Our country is in the midst of multiple crises and it is difficult to imagine if, or when we will...
MEDICARE ADVANTAGE + TWO-MIDNIGHT Rule Threshold for INPATIENT ADMISSIONS - How Are They Doing?
CMS-directed contract policy and technical updates went into effect on January 1st, 2024. For hospitals, the most important element may be CMS’s codifying the requirement that Medicare Advantage plans follow the two-midnight (2MN) threshold for inpatient status. We learned in a recent blog post (IMPROVING PROTECTIONS + NEW REGULATIONS for 2024 MEDICARE ADVANTAGE PLANS REGARDING the TWO-MIDNIGHT RULE) the new regulations and protections that came into effect regarding Medicare Advantage beneficiaries and how they relate to these payers following the Two-Midnight rule.
As 2024 began, and hospitals started using a 2MN threshold for inpatient status, the utilization management teams and physician advisors were braced for a tidal wave of denials from MA plans. Surprisingly, the wave hasn’t hit. In my discussions with hospitals and providers around the country, there has been little pushback from MA plans. The denial of inpatient stays < 3 midnights is running lower than expected, and the 2MN is being appropriately applied by the payers. When medical necessity for hospital-based care is present, and the length of stay is more than two-midnight, the payors are agreeing to inpatient payments. This is a welcome change, and we hope that the trend continues. However, it is more likely we are in the honeymoon period and denials will trend upward in the latter part of 2024. Hospitals should remain vigilant and continue to monitor short-stay cases ensuring that there is proper supporting documentation by the clinicians. For those hospitals that have not updated their UM policies and procedures to match the changes that took effect in January, we encourage you to reach out immediately to your Physician Advisor, our team at JBH-Solutions, or other content experts. Until the workflow is updated, there will be a daily negative impact on hospital revenue.
WHAT DO WE EXPECT?
As we mentioned earlier, the Medicare Advantage (MA) plans seem to be adhering to the two-midnight (2MN) threshold for inpatient (IPS) hospital stays. Given their track record, it is doubtful they will concede a major increase in the payments for IPS stays. Likely, the MA plans will not contest a 2MN inpatient (IPS) admission directly, since a patient’s length of stay is easy to substantiate. Instead, they will argue that there was inadequate medical necessity for the inpatient status.
For MA plans the formula is MEETS IPS CRITERIA (e.g. MCG, InterQual) + LOS > 2MN = IPS
However, the correct formula is REQUIRES HOSPITAL SERVICES (IPS or observation) + LOS> 2MN = IPS
Included in the second group are those who are hospitalized with observation services, and fail to meet discharge criteria prior to 2MN. This has been a perennial battle and stems from payers having an overly restrictive view of IPS. They can have difficulty understanding that observation services are hospital services. If we look at the reasons for CMS implementing the 2MN threshold, then the formula hospital services + LOS >2MN = IPS. The only exceptions would be system delays that contributed to 1+ days of unnecessary LOS, or a patient that is only receiving custodial care. If the payer can not show me evidence for either of these situations, then they should support IPS.
CMS has issued one of its strongest statements regarding the medical necessity criteria used by Medicare Advantage (MA) to issue a denial of services. The payers are now required to show the standards they use to deny or approve services.
CMS is finally addressing the common practice of MA plans using a black box process for issuing denials of Medically Necessary care. Until now, the insurance plan could effectively say “because we said so” when denying services that did not fit into standard NCD or LCDs. These changes will require the payors to show their work and provide the logic behind coverage criteria. If they are unable to do so, then by default the services must be covered.
HOW WILL HOSPITALS BE ABLE TO BEST ADAPT to THESE NEW GUARDRAILs + ENHANCE CARE? ARE HOSPITALS PREPARED FOR THE SHIFT?
With strict enforcement of a two-midnight threshold for inpatient status, it will be interesting to see if there is a spill-over effect on the clinical validation denials. If they can’t deny the inpatient stay, perhaps they can lower the hospital payment by changing the DRG (diagnostic-related group). Clinical validation denials occur when the hospital is requesting payment for DRG A, but the insurance company states the patient instead has DRG B. It should come as no surprise that the DRG preferred by the payor has a lower payment. I’ll often provide evidence during peer-to-peer (P2P) discussions that a patient meets the criteria for the original diagnosis. Despite this, the insurance medical director would still uphold the denial, stating they don’t follow those criteria (e.g. Acute Encephalopathy, or Acute Respiratory Failure). Yet they often do not have an alternative diagnostic set. In the rare cases where they have guidelines for a disease, the criteria may not be widely accepted for use in clinical practice (e.g. Sepsis 3). I believe that if the payor is acting in good faith, and has not adopted a specific criteria set for a diagnosis, then the payor should be obligated to accept the hospital’s. Clinical validation denials should be based on mutually accepted definitions of the disease, not the unilateral opinion of the payer’s medical director. We have seen that the hospitals most successful with averting clinical validation denials, or in winning the appeal, are those that have established criteria for the most commonly contested diagnoses.
If you are concerned you are missing opportunities to pivot with your team to this new reality, or want to optimize your UM or CDI services, contact us to help bring clarification and action. With a built-in Physician Advisor FHIR-based logic monitoring tool, you’ll identify frequently missed opportunities that drive early and substantial improvement in key performance metrics of the hospital. SAPHUR’s CART monitoring tool provides situational awareness to the care team during the patient’s outpatient or observation service window.
CMS issued on 2/6/24 an update regarding coverage criteria and utilization management requirements, you can read more here.
