2022 Healthcare Reimbursement Changes Reinstating Significant Inpatient Coverage

2022 Healthcare Reimbursement Changes
Reinstating Significant Inpatient Coverage
Mikki Fazzio, RHIT, CCS
Content Integrity Consultant,
Principal

© 2021 Health Catalyst
Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
On November 2, 2021, the Centers for
Medicare and Medicaid Services (CMS)
released the 2022 Hospital Outpatient
Prospective Payment System (OPPS)
final rule, which reversed a three-year
phaseout of the Inpatient-Only (IPO) list.
This comes only a year after the 2020
phaseout of the IPO list began.

For years CMS has published a list of
procedures that providers could only
perform and receive reimbursement for in
the hospital inpatient setting.
Completing these procedures in a
hospital outpatient department or an
ambulatory surgical center (ASC) was
considered unsafe, according to the
rationale behind the IPO list.

Each year CMS has reviewed the IPO list
(more than 1,700 services) and removes or
adds procedures based on certain criteria.
For example, if data showed a procedure
can now be safely performed in the
outpatient setting, CMS removed it from
the IPO list.
However, with the 2022 OPPS final rule,
the IPO list will remain intact and continue
to designate which procedures qualify for
the out- or inpatient setting.

Healthcare Reimbursement Changes: The Phase-
Out of the IPO List and the Two-Midnight Rule
In the 2021 OPPS/ASC final rule, CMS
announced it was phasing out the IPO list,
stating that the physician’s designation of the
admission status of all surgeries would be
based on the Two-Midnight rule, adopted in
October 2013.
CMS created the Two-Midnight rule to address
the higher frequency of beneficiaries receiving
treatment as hospital outpatients for extended
(i.e., longer than reasonable) periods of time.

Compliance issues often arose from patients
placed in extended “observation” status,
meaning they received outpatient services
while the provider determined whether to
make an inpatient admission or discharge
the patient.
Extended observation services impact
patient copays as well as a patient’s ability to
qualify for skilled nursing facility (SNF) care
through the SNF Three-Day IP Stay Rule.

The original Two-Midnight rule stated that
inpatient admissions would generally be
payable under Medicare Part A if the
admitting physician expected the patient
to require a hospital stay crossing two
midnights, with documentation in the
medical record supporting that expectation.

CMS felt that physicians should consider
the complexity of the planned surgery,
the patient’s medical and psychosocial
history, the time of day, and the expected
perioperative course when deciding if
they should admit the patient under
inpatient status.

The initial Two-Midnight ruling also
eliminated almost 300 procedures from
the IPO list, the majority of which were
high-volume orthopedic and spine-
orthopedic procedures.

Many stakeholders disapproved of this
ruling, with objectors stating that even
though it was not the intent of CMS, the
removal of procedures from the IPO list
indicated that these procedures were not
complex enough to warrant inpatient care
for a generally healthy patient and that
the physician had to “prove” the
procedure justified an inpatient stay.

How Reinstatement of the IPO List
Benefits Health Systems
Many stakeholders consider the reversal of the
original Two-Midnight ruling in the 2022 OPPS
Final Rule a major win for patients, providers,
and hospitals in several significant aspects:
 Improved patient safety
 Increase in reimbursement and/or
case mix for some hospitals
 Decrease in billing denials
 Reduced burden on physicians

Improved patient safety
Services on the IPO list are often
complex and sometimes invasive
procedures that require close care and
coordinated services in the hospital
inpatient setting.
The reinstatement of the IPO list
ensures that patients do not return
home prematurely and have the
opportunity for a successful recovery.

Increase in reimbursement and/or case mix for some hospitals
Diagnosis-Related Group payment for
inpatient procedures is often compara-
tively more than Ambulatory Payment
Classification payment for the same
procedure performed in the outpatient
setting.
Hospitals with high volumes of
procedures eliminated from the IPO list
saw a decline in both reimbursement
and case mix index.

Increase in reimbursement and/or case mix for some hospitals
This decline coupled with the financial
impact of the COVID-19 pandemic
presented some hospitals with a real
financial threat to their security.
Reinstated procedures on the IPO list
mean an increase in reimbursement for
many facilities.

Decrease in billing denials
Many stakeholders felt that commercial
payers interpreted the Two-Midnight ruling as
a restriction to appropriate care settings
based on the cost alone.
They worried the ruling promoted procedures
in outpatient settings or ASCs, even in cases
where outpatient care wasn’t appropriate.

As a result, hospitals have had to devote
time and resources to appealing these
denials and have often had to accept
lower payment even though the provider
believes the patient was appropriately
admitted as inpatients.

With CMS regulating that the procedures
on the IPO list should be performed in the
inpatient setting, insurance companies are
less likely to deny these cases based on
patient status.
The intended result is a decrease in denials
and ultimately more timely and appropriate
payment to the facility.

Reduced burden on physicians
The reinstatement of the IPO list means that
the procedures are no longer subject to the
Two-Midnight rule requirements.
Although case managers assisted physicians
deciding between inpatient versus outpatient
care, it was ultimately the physician’s decision
and obligation to order the correct status.

Reduced burden on physicians
Physicians no longer must worry about
justifying an inpatient stay or having an
outpatient stay unexpectedly exceed the
appropriate amount of time, which can lead
to more issues impacting the patient’s care.

Preparing for Reinstatement of the IPO List
Hospitals can prepare for the reinstatement
of the IPO list as of January 1, 2022.
For some health systems, inpatient volumes
will increase at a time when many hospitals
are already at inpatient capacity due to the
pandemic, and some hospitals may see
increased need for inpatient coders.

Cross-training between inpatient and
outpatient coders can take some time and
effort, but such preparation will support
shifts in patient volumes anticipated with
reinstatement of the IPO list.
Case managers and physicians should be
up to date on the reinstatement to avoid
unnecessary work determining the correct
setting for a procedure and/or denials for
IPO procedures performed as an
outpatient procedure.

In addition, revenue cycle teams may find
it helpful to put an account check in place
to hold accounts with IPO codes. This
way, they can review the patient status
before dropping the claim.
Some systems may be sophisticated
enough to hold a claim if an IPO
procedure code is detected with any
status other than inpatient.

Avoiding Denials and Payment Delays
Even healthcare reimbursement changes
designed to improve the delivery of care
for patients and experience for providers
requires adjustment and adaptation that,
without preparation, can interrupt
operations and the revenue cycle.

Avoiding Denials and Payment Delays
Understanding the updated rules and
following the above preparation
measures will help facilities code and
bill in a timely manner and avoid
denials and delays in payment.

For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

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Mikki Fazzio, RHIT, CCS, joined Health Catalyst in June 2021 as a principal content integrity
consultant. She is responsible for content integrity in the VitalWare® by Health Catalyst
VitalKnowledge™ system, the maintenance of VitalWare’s proprietary crosswalk information
(including CPT to ICD-10-PCS crosswalks, CPT/HCPCS to modifier crosswalks, and
CPT/HCPCS to revenue crosswalks), assisting with responding to specialized client billing
and coding questions, and providing educational webinars. Fazzio has 15+ years of experience in the
healthcare field. Prior to joining Health Catalyst, she was the Director of Health Information
Management and Clinical Documentation Integrity at Thibodaux Regional Health System, where she
led a team of hospital and professional coders, CDI specialists, EMR specialists, transcriptionists,
scanning technicians, and release of information technicians. Fazzio's main responsibilities included
overseeing the Clinical Documentation Integrity program, decreasing and sustaining discharged-not-
final-billed dollars for facility and professional coding, and case mix index analysis. She has a degree
in Psychology and Health Information Management, as well as certifications as a Registered Health
Information Technician and a Certified Coding Specialist through the American Health Information
Management Association.
Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Mikki Fazzio, RHIT, CCS

Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Health Catalyst is a mission-driven data warehousing, analytics and outcomes-improvement
company that helps healthcare organizations of all sizes improve clinical, financial, and operational
outcomes needed to improve population health and accountable care. Our proven enterprise data
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Health Catalyst was recently named as the leader in the enterprise healthcare BI market in
improvement by KLAS and has received numerous best-place-to work awards including Modern
Healthcare in 2013, 2014, and 2015, as well as other recognitions such as “Best Place to work for
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2022 Healthcare Reimbursement Changes Reinstating Significant Inpatient Coverage

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2022 Healthcare Reimbursement Changes Reinstating Significant Inpatient Coverage