Utilization Reviews Can Uncover New Revenue Opportunities

The Healthcare Financial Management Association (HFMA) recently wrote about utilization reviews (UR) and how many acute care hospitals are losing revenue due to common “breakdowns” in the UR processes. Cited were five key areas where problems often lie. They included: department organization and management, failure to understand or properly adopt regulatory guidelines, challenges relating to clinical acumen and clinical criteria, revenue cycle integration, and inefficient and inaccurate processes. The HFMA noted that for some acute care hospitals, poor UR processes can cost an institution hundreds of thousands of dollars and in some cases, millions of dollars that could be gained with “medically appropriate patient status” and by adhering to the Centers for Medicare & Medicaid Services’ (CMS) “Two-Midnight Rule.”

The Two-Midnight Rule

According to the CMS Fact Sheet, the original “Two-Midnight Rule,” stated that: “Inpatient admissions would generally be payable under Medicare Part A if the admitting practitioner expected the patient to require a hospital stay that crossed two midnights and the medical record supported that reasonable expectation. Medicare Part A payment was generally not appropriate for hospital stays expected to last less than two midnights.  Cases involving a procedure identified on the inpatient-only list or that were identified as “rare and unusual exception” to the Two-Midnight benchmark by CMS were exceptions to this general rule and were deemed to be appropriate for Medicare Part A payment.” Also specified under the “Two-Midnight Rule” was that all treatment decisions for beneficiaries were to be based on the medical judgment of physicians and other qualified practitioners.  The rule did not prevent the physician from providing any service at any hospital, regardless of the expected duration of the service. 

Feedback from physicians ultimately prompted the CMS to review its rule whereby its final “Two-Midnight Rule” now permits “greater flexibility for determining when an admission that does not meet the benchmark should nonetheless be payable under Part A on a case-by-case basis.” Also introduced were new policies for stays expected to last less than two midnights. These policies included: enabling an inpatient admission to be payable under Medicare Part A on a case-by-case basis based on the admitting physician’s judgement which required supporting documentation and would be subject to medical review, as well as the CMS’ monitoring of the number of these category of patient admissions and how they would be prioritized for medical reviews.

Addressing the Five Main Areas for Improvement

Given the “Two-Midnight Rule” and knowing where the breakdowns typically occur, acute care hospitals should look to implement the following UR process improvements:

  1. Establish UR as a separate and distinct discipline placed under the management of a professional with both clinical and financial management experience and who has the resources (time, people, and controls) in place to effectively manage the UR process.
  2. Implement educational and training programs focused on regulatory guidelines, levels of care, and insurer-authorizations steps which must be adhered to, and make sure there is a full understanding and adoption of theses measures by all staff involved in the UR process.
  3. Foster effective communications and collaboration between clinical and UR staff specifically when creating a case for submission for insurer authorization of inpatient treatment.
  4. Foster open communications between staff members working on insurance eligibility and notifications and the UR team members so that patient status is reflected accurately and, if a patient’s status changes, which would impact the case’s clinical review, it can be communicated quickly and effectively. This is especially important given that hospital UR team must work with many different commercial insurers and government payers such as Medicare and Medicaid.

Don’t Simply Accept Payment Reductions

The right UR process also facilitates “communications” between patient-interfacing clinical data and insurer-interfacing financial management. Without this, the UR team submitting a claim would not know whether or not the insurer had approved or denied the claim, while the financial team would not know how to appeal an insurer’s decision. Based on a Navigant research study, 60% of hospitals never appeal their claim denials. To underscore the revenues losses this represents, a mid-sized hospital with 350 beds that never appealed claim denials would lose an estimated $3 million annually.

By taking the time to improve their UR processes, acute care hospitals can avoid unnecessary revenue losses, while also working toward improved intra-departmental communications, resource utilization and most importantly, patient care.


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