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CMS Releases Proposed Rule Regarding Hospital Inpatient Admissions

On April 26, 2013, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to clarify when a Medicare beneficiary is appropriately admitted to a hospital as an inpatient and what is required for Medicare Part A payment of hospital inpatient services. In this rule, CMS proposes a time-based presumption of medical necessity for hospital inpatient services based on the beneficiary’s length of stay. More specifically, RACs and other Medicare contractors would presume that hospital inpatient admissions are appropriate for payment under Medicare Part A if the beneficiary is admitted to the hospital pursuant to a physician order and receives care for at least two midnights. Similarly, there would be a presumption that hospital inpatient admissions spanning less than 2 midnights should have been provided on an outpatient basis, unless there is clear documentation in the medical record supporting the physician’s order and expectation that the beneficiary would require care spanning more than 2 midnights or the beneficiary is receiving a service or procedure designated by CMS as inpatient-only. In contrast, CMS’s current manual instructions indicate that physicians should use a 24-hour period and the expectation of a beneficiary’s need for an overnight stay in the hospital as inpatient admission benchmarks. In reviewing inpatient stays that did not reach the 2 midnight threshold, RACS and other Medicare contractors will be instructed to employ factors similar to those currently included in the Medicare Benefit Policy Manual (MBPM) to determine the medical necessity of the inpatient admission. These factors include, for example, the severity of the signs and symptoms exhibited by the patient and the medical predictability of something adverse happening to the patient. Later in the proposed rule, however, CMS indicates that it will codify the general 2 midnight threshold rule at 42 CFR 412.3(c)(1) and that 42 CFR 412.3(c)(2) would include an exception stating that “…if an unforeseen circumstance, such as beneficiary death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and the hospital inpatient payment may be made under Medicare Part A.” This language tends to suggest that a Medicare contractor’s review of an inpatient admission of less than 2 midnights will focus less on the clinical factors listed above, and more on “unforeseen circumstances.” Clarification will likely be sought during the open comment period.

In addition, the proposed rule also clarified the requirement that a patient is admitted as an inpatient only on the recommendation of a physician or licensed practitioner permitted by the State to admit patients to the hospital. The proposed rule explained that this requirement is understood to mean that a patient is admitted through an inpatient admission order given by the practitioner responsible for the care of the patient, provided that the practitioner, either a physician or other licensed practitioner, has been authorized by the State and granted admitting privileges by the hospital. However, CMS clarifies that although the Conditions of Participation (CoPs) do not specifically prohibit the delegation of an inpatient admission to a non-physician practitioner, for payment purposes CMS will clarify in regulation that the authority to admit cannot be delegated to an individual who lacks that authority in his or her own right.

This proposed policy is intended to address longstanding concerns from hospitals that they need more guidance on when a patient is appropriately treated and paid by Medicare as an inpatient. Although CMS’ proposed rule provides some clarity on how a medically necessary inpatient admission would be defined by a Medicare review contractor, it raises other questions, particularly how Medicare review contractors will review inpatient admissions spanning less than 2 midnights. Please note that CMS will accept comments on the proposed rule until 5:00 p.m. EST on June 25, 2013. The comments must be received by that time and date, not postmarked. CMS will respond to comments in a final rule to be issued by August 1, 2013.

If you have any questions regarding CMS’s proposed rule or questions regarding the RAC appeals process, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888 or

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