One New Form in, Two to Go – And the Delicacy of Handling a Switch from Inpatient to Observation Billing

The first piece of news for today is that the Centers for Medicare & Medicaid Services (CMS) has finally released a new version of the Advance Beneficiary Notice of Non-Coverage, the ABN.

As I reported a few weeks ago, the new form is basically the same as the old form, but because the old form is expired, you must transition to the new form by May 12. This is a good opportunity to remind you that an ABN can be given in the emergency department for the Medicare patient who has had their medical screening examination and been found not to require hospital care, but still insists on hospitalization.

Interestingly, the new versions of the Important Message from Medicare (IMM) and Detailed Notice of Discharge (DND) have also received approval for release from the Office of Management and Budget (OMB), but as I write this on March 15, they have not been formally posted for use. I suspect that as you read this on March 18, they will be released, so check at this link.

Last week I was asked by a utilization review leader about rebilling an inpatient claim that was denied by a Medicare Advantage (MA) plan. The physician advisor reviewed the case, and although the patient stayed two days, the documentation and medical necessity for the second day were weak, and they chose to accept the denial. The MA plan informed them that they could submit an observation claim.

But when they asked the billing and coding staff to reprocess the claim with observation hours, the staff said they would not do it without an order from the physician added to the chart.

Now, this is not the first time I have heard this. And I understand the reluctance of the billing staff to place a service on the claim for which there is no order, but at the same time, it is not appropriate to ask a doctor for an order for a service after the patient is discharged when the patient never received that service.

In addition, the payer is not asking for a physician order; they are acknowledging that the patient received inpatient care but noting that they are willing to pay for that time as observation services – and they are instructing the hospital how to prepare the claim to get paid that revenue.  

And contrary to many policies from MA plans, this one has CMS’s support. The Medicare Managed Medicare Manual, Chapter 4 states that “MA plans need not follow original Medicare claims processing procedures. MA plans may create their own billing and payment procedures…”

It is rare, but in this case, the MA plan wants to give you money. Take it. Yes, that means having different procedures for different payers, but until we have single-payer healthcare, we just have to go along with the ambiguities in our system.

Speaking of different procedures for different payers, a close friend was recently hospitalized for an acute illness. They are about 50 years old and insured by Blue Cross commercial insurance. They were admitted inpatient.

The provider reviewed their medical record online and found the following statement: “This patient meets inpatient level of care because I expect the patient to be in the hospital, including time spent in the outpatient setting, for at least two days, because I am concerned for colitis.

I anticipate the patient to be discharged to home. I certify an admit to inpatient order has been entered. Services provided in accordance of section 42 CFR 412.3.”

Now, why is this doctor certifying this inpatient admission when no payer, including Medicare, requires certification of every admission? Why are they applying the Two-Midnight Rule to a commercial payer, and most importantly, since when does concern for any condition warrant inpatient admission?

I suspect that despite all that official language, Blue Cross is still likely to deny inpatient payment, but only time will tell.