A new approach to inpatient admission status


The distinction between an inpatient admission (whether routine acute care or intensive care) and observation care has become a prominent billing and reimbursement concern.

Deciding whether a patient should be admitted as an inpatient or managed in observation is often confusing, controversial and clinically challenging. Physicians, not the hospital or its case managers, are responsible for making this determination. Regulations from the Centers for Medicare and Medicaid Services (CMS) do not permit anyone other than a clinician with admitting privileges to order inpatient admission versus observation care. Case managers are intended to be a decision- making resource to support and assist clinicians.

Photo by Thinkstock
Photo by Thinkstock.

The main reason it is important to distinguish between inpatient admission and observation care is that CMS pays substantially more for the former than the latter. If a patient is admitted as an inpatient and the hospital files a Part A inpatient claim when the patient's severity of illness and the intensity of resource utilization do not meet Medicare's expected standard for inpatient care, CMS may interpret this as a false claim for higher reimbursement.

With some exceptions, orders for inpatient versus observation care are usually irrelevant to commercial insurers and state Medicaid programs. Typically, those payers make their own decisions about the level of care to be paid, without regard to a physician's order. Nonetheless, documentation of patient acuity, intensity of services required, and the clinical reasoning that justifies an inpatient admission is critical to convince these payers that inpatient care is warranted or to appeal unfavorable decisions.

Guidelines like InterQual® and Milliman (now “MCG”), are often recommended and used as the standards to apply for admission decision making. They are based, at least in part, on information gleaned from the medical literature and have been clinically validated by their successful application for several decades now. They are also very detailed, complex and confusing, even to those schooled in their use.

Some of these “tried-and-true” criteria recently have been abandoned by InterQual in favor of entirely new definitions and descriptions whose clinical validity and necessity are questionable. Why would criteria confirmed by the medical literature and validated by decades of clinical application suddenly be discarded in favor of something new and untested by practical experience? Especially when some of the new requirements don't address the medical necessity of inpatient admission but rather constitute clinical performance measures like the National Hospital Inpatient Quality Measure Set (“Core Measures”)?

In reality, guidelines such as InterQual and MCG were never intended to be applied as requirements for admission decisions, replacing a physician's clinical judgment. Rather, they are supposed to be screening tools or guidelines that, when met, confirm the correct assignment of a patient to the most appropriate level of care (for example, acute inpatient, ICU, observation, etc.) without further question or discussion. When not met, these guidelines recommend additional documentation to support the assigned level of care, or further independent medical review by a physician to confirm the clinical safety, necessity and correctness of the level of care.

Over time, as the need emerged for an inpatient admission “gold standard,” these guidelines have improperly become the de facto authoritative standard for admission decisions, much to the consternation of physicians who are responsible, held accountable, and should be the ultimate authoritative experts for correctly assigning the clinically necessary level of patient care.

Does CMS require the use of such guidelines as InterQual and MCG? Absolutely not. CMS recommends admission guidelines as one of many factors to consider when making an admission decision, but it does not endorse any particular criteria, nor does it assign specific authority to them.

Who or what does CMS consider the final arbiter of the medical necessity and appropriateness of admissions to any level of care? Contrary to the conventional health care wisdom, it is the admitting physician, with the advice and support of case managers.

CMS has very clear regulatory standards, criteria and recommendations that actually empower physicians to apply their reasonable clinical judgment and knowledge of legitimate, expected standards of medical practice and guide them when making an inpatient medical necessity decision.

In next month's column, we will continue this discussion of the standards and criteria that CMS describes and expects to be considered and documented when an inpatient decision is made, and how physicians can apply their clinical experience, knowledge and judgment to validate their decisions in accordance with CMS requirements.

Disclaimer: The information above is the personal opinion of the author and does not represent the position of ACP. It does not constitute, and should not be considered, legal advice or a representation of authoritative statutory, regulatory, or contractual requirements for which legal counsel is necessary. It does not purport to offer medical advice for the care of patients or to establish any recommended medical standard of care, which remains the prerogative of all physicians who must exercise their own medical judgment.