Navigating the Distinction: Inpatient vs. Observation Level of Care Auditing

In the complex landscape of healthcare, determining the appropriate level of care for patients is a critical aspect of the revenue cycle. Two key categories, inpatient and observation, are subject to rigorous auditing to ensure accurate billing and proper utilization of resources. In this blog post, we’ll delve into the nuances of inpatient level of care criteria, highlighting instances where some observation patients could have met these criteria, and conversely, where inpatient status might not have met the stringent criteria.

Understanding Inpatient Level of Care Criteria:

Inpatient level of care is typically reserved for patients whose medical conditions necessitate an extended hospital stay, often spanning at least two midnights. This distinction is governed by the Two-Midnight Rule, ensuring that inpatient admission is warranted based on the anticipation of a two-midnight stay.

Observation Patients That Could Have Met Inpatient Criteria:

In some instances, patients categorized as observation status might have met the criteria for inpatient care. This can occur when the complexity and severity of their condition become evident after admission. For example, a patient presenting with seemingly mild symptoms might later exhibit complications that warrant prolonged medical attention, aligning with the Two-Midnight Rule. In these instances, the hospital will receive much less reimbursement for the case than it would for an inpatient admission.

Inpatient Status That Didn’t Meet the Criteria:

Conversely, there are cases where patients admitted as inpatient might not have fully met the strict inpatient criteria. Due to the inherently uncertain nature of medical conditions, a physician’s initial assessment might lead to an inpatient admission. However, as more information becomes available, it might be determined that the patient’s condition could have been managed effectively through observation. These cases can result in claim denials, where the hospital not only loses the reimbursement but has the added cost of appealing the denial.

The Role of Auditing:

Auditing plays a pivotal role in ensuring that the level of care assigned aligns with the patient’s medical needs and meets regulatory guidelines. Through comprehensive review and analysis of clinical documentation, our clinical medical reviewers assess whether the selected level of care is justified by the patient’s condition, severity, and required treatment. Our reviewers possess expert clinical knowledge and a deep understanding of inpatient criteria, having done extensive work on the recoupment (payor) side. In essence, we know exactly what government auditors are looking for because we’ve done that work.

Conclusion: Striking the Right Balance:

Balancing inpatient and observation level of care auditing is paramount to guaranteeing accurate billing, optimal resource allocation, and proper patient care. Adhering to the stringent criteria for inpatient admissions safeguards against overutilization of resources, while acknowledging that the fluidity of medical conditions requires constant assessment and adjustment. Through retrospective review, our seasoned review team can help navigate this complicated landscape to help providers optimize reimbursement and avoid cumbersome, costly denials and recoupment.