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Collaboration with Your Contracting Office Provides the Rules for Status Games

Published on 4/1/2017

Most of us understand the Medicare Two-Midnight Rule.  Whether anticipation of two midnights of medically-necessary care in the hospital at the time of admission, or expectation of a second, medically-necessary midnight the day following admission after a first midnight has passed, we get it.  For the most part, it’s become pretty engrained in our psyche.


As such, it should not be surprising that for many health systems, the Two-Midnight Rule is the veritable law of the land.  Despite knowing that managed Medicare plans, Medicaid, managed Medicaid plans, and private plans have no obligation to follow the rule, case managers are often instructed to use it when assessing patients for appropriate status.  Undoubtedly, this is due to the significant potential risk of not following the rule with patients covered by Medicare.  But, there is also another reason.


If your case management department has no connection to or communication with your contracting office, the department and your staff are effectively flying blind.  Health system contracts with private payors and managed plans have scores of details within them, not the least of which are the rules of the patient status game.  Could your system have a contract right now, which spells out that Inpatient status is appropriate for patients who require care in the hospital for 24 hours from the time the patient is placed into a unit bed?  You sure could.  How about a contract which states patients are ineligible for Inpatient status until they have required care in the hospital for 48 hours from the time the initial status order is written?  Yep – you could have that, too.


It is absolutely imperative that you connect with your contracting folks and learn what you have to work with.  They might be skittish at first, because the great majority of contract details are top-secret.  You will have to make your case and lay the situation out for them so they understand the impact of the situation.  Explain how the Two-Midnight Rule works.  Then, explain that by blindly applying the Medicare rule to all payors, you expose the health system to two distinct risks:

  1. Denials and all of the re-work associated with appeals for patients placed into Inpatient status incorrectly

  2. Inappropriately low reimbursement for inaccurate billing due to patients kept in Outpatient status with Observation charges when they SHOULD have been discharged in Inpatient status

Round out your discussion with an estimate of the financial impact of the two points above, and you’ll have your next appointment to discuss contract details within the following week.


Consider creating a spreadsheet with all of your contracted payors listed in the left-hand column – private plans, managed Medicare plans, and managed Medicaid plans.  Then, across the top row include categories such as, “Criteria” and “Criteria Start.”  Some criteria may solely involve MCG guidelines.  Others may involve a specific timeframe like 24 hours or two midnights.  Include the “start” piece to know when consideration of the criteria begins.  Does the timeframe start when care begins in the emergency department?  How about when the first status order is written?  What about when the patient actually transfers to the medical/surgical unit?  This all needs to be clear so your case management staff can follow the grid accurately.


Obtaining this information from the contracts, or, if not there, within the generalized rules of the plans themselves, will likely take your contracting office a number of weeks if not a couple of months.  Fill in your spreadsheet as the information is made available, and eventually you will have a functional tool for your case managers.  Once you have this situated, consider broadening the scope of the spreadsheet to include whether or not the managed plans follow their respective Medicare or Medicaid Inpatient-Only lists.  Or, if the plan allows you as physician advisor to participate in peer-to-peer calls in place of the attending physician.  Once you start thinking about it…there is a wealth of information important to case management within the contracts.  Go out and get it!




About the Author

Juliet B. Ugarte Hopkins, MD, CHCQM-PHYADV, is physician advisor for case management, utilization, and clinical documentation at ProHealth Care, Inc. in Wisconsin.  Dr. Ugarte Hopkins practiced as a pediatric hospitalist for a decade and she was also medical director of pediatric hospital medicine and vice-chair of pediatrics in northern Illinois before transitioning into her current role.  She is a member of the American College of Physician Advisors Board of Directors, the first physician board member for the Wisconsin chapter of the American Case Management Association (ACMA,) and a member of the RACMonitor editorial board.


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