Source: https://www.medicareadvocacy.org/observation-services-what-can-beneficiaries-and-advocates-do/
Timestamp: 2019-04-21 12:22:19+00:00

Document:
Observation Services: What Can Beneficiaries and Advocates Do?
Being in a hospital bed in a Medicare-participating hospital is no guarantee that a Medicare beneficiary is an inpatient. In our December 11, 2008 Alert, the Center for Medicare Advocacy described the increasingly common practice of placing Medicare beneficiaries in acute care hospital beds and calling them outpatients.
At the same time that the use of observation services is becoming more extensive by hospitals throughout the country, some beneficiaries who have appealed the denials of their hospital stays have been successful. This article describes a new brochure from the Centers for Medicare & Medicaid Services (CMS) – CMS's first description of observation services for beneficiaries. It also discusses three recent favorable decisions – two at the Administrative Law Judge level of appeal and a third at the level of the Qualified Independent Contractor (QIC), Maximus Federal Services. A fourth case, which is not about observation services, addresses the InterQual criteria and process that are used by hospitals to determine whether a patient is receiving inpatient care.
The Manuals suggest that a patient may not remain in observation status for more than 24 or 48 hours. Since 2004, CMS has authorized hospitalization utilization review (UR) committees to change a patient's status from inpatient to outpatient, retroactively, if (1) the change is made while the patient is still hospitalized; (2) the hospital has not submitted a claim to Medicare for the inpatient admission; (3) a physician concurs in the UR committee's decision; and (4) the physician's concurrence is documented in the patient's medical record. CMS anticipated that retroactive reclassifications would occur infrequently, "such as a late-night weekend admission when no case manager is on duty to offer guidance."
A new six-page CMS brochure entitled "Are You a Hospital Inpatient or Outpatient?" begins with the statement, "Did you know that even if you stay in the hospital overnight, you might still be considered an 'outpatient'?" The brochure suggests that patients who are in the hospital for "more than a few hours" ask their doctor or hospital staff if they are inpatients or outpatients.
The brochure incorrectly suggests in two places that decisions to place a beneficiary in observation are made by the beneficiary's own physician. In fact, CMS allows any physician to confirm a decision by a hospital's UR committee to reverse an inpatient admission decision made by an attending physician.
Even more significant, while the brochure may give beneficiaries notice of their status as observation patients, it does not give them any rights to challenge their placement in observation. The brochure's discussion of "rights" says only that beneficiaries have the right to "get a review of (appeal) certain decisions about health care payment, coverage of services."
In January 2010, Administrative Law Judge (ALJ) P. Arthur McAfee overruled a decision by Maximus Federal Services and held that a Medicare beneficiary's entire five-day stay in an acute care hospital should have been covered by Medicare Part A.
The beneficiary's physician had ordered that she be admitted "for inpatient care secondary to a diagnosis of an L1 compression fracture." Her condition was "fair" and she required monitoring, assessment, and intravenous fluids, including multiple doses of intravenous morphine. On her third day in the hospital, October 25, 2008, she was notified that her status was being changed from inpatient to outpatient. On appeal, the Quality Improvement Organization (QIO) found that inpatient coverage was appropriate for days three through five, October 25-27. The QIO did not review the beneficiary's observation status for the first two days of her hospital stay. On appeal, Maximus issued an unfavorable decision, finding that the claim had already been processed for payment.
the decision to admit a patient [as] a complex medical judgment which can be made only after the physician has considered a number of factors, including the patient's medical history and current medical needs, the types of facilities available to inpatients and to outpatients, the hospital's by-laws and admissions policies, and the relative appropriateness of treatment in each setting.
Relevant factors to be taken into consideration include "the severity of the signs and symptoms exhibited by the patient," "the medical predictability of something adverse happening to the patient," "the need for diagnostic studies that appropriately are outpatient services," and "the availability of diagnostic procedures at the time when and at the location where the patient presents." He also cited Chapter 1, §10 of the MBPM, which uses "a 24-hour period as a benchmark" and wrote, "physicians should order admission for patients who are expected to need hospital care for 24 hours or more."
The second Manual relied on by the ALJ was the QIO Manual, which gives guidance to QIOs on reviewing inpatient hospital admission decisions and directs a physician reviewer to "consider, in his/her review of the medical record, any preexisting medical problems or extenuating circumstances that make admission of the patient medically necessary." Inpatient care is "required only if the patient's medical condition, safety, or health would be significantly and directly threatened if care was provided in a less intensive setting."
Applying these criteria, the ALJ reversed Maximus's denial of inpatient status for the beneficiary's entire five-day stay, finding "The documentation provides no foundation to go against the judgment of the admitting physician."
A second favorable decision, issued by Maximus on November 10, 2009, involved "a 79-year old man who presented to the emergency room (ER) from his assisted living facility with progressive altered mental status over the prior week." The man had been "fully oriented," but at the time he was brought to the ER, he was "quite disoriented" or delirious.
The Maximus decision recognized that "Delirium represents an acutely life-threatening condition, evaluation and management of which can be complex and extended." Although it turned out that the management of the patient was not complex, Maximus wrote, "it was not reliably predictable at the time of admission that the necessary work-up of the balance of the differential diagnosis would have been able to be completed within a reasonable period of hospital observation." Relying on the Medicare Benefit Policy Manual, Pub. 100-2, Chapter 1, §10, the same provision relied on by the ALJ in the decision discussed above, and on the Program Integrity Manual, Pub. 100-8, Chapter 8, §6.5.2, Maximus authorized inpatient hospital coverage for the entire five-day period.
The fourth decision addressed whether a Medicare Advantage beneficiary's inpatient hospital admission ended, as set out in the Notice of Denial of Medicare Coverage, or should continue. The ALJ discussed the hospital's reliance on InterQual criteria, which are also used in observation cases to determine whether a beneficiary should be classified as an inpatient.
At the ALJ level, the hospital was required to produce the patient's complete medical records, the CareEnhanced Review Manager Enterprise (CERME), and the InterQual/McKesson Manual. The ALJ found "a significantly limited independent review of the approximately 6000 pages of medical records in this case [italics in original]" by the QIO physician who cited physical therapy notes, wound care notes, and a single physician note in upholding the discharge notice. He then described the InterQual Manual and CERME as proprietary tools that are used for various purposes, including "coverage denial management programs." He wrote, "Information is obtained from patient medical charts and from other captured data which is input into a software program that generates a summary report." Although the ALJ sealed the InterQual and CERME documents because they were proprietary, he found that "the inputs are very subjective" and that, in this case, they were "inconsistent with the known medical treatment" provided to the patient, as described in her medical records. He concluded that the patient's inpatient stay was medically necessary and that Medicare coverage properly continued after the beneficiary received the notice denying further coverage.
In all cases, beneficiaries and their advocates should gather the complete medical records from the hospital to establish the entire set of services and treatments that were received during the period of hospitalization. Advocates should request copies of all documents used by the hospital, its UR committee, and outside consultants to determine beneficiaries' status. Advocates should present the medical and nursing facts and cite any physician support for inpatient status to demonstrate that the beneficiary met Medicare's criteria for an inpatient stay. If SNF coverage is also at issue, advocates must demonstrate not only that the beneficiary met the criteria for Medicare-covered care in the SNF but also that the beneficiary received Medicare-covered care in the SNF.
The increasing use of administratively-created observation services is undermining the Medicare Part A hospital benefit, which authorizes inpatient hospital care for both diagnosis and treatment, by essentially redefining diagnosis as observation under Part B. Observation services also violate the Medicare statute by allowing hospital UR committees to issue retroactive and binding determinations that a patient, admitted to inpatient status by the patient's attending physician, is instead receiving observation services.
The Center for Medicare Advocacy is interested in hearing from advocates and beneficiaries about their experiences with observation services, including issues stemming from the lack of notice and the inability to use existing appeals processes.
 "When Is a Hospital Stay Not a Hospital Stay? When the Patient Is in 'Observation Status," (Dec. 11, 2008 Weekly Alert), http://medicareadvocacy.org/InfoByTopic/SkilledNursingFacility/SNF_08_12.11.ObservationStatus.htm.
 CMS, "Clarification of Medicare Payment Policy When Inpatient Admission Is Determined Not To Be Medically Necessary, Including the Use of Condition Code 44: 'Inpatient Admission Changed to Outpatient,'" MedLearn Matters (Sep. 10, 2004), now at Medicare Claims Processing Manual, CMS Pub. No. 100-04, Ch. 1, §50.3. "Use of Condition Code 44 is not intended to serve as a substitute for adequate staffing of utilization management personnel or for continued education of physicians and hospital staff about each hospital's existing policies and admission protocols. As education and staffing efforts continue to progress, the need for hospitals to correct inappropriate admissions and to report condition code 44 should become increasingly rare." Question and Answer 3.
 "Your doctor may order 'observation services' to help decide whether you need to be admitted to the hospital as an inpatient or can be discharged," page 4; and fifth example in the chart, page 3, indicates that if "your doctor" admits you as an in-patient and the hospital later changes your status to out-patient, "your doctor must agree."
 The ALJ described the Manual as requiring medical reviewers to "consider any pre-existing medical problems or extenuating circumstances that make admissions of the beneficiary medically necessary."
 The Medicare statute defines "hospitals" as providing both diagnostic and treatment services to inpatients. 42 U.S.C. §1395x(e)(1)(A). It similarly defines "inpatient hospital services" to include diagnostic or treatment services. 42 U.S.C. §1395x(b)(3).

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