The Office of Inspector General (“OIG”) released the results of an audit in April 2022 in response to widespread, persistent problems pertaining to inappropriate Medicare Advantage (“MA”) denials. The findings of the OIG review illustrated what many health care entities were painfully aware of; some Medicare Advantage Organizations (“MAO’S”) delayed or denied MA beneficiaries access to services even though they would have been covered through traditional Medicare coverage rules.
Background
Inpatient hospital denials by MAO’s are frequently based on proprietary or commercially available criteria, such as Milliman Clinical Guidelines (“MCG”) or Interqual. The OIG report articulated that claims meeting traditional Medicare requirements were denied 18% of the time. Based on these findings, the OIG recommended the Center for Medicare and Medicaid Services (“CMS”) issue new guidance on the appropriate use of MAO clinical criteria for medical necessity reviews and update its audit protocols.
In December 2022, CMS responded with proposed rule CMS-4201-P, which addresses this, and other concerns outlined in the OIG report. A major portion of the proposed rule focuses on the use of medical necessity tools in determining payment for inpatient admissions. CMS-4201-P further strengthens the existing, long-standing rules found in the Medicare Managed Care Manual Benefit Policy Manual, codified at 42CFR 422.101, stating that MAO’s must comply with National Coverage Determinations (“NCD’s”), general coverage guidelines in original Medicare manuals and written coverage decisions of local Medicare contractors. The proposed rule enforces the Medicare Managed Care Manual Benefit Policy citation by stating:
MA plans must comply with national coverage determinations (NCD’s), local coverage determinations (LCD’s) and general coverage and benefit conditions included in Traditional Medicare statutes and regulations as interpreted by CMS. Further, we propose that MA plans cannot deny coverage of a Medicare covered item or service based on internal, proprietary or external clinical criteria not found in Traditional Medicare coverage policies.
Two Midnight Rule
Known as the Two Midnight Rule, one of the benefit conditions described in The Medicare Benefit Policy Manual supports the CMS policy that Part A payment is generally appropriate (medically necessary) for an inpatient admission if the admitting practitioner has a reasonable expectation that the patient will require hospital care passing two midnights, with a few exceptions. By enacting the Two Midnight Rule, CMS stipulated that it does not recognize any commercial or proprietary clinical criteria for medical necessity and rather, two midnights determine the inpatient versus outpatient benefit.
That said, MA plans have consistently cited that they do not need to abide by traditional CMS rules and have been denying inpatient admissions in favor of lower reimbursed observation stays based on criterial such as MCG or Interqual, for services that would meet the Two Midnight Rule. Appeals by Hospitals to overturn the MAO denials citing the Two Midnight Rule, have largely been ignored.
While to date, CMS has been silent regarding the applicability of the Two Midnight Rule as it pertains to MA’s, CMS -4201-P clearly states that the MAO’s have incorrectly utilized tools that override Medicare’s coverage guidelines. Should the proposed rule become final, MAO’s will need to start following the Two Midnight Rule when reviewing inpatient admissions for medical necessity.
In summary, CMS’s proposed rule would ensure Hospitals are paid appropriately for inpatient services by MAO’s, as well as alleviate the administrative complexity in appealing denials for stays that would be covered by traditional Medicare. Until such time as a rule is finalized, we recommend Hospitals:
Evaluate and/or renegotiate contract language to ensure the appeal process for MA beneficiaries is consistent with Medicare, thereby creating consistent Utilization Management processes and reducing administrative complexity resolving denials.
Since patients retain their traditional Medicare appeal rights, assisting MA beneficiaries with appealing a denial by having them complete CMS 1696, Appointment of Representative Form, enabling the Hospital to utilize the Medicare appeals process on the patient’s behalf.
Consider citing the proposed rule for inpatient MAO denials when the patient has clearly met the Two Midnight Rule.
Conduct a diagnostic review regarding the application of the Two Midnight Rule for traditional Medicare patients to ensure an effective and consistent application of the rule by Utilization Management.
Short Stays
Audits for traditional Medicare short stays have already begun, and MAO’s will likely also evaluate short stays if the proposed rule takes effect. Hospitals can prepare for these audits by taking the following steps:
Ensure consistent application of the Two Midnight Rule by Utilization Management on a daily basis. This includes a working knowledge of:
The CMS inpatient only list for procedures that may encompass a stay less than two midnights but are an exception to the Two Midnight Benchmark.
The Case-by-Case Exception to the Two Midnight Rule.
Unforeseen circumstances that interrupt the reasonable expectation of two midnights of care, such as death, transfer to another acute hospital or election of hospice.
Develop a process to append occurrence span code 72 for those one-day inpatient encounters that include one midnight of outpatient care and one midnight of inpatient care. While this does not guarantee the cases will not be audited, it is a clear signal to CMS that the Hospital understands the Two Midnight Rule.
SunStone Consulting offers comprehensive services geared to help hospitals and health systems evaluate and navigate the ever-changing regulatory environment. If you have any questions, please contact Vonda Moon, Senior Principal at vondamoon@sunstoneconsulting.com, Joli Fitzgibbons, Director at jolifitzgibbons@sunstoneconsulting.com or Laura Ehrlich, Senior Clinical Specialist at lauraehrlich@sunstoneconsulting.com