February 22, 2017

The MOON and Two-Midnight Rule Questions Continue

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Schoolhouse Rock, an educational cartoon series that many of us recall with fondness from our own childhoods, has a classic episode in which they show how a bill becomes a law, passing from the original author through all the steps of the lawmaking process in Congress and finally ending up being signed by the president.

Medicare regulations seem to take a similarly circuitous path. Someone at the Centers for Medicare & Medicaid Services (CMS) is alerted to a problem and seeks to remedy that problem. Along the way, other agency personnel contribute, the lawyers contribute, the finance experts contribute, and the actuaries contribute. Depending on the issue, stakeholders may be given the opportunity to contribute. That simple idea then becomes a multi-page proposed rule.

That rule then is published for review, and depending on the specifics, anywhere from just a handful to several thousand comments are submitted. Those comments are then reviewed by CMS, adjustments are made to the rule, and it is eventually published as a final rule and put into effect.

Yet despite all these steps and the hundreds (or thousands) of people who review the rule, when the final rule is published and providers start to implement it, new questions arise. Effects of the new rule on old rules arise. Scenarios that were never envisioned arise. The people who actually have to implement the new rule think of questions that the rule’s authors never considered.

The current hot-button issue involves the Medicare Outpatient Observation Notice (MOON) and the vague instructions that came with it, with varying interpretations of the requirement to specify the reason a patient is not being admitted as an inpatient. CMS chose to use the word “specific” without providing a specific explanation. I have discussed this ad nauseum in previous articles, so I will not rehash it here. Needless to say, we still do not have an answer from CMS.

Instead I want to commend two people who read a regulation and one person who read a directive and came up with insightful and important questions that had not been addressed. First is Carmen Jacobson, RN, the director of case management at Arkansas Heart Hospital in Little Rock. She asked about the MOON: “since the MOON is required for more than 24 hours of observation services, if a patient is transferred to our hospital from an outside hospital where they were receiving observation services and the patient is also going to receive observation at our institution, do we count the observation hours starting with our order for observation, or must we start with the number of observation hours provided at the outside hospital?” What a great question!

The advent of the two-midnight rule allowed hospitals to count the number of midnights a patient spent at a transferring hospital when making the decision to admit a patient as an inpatient or treat them as outpatient with observation services, and Jacobson’s hospital often receives transfers from rural parts of the state where the patient spent several hours in observation (but not a full midnight) and was then transferred. Their expectation is to complete the evaluation in under two midnights, so they are placing the patient as an outpatient with observation services. When she should start her observation hour-counting is a great question, and one for which there is not yet an answer.

The second question came from Dr. Kevin Omilusik, the physician advisor at Munson Medical Center in Traverse City, Mich. He asked, “now that CMS pays for outpatient dialysis on patients with acute kidney injury who are not considered end-stage renal disease (ESRD), is the cost of this dialysis at an outpatient center excluded from consolidated skilled nursing facility (SNF) billing as is the cost of dialysis on ESRD patients?” Again, what a great question!

Because most patients develop acute kidney injury as part of a serious debilitating illness, many of these patients require skilled care after hospitalization and are unable to go home. The SNFs would be unlikely to accept these patients, as the cost of the dialysis and supplies would rapidly consume their per diem payment from CMS and lead to financial losses. If a patient with ESRD goes to a SNF and receives their dialysis at an outpatient center, those costs are excluded from consolidated billing and are not the responsibility of the SNF. Until this year, CMS never covered outpatient dialysis on patients with acute kidney injury, so when the SNF consolidated billing rules that were written many years ago, this was not even a consideration. Another great question with no answer so far.

The third question came from Steven Biczak, RN, the manager of clinical revenue integrity at Renown Health in Reno, Nev. He was reviewing the guidance from the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) on the waiving of costs of self-administered drugs. He noted that the guidance starts with “the purpose of this policy statement is to assure hospitals that they will not be subject to Office of Inspector General administrative sanctions for discounting or waiving amounts Medicare beneficiaries may owe for self-administered drugs (SADs) they receive in outpatient settings when those drugs are not covered by Medicare Part B.”

He then asks, “but when we do a self-denial of a short-stay inpatient admission and rebill the claim, we will be submitting an inpatient Part B claim for all services after the admission order. Since this is not an outpatient claim, as the memorandum from the OIG specifies, are we allowed to waive the self-administered drug costs?” One more time – what a great question.

In this case, though, I was able to provide an answer. I had previously noted this discrepancy and contacted the OIG. One of the lawyers who drafted the memorandum was kind enough to discuss the situation directly with me. She was unaware of the rebilling nuances, but reassured me that their intent was that hospitals could choose to waive the costs of all self-administered drugs that would otherwise be the patient’s obligation under part B – and that would apply to both outpatient and inpatient Part B. Finally, a great question with an answer.

I am sure there are more great questions out there, and I’d love to hear them. Feel free to email them to me. I can’t guarantee an answer, but you may make my next “great question” article in RACmonitor.

Ronald Hirsch, MD, FACP, CHCQM

Ronald Hirsch, MD, FACP, CHCQM is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays.

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