Just as you hospitals have their clinicians understanding that they need to specifically order observation services, the MACs and RACs have a new way to deny observation claims. At a recent speech, the Medical Director of the Medicare Administrative Contractor Cahaba (which processes claims for many of the for-profit systems out of Nashville), said that observation orders stating "admit" instead of "referred" to observation would be invalid. The medical director reasoned that there was no such category as an observation patient so therefore a patient cannot be "admitted" to observation.
However, the confusion regarding the wording seems to come
directly from CMS. From January 2006 until January 2010, CMS Claims
Processing Manual Chapter 4, §290.3.3 stated repeatedly that
providers could make a "direct admission to observation."
In January of 2010, the section was repealed and in newly adopted
adjacent manual provisions CMS started using the phrase
"referred to observation."
Regardless of what language is used, it should have no effect on
the medical necessity of the observation services, unless of
course, the MAC or RAC is splitting hairs in order to deny claims.
Indeed, one physician commented that "referred to
observation" makes even less sense than "admitted to
observation."
Providers should take the following actions:
(1) Educate clinicians to drop the words "admit" from
their observation orders. Also consider that mandating use of the
term "referred" could weaken arguments that other claims
still using the word "admit" are problematic. Using
"referred" is not required in the CMS Manual provisions
and you could just recommend not mandate that clinicians use it
instead of "admit."
(2) Appeal all claims related to the wording citing the fact that
the words "referral" are more confusing than
"admit" and there is no impact on the medical necessity
of the services.
(3) Ask your state hospital association and the AHA to intervene in
this egregious example of focusing on overpayment recoveries
instead of patient care.
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