Observation Case Survey Results - Case #2, January 2021

This is an 82-year-old female, with a past medical history of hyperlipidemia, hypertension, GERD and number stenosis who presented to the ED with right leg pain after she was attempting to get into her daughter's car. Imaging showed evidence of right proximal fibular shaft and neck fractures. This was splinted by Orthopedics and patient is admitted for further evaluation by physical therapy.

Committee Discussion: 

We received 28 responses—3 for inpatient, 21 for observation, and 4 for “outpatient in a bed.” We also asked whether the overnight surgical stay two days prior to this presentation assisted in the status decision. Two respondents indicated that they would count that midnight towards the two necessary for inpatient status, 2 indicated that the three-day payment window allowed them to admit as inpatient, and 19 indicated that it had no impact. The local determination was for observation status.

“Outpatient in a bed” status is used within some health systems to accommodate patients with no acute medical needs who have no alternative to hospitalization for safe disposition. Such patients are always a challenge for utilization management teams, and in general IP or OBS claim submission for custodial care is not appropriate. The local system uses a “custodial’ status which blocks claim processing pending further human review. 

To satisfy Medicare’s two-midnight policy, the midnights under care must be consecutive, so the midnight spent under care does not count towards the two necessary for IP status.

The “Three Day Payment Window” is a consideration in this case. That rule describes Medicare's policy for payment of outpatient services provided on either the date of a beneficiary's admission or during the three calendar days immediately preceding the date of a beneficiary's inpatient admission. Under the 3-day payment window policy, all outpatient diagnostic services furnished to a Medicare beneficiary by a hospital (or an entity wholly owned or operated by the hospital), on the date of a beneficiary's admission or during the 3 immediately preceding the date of a beneficiary's inpatient hospital admission, must be included on the Part A bill for the beneficiary's inpatient stay at the hospital; however, outpatient nondiagnostic services provided during the payment window are to be included on the bill for the beneficiary's inpatient stay at the hospital only when the services are “related” to the beneficiary's admission. In this case, as documented, the spine surgery was not apparently related to the second presentation, and the second presentation was locally determined to be appropriate for initial observation services. If subsequent investigation (and documentation) determined that the fall and fracture were directly related to the surgery—e.g., due to complication, side effect, etc.—then the Three-Day Payment Window may apply. Of note—the patient was placed in observation in good faith, and medical necessity for inpatient status was not established. However, keeping the patient under observation to avoid including the spine surgery in the three-day payment window, or under other circumstance to avoid readmission penalties, is illegal gaming.

Selected Comments:

“Place in Observation as she does not meet medical necessity for inpatient stay and it is not right to admit someone for placement issues. Wait for PT evaluation the next day to determine plan of care. She may need to make alternative arrangements for more help at home if she is cleared by PT and if PT recommends rehab, we can admit her and transfer her to rehab once bed is available. The Medicare waiver during COVID 19 pandemic no longer requires three qualifying inpatient days for SNF placement.”

“Previous stay is not pertinent to this episode of care regarding 2 MN rule. She should start obs and if she has a medical complication such as escalating need for (IV) analgesia, or develops delirium, I would upgrade at that time.”