Utilization review staff may be hurting results when fixing incorrect inpatient admissions

Since 2004, the Centers for Medicare and Medicaid Services (CMS) has allowed hospitals to change the status of a patient who was improperly admitted as an inpatient to outpatient by following a process commonly known as Condition Code 44. Successful completion of this process allows the hospital to submit an outpatient claim and receive payment for almost all services.

The process is not simple; it does require a physician member of a utilization review (UR) committee to review the case, the attending must agree to the change and all parties must be notified in writing. Not only are there several steps, but it is also time-sensitive, as it must be completed prior to the patient’s discharge.

In 2013, CMS began to allow hospitals to complete a very similar process retrospectively after discharge where the hospital can get paid under Medicare Part B for eligible services when it is determined the patient should not have been admitted as an inpatient. This process is commonly called the self-denial/rebill process. While the self-denial/rebill process is similar to the Condition Code 44 process, there are significant differences that must be considered, especially by hospital financial services staff.

A recent social media discussion led me to discover that, unbeknownst to a lot of executives in hospital finance, many utilization review staff have abandoned the concurrent process in favor of the retrospective process. The post noted for the concurrent process, one must “chase down the attending, hasten the UR doctor along, and upset the patient when you notify them, generating calls to administration.”

While the process does require an efficient process, it should not be the decision of the UR staff to potentially reduce compliant revenue and delay cash flow because it is inconvenient.

To understand the implications, it is important to realize that the self-denial/rebill process is still governed by the same federal regulations that govern the Condition Code 44 process. In other words, to perform a self-denial, the attending must still be contacted and given the opportunity to provide input, the UR committee physician must review and approve the change, and all parties must be notified in writing within two days. That means instead of handing the patient a notice in their hospital room, a notice must be promptly mailed to them.

Finding the attending to change the status when using the concurrent method  is relatively easy as the hospitalist should be somewhere in the hospital, simply a phone call away, whereas tracking down that hospitalist weeks later may be much more difficult and delay the process.

Financially the difference can be significant. With a concurrent Condition Code 44 process, the patient is discharged as an outpatient and upon discharge a single outpatient Part B claim can be prepared and submitted with payment arriving as with any other outpatient claim. In addition, if done relatively early in the stay, the new order for outpatient with observation services often allows you to accrue enough hospital time to be paid, as with almost all observation visits, at a base rate of $2,232.

On the other hand, with the self-denial/rebill process, you have no observation hours and payment would be limited to eligible line-item services with no payment for room and board and nursing care at all. Although payment can vary depending on the services, one can expect approximately $1,000 after rebilling.

So, not only is there the potential for less revenue with self-denial/rebill, but the payment will take significantly longer, and the billing and coding staff must perform three times the amount of work. In order to compliantly perform the self-denial/rebill, the hospital stay must first be coded and billed as a self-denied claim. That claim must then be processed by the Medicare Administrative Contractor. It is only after that claim has processed that the coders and billers can then go back and prepare the rebilled claim, which is actually two separate claims.

Not only is it possible that the self-denial-rebill process will result in up to $1,300 less revenue in select cases, but in every case, payment will not be received until the hospital stay has been coded three times and those three claims submitted for processing in the proper sequence.

In other words, the Condition Code 44 process will always result in faster payment, in many cases a higher payment, and requires significantly less coding staff time.

The decision about what process to use should be made with input from all interested parties, understanding the implications for all. It would be important for finance staff to know if UR staff have made a unilateral decision that has slowed cash flow and increased the workload of the finance staff.