-midnight benchmark would not apply (see “Reviewing Hospital Claims for Patient Status" in the Downloads section below). CMS will work with the hospital industry and with MACs to determine if there are any categories of patients that should be added to this list. Suggestions should be emailed to SuggestedExceptions@cms.hhs.gov with “Suggested Exceptions to the 2-Midnight Benchmark” in the subject line. If any rare and unusual exceptions are identified by CMS, these will be provided through subregulatory instruction.
- Questions and Answers Relating to Patient Status Reviews 3/12/14 [PDF, 324KB]
- Special Open Door Forum Transcript: Thursday, September 26, 2013 [PDF, 175KB]
- Critical Steps for Providers on the Appeals Settlement Process (updated 2/20/2015) [PDF, 168KB]
- Update on Probe & Educate Process 2/24/2014 [PDF, 86KB]
- Adminstrative Agreement (9/16/14) [PDF, 68KB]
- Hospital Participant Settlement Instructions (updated 2/20/2015) [PDF, 239KB]
- Eligible Claim Spreadsheet (updated 9/9/14) [XLSX, 29KB]
- Hospital Appeals Settlement FAQs (updated 10/31/2014) [PDF, 467KB]
- Hospital Appeals Settlement Call_2-25-15 [PDF, 338KB]
- Page last Modified: 08/12/2015 1:17 PM
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