A new rule about outpatient observation care for Medicare patients could mean more hurdles for hospitals and affect admissions.
On Oct. 1, a "two-midnight rule" established by the Centers for Medicare and Medicaid Services took effect, although a 90-day delay on enforcement will give health care providers time to get used to the changes.
Under the rule, Medicare patients have to spend at least two midnights in a row in a hospital to be classified as an inpatient. Those who spend less time will be given a status of outpatient or under observation. Hospitals receive a higher reimbursement rate for inpatients.
"This rule has a significant impact, not only on hospitals, but also for Medicare patients who will have more of a financial burden," said Porter Health Care System CEO Jonathan Nalli.
Medicare patients will be responsible for 20 percent of the cost of stays that do not meet the two-midnight benchmark, and Medicare will pay only for post-acute care in rehab or a skilled nursing facility after three inpatient days, Nalli said.
"If a physician expects a Medicare beneficiary’s treatment to require a hospital stay lasting at least two midnights, and admits the patient based on that expectation, the service will be covered under Medicare Part A," he said. "Episodes of care shorter than this will generally be classified as observation status, an outpatient service covered by Medicare Part B."
But, Dr. Alex Stemer, president of Franciscan Medical Specialists, expects out-of-pocket costs to go down in some cases.
"Patients who meet the two-midnight rule will experience lower out-of-pocket expense for some admissions that earlier may have been 48- to 72-hour observation stays," he said.
The full impact of the regulation on hospitals is unclear, Nalli said.
Gene Diamond, Franciscan Alliance Northern Indiana Region CEO, said hospital officials had early concerns about the impact, but an internal analysis showed the system won't be hit hard.
"We think it will have a negligible net impact, probably costing us some money, but overall it won't have a significant effect," he said.
There are enough patients who fall inside the rule and enough who fall outside the rule to consider it a "wash minus," Diamond said.
"The two-midnight rule is another wrinkle, another threshold we have to get past," he said.
An overarching issue is a shift in care management, said John Gorski, COO of the hospitals of Community Healthcare System.
Hospitals are having more responsibility in post-acute care, such as making sure there is someone to be at home with a patient after a hospital visit.
"That's a whole responsibility we haven't had in the past," he said. "It's a dramatic paradigm change in the way health care is provided."
Under the rule, the burden is on the hospital to decide more quickly whether a person needs to be admitted.
Community Healthcare System has added staff in utilization management to make sure patients are moved along fast enough to have a decision made within that time frame, he said.
At Methodist Hospitals, about 50 percent of the inpatients will fall within the new rule, CFO Matt Doyle said. He anticipates little change in how health care is provided to patients.
"The challenge has been to refine our current documentation to place all of the documentation elements which were already within the record in a central and easily accessible form for reference by (Centers for Medicare and Medicaid Services)," he said. "This rule brings new requirements for documentation by physicians when a patient is admitted to Methodist Hospitals as well as any hospital admitting Medicare patients. To assure that our physicians and our documentation processes comply with this rule, Methodist provided education to physicians about the new CMS guidance and developed an efficient method for physicians to assure that certification is complete."
The hospital leveraged its electronic medical record to help physicians provide necessary documentation, such as documenting the medical reason for inpatient services, estimated time required in the hospital and plans for post-hospital care, he said.
"The new rules are intended to address concerns about some Medicare beneficiaries having long stays in the hospital as outpatients and improve Medicare program integrity," he said.