Inpatient and Observation Status with Utilization Management

The meeting begins with introductions of the Utilization Management Department team, including Lance Russell and Cheryl Smith, who will discuss inpatient versus observation status. The focus is on addressing challenges related to new hires and existing staff struggling with differentiating between inpatient and observation. Key topics include conversion rates and decision-making processes for patient status.

Lance Russell begins by explaining the purpose of the Utilization Management department, emphasizing risk management, regulatory compliance, and ensuring necessary care for patients. Importance is placed on correctly determining patient status due to its financial implications, particularly concerning Medicare and Medicaid regulations. The concept of medical necessity is introduced, including its impact on billing.

Discussion on medical necessity continues. Medical necessity is defined as care or treatment deemed reasonable and necessary according to evidence-based standards. Various payer-specific protocols such as those from Blue Cross and Medicare are highlighted. Tools like Milliman Care Guidelines and the Interqual Level of Care Criteria are used to assess medical necessity. Emphasis is on the financial impact of non-compliance, which leads to denials.

The focus shifts to the importance of accurate documentation and determination of inpatient versus observation status, a critical aspect due to payer regulations. Russell notes that inpatient and outpatient are the two main statuses, with observation being a service rather than a status. Emphasis is placed on reviewing all admissions within the first 24 hours to ensure accurate status.

Patient status impacts are discussed from multiple perspectives, including providers, patients, and hospitals. The financial health of hospitals is tied to accurate status determination. Proper documentation is highlighted as a defense against audit risk. Medicare's payment structure (Part A for inpatient, Part B for outpatient) is explained, noting implications for deductibles and copayments.

Russell explains inpatient status using Medicare definitions, highlighting the importance of admission orders and documentation of complex medical factors. The 'two midnight' rule under Medicare is introduced, explaining how it generally applies to admissions expected to last over two midnights. Proper documentation of this expectation in medical records is stressed as crucial.

The talk covers exceptions to the two midnight rule and the importance of documentation in these cases. Reasons for early discharge such as improvement, transfer, or leaving against medical advice are noted. Any changes in status must be carefully documented to support medical necessity. Attempts to backdate orders are strictly prohibited due to compliance risks.

Observation status is defined as short-term, time-limited care for decision-making on whether a patient should be admitted. Limits on time for observation under Medicare, Medicaid, and commercial payers are noted. Common conditions suitable for observation are listed. The importance of documentation in justifying observation over inpatient status is reiterated.

The process of documenting two midnight expectations and the necessity of clear, concise progress notes are discussed. Poor documentation examples are addressed, highlighting issues like copy-pasting and lack of medical necessity justification. The impact of inadequate documentation on denials and financial repercussions for hospitals is emphasized.