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With 2024 just around the corner, hospitals eagerly await changes by Medicare Advantage payors in response to the CMS final rule 4201-F released in April 2023. This rule aimed to enforce a minimum standard of benefit parity for patients enrolled in Medicare Advantage when compared to those enrolled in Medicare Fee-For-Service (FFS) in a landscape that has seen only year-over-year increases in denials by Medicare Advantage plans for medical necessity of inpatient stays. Significant impacts are anticipated for hospitals, and what initial steps should hospitals take to best prepare for CMS-4201-F?
First, understanding what is covered and what is not covered by CMS-4201-F is essential. CMS-4201-F clarifies that Medicare Advantage plans must follow the 2-midnight rule that has been used for Medicare FFS to determine when a patient is appropriate for inpatient status. The 2-midnight rule states that a patient is appropriate for inpatient when there is a reasonable 2-midnight anticipation of need for hospital-level services by the physician at the time the inpatient order is placed. This includes patients for whom 2 midnights of medically necessary hospital-level services were reasonably anticipated when the inpatient order was written, but hospitalization was cut short after a reasonable 2-midnight anticipation due to one of the following: 1) unanticipated death, 2) the patient leaving against medical advice, 3) patient/family election of palliative measures/new hospice care resulting in early discharge, or 4) unexpected rapid recovery.
CMS-4201-F also clarifies that Medicare Advantage plans must honor patients that meet medical necessity for inpatient status due to unplanned mechanical ventilation and the “case-by-case” exception. Patients meet the “case-by-case” exception for inpatient when there is an inpatient order and 2 midnights of hospital-level services were not anticipated at the time the order was placed, but inpatient level of care is appropriate based on “patient history and comorbidities, current medical needs, severity of signs and symptoms, and risk of adverse outcomes.” (As an example, a patient coming in with bradycardia and hypotension secondary to complete heart block who needs atropine followed by emergent pacemaker placement would meet a “case-by-case” exception).
CMS-4201-F also specifies that Medicare Advantage plans must follow the “inpatient-only” list that applies to Medicare FFS and authorize inpatient-only surgeries and procedures as inpatient regardless of a patient’s length of stay. Additionally, Medicare Advantage payors must follow CMS guidelines used for Medicare FFS when determining whether a patient is appropriate for acute inpatient rehabilitation facility placement or skilled nursing facility (SNF) placement rather than relying on their own internal criteria.
Key to note is that CMS-4201-F does NOT insist that Medicare Advantage plans follow the “3-day rule” for SNF coverage. This rule applicable to Medicare FFS states that beneficiaries must have a qualifying 3-day inpatient stay in the past 30 days for the SNF to be paid by Medicare Part A. With CMS-4201-F, Medicare Advantage members do NOT need to have 3 inpatient midnights after an inpatient order is placed to be able to go to a SNF with insurance coverage, and plans have full liberty to authorize SNF care for patients from any setting with or without a hospital stay in any status and of any length.
Additionally, CMS-4201-F has NOT commented on whether Medicare Advantage plans must change their readmission policies to be similar to those imposed on hospitals for Medicare FFS patients (despite recognition that Medicare Advantage plan readmission penalties often impose a much large total financial burden on hospitals). The rule also does not specifically state that Medicare Advantage plans cannot use internal criteria such as Interqual or MCG to assist with inpatient determinations, rather that these cannot be the only criteria and that the 2-midnight rule must be honored. Also, with regards to auditing, Medicare Advantage plans have liberty per the rule to audit any stays, including stays that clearly spanned 2-midnights for inpatient appropriateness (even though these stays have been less of a focus of auditors for Medicare FFS beneficiaries).
Knowing how Medicare Advantage plans will behave in response to CMS-4201-F is not clear, though it is anticipated that hospitals will encounter challenges with plans’ ability to adapt to change. Medicare Advantage payors may continue to suggest that their contracts supersede the 2-Midnight rule. They are also expected to question whether the hospital-level services being given over 2 midnights are truly medically necessary, certainly required 2 midnights, and could only be safely provided in an acute care hospital.
Medicare Advantage plans are also anticipated to contend that a patient was did not have the severity of illness to require inpatient care despite requiring 2 midnights of clear hospital-level services (all while the focus of the 2-midnight rule specifically has been on need for clear “hospital-level” services rather than services that must be of very high intensity). Discussions around perceived or actual delays in care that resulted in a 2-midnight stay are also expected to occur. Furthermore, it is highly likely that plans will be slow to adopt what is defined by CMS as the start of 2 midnights of care (specifically, that CMS defines the start of care and the 2-midnight clock as the time a patient begins receiving treatment for a patient-specific condition, NOT the time the status order is placed).
Hospitals should engage key stakeholders affected by CMS 4201-F including staff physicians, physician advisors, care management, revenue cycle (including the appeals and denial team and the chief financial officer), compliance, and legal. It will be critical to educate physicians and other hospital staff that time alone is not the only part of the 2-midnight rule that makes a patient inpatient-appropriate, and to reiterate that the presence of hospital-level services does not equate to medical necessity. If a patient is on IV solumedrol, but there is no documented persistent tachypnea, hypoxia, respiratory distress, or dyspnea on exertion, a Medicare Advantage plan may question why ongoing IV solumedrol over a second midnight is necessary in lieu of switching the patient to prednisone and discharging them to a lower level of care.
Similarly, clear documentation will be needed to underscore, for example, why a patient must continue to get IV antibiotics for cellulitis over a second midnight in the hospital with rather than being transitioned to oral or IV antibiotics in an alternative setting (SNF, home infusion, etc.). Hospitals will need to correctly identify the start of care (2 midnights) for Medicare Advantage patients as defined by CMS rather than the time of order placement, and to insist Medicare Advantage plans adhere to the appropriate short stay exceptions and the “case-by-case” exceptions. Hospitals will also need a robust process upfront in clinics and at the hospital to ensure procedures that are “inpatient-only” are universally prior authorized for inpatient status only by Medicare Advantage payors.
Denials for appropriate 2-midnight inpatient stays are anticipated to increase for Medicare Advantage in the short term at least and developing a system to identify Medicare Advantage denials that obviously meet inpatient per CMS-4201-F is paramount. While CMS has not offered official guidance on how to report non-compliance by Medicare Advantage plans, hospitals are encouraged to ensure key staff understand the new rule to be able to easily identify blatant disregard for the new rule as opposed to cases that are less “clear”, to take advantage of all levels of appeal available, utilize the beneficiary complaint process via the “Appointment of Representative” (AOR) form, file complaints with their regional CMS offices, and consider taking further legal action if needed secondary to harm caused to beneficiaries and the hospitals caring for them. Discussions should occur regarding the financial impacts of the new regulation accounting for not only the potential upside with long-term increased inpatient approvals, but also the resources needed for denial management, all while recognizing that delays in inpatient approval could lead to revenue cycle collection delays. Some hospitals may want to alter Medicare Advantage contracts to include adherence to the 2-midnight rule and avoid arguments over contracts superseding the 2-midnight rule, though this is not presumed to be necessary given the authority the final rule should carry over contracts that explicitly contradict it.
We anticipate a lively beginning of 2024 given the CMS-4201-F changes and look forward to ongoing discussion regarding hospital preparedness, experiences with the transition, and approach to adapting to this change. Happy New Year!
Dr Boyd is Associate Chief Medical Officer at Sound Advisory Services
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