Hospitals Are Still Confused About Inpatient vs. Observation

Area of Science:

• Healthcare Administration
• Patient Classification Systems
• Medical Billing and Coding

Background:

• The Centers for Medicare & Medicaid Services' Two-Midnight Rule, implemented nearly four years ago, continues to present challenges for hospital staff.
• Ambiguities in the rule lead some hospitals to incorrectly classify patients under observation services, impacting patient expenses and skilled nursing facility eligibility.

Purpose of the Study:

• To highlight the ongoing difficulties hospitals face in implementing the Two-Midnight Rule.
• To propose strategies for improving patient status classification accuracy and mitigating adverse financial consequences for patients.

Main Methods:

• Analysis of common challenges and "gray areas" within the Two-Midnight Rule.
• Recommendations for enhanced case management roles and physician education initiatives.

Main Results:

• Incorrect patient status classification under observation services can increase out-of-pocket expenses.
• Patients deemed observation may be ineligible for essential post-hospitalization skilled nursing care.

Conclusions:

• Implementing case managers at all entry points is vital for accurate upfront patient status determination.
• Regular self-audits, corrections, tracking self-denials, and physician education are essential for compliance and improved patient outcomes.