Unifying CDI, Coding, and Physician Advisors

The landscape of hospital revenue integrity is rapidly evolving, and the once-separate worlds of Utilization Review (UR), Clinical Documentation Integrity (CDI), coding, and Physician Advisors are now converging into a unified strategy. Cheryl Ericson, RN, MS, CCDS, CDIP’s career journey exemplifies this transformation. With experience in public health, nursing, insurance, and hospital administration, Cheryl witnessed firsthand how siloed functions led to inefficiencies and missed opportunities. Coders, nurses, and physicians often operate independently, unaware of how their work impacts the broader clinical revenue cycle. Claims data (also referred to as administrative data) both directly and indirectly impact hospital revenue as a function of reimbursement and value-based care.

The Power of Collaboration

Today, effective revenue integrity depends on structured collaboration. Cheryl emphasized the importance of regular meetings, case reviews, and open dialogue among UR, CDI, coding, and Physician Advisors. This collaborative approach breaks down barriers, fosters mutual respect, and ensures that each group’s expertise is leveraged toward shared organizational goals. It all begins with physician documentation; without physician support, we can’t achieve optimization. Having physicians actively involved is invaluable; sometimes, when you’re coding or working through cases, their direct input can clarify ambiguities and ensure that the documentation reflects the true clinical picture. Physician Advisors, once seen as peripheral, are now central to bridging clinical and administrative priorities. Their involvement ensures that physician intent is accurately captured; coding reflects true patient acuity, and documentation supports both reimbursement and quality metrics. Cheryl noted, “Physician Advisors have gained a lot more confidence and a lot more knowledge. I think before they used to be very dependent on CDIs and coders, and so they didn’t necessarily express their own opinions as much.” This evolution highlights how Physician Advisors now play a more assertive and informed role, contributing their own perspectives alongside the expertise of other revenue cycle teams.

Adapting to a Changing Environment

Hospitals today face pressures like shrinking margins and staffing shortages. Cheryl emphasizes that achieving sustainable revenue integrity requires integrating UR, CDI, coding, and Physician Advisors into a cohesive reporting framework. At many hospitals, UR, CDI, and coding report to different departments, creating silos and communication barriers. Cheryl notes, “Often departments are so focused on their own silo and trying to meet those metrics instead of considering how their metrics relate to organizational goals.” By integrating these functions into a single clinical revenue cycle structure, organizations can improve coordination, oversight, and accountability. This alignment ensures that committees, such as those focused on sepsis, readmissions, or mortality, make decisions that consider clinical functions and downstream impacts associated with patient status and coding, while supporting organizational goals such as the case mix index, denial prevention, and quality. Cheryl recommends practical steps, including unified leadership, transparent technology, and a shared culture of learning, to help teams work toward common objectives and strengthen both financial and clinical outcomes.

Looking Ahead

As outpatient volumes rise and inpatient cases become more complex, the need for integrated expertise will only grow. The migration of procedures from the inpatient to the hospital outpatient setting will be hastened by the elimination of the inpatient only list, likely resulting in an eventual shift to independent ambulatory surgical centers leading to significant loss of revenue for most hospitals. For example, the National Patient and Procedure Volume Tracker by StrataSphere® for 12/31/24 shows that inpatient primary knee replacement is down 21.2% in 2024 compared to 2023. Inpatient primary hip replacement is down 3.8% when comparing 2024 rates to 2023. The healthcare industry is changing more rapidly than at any other time, as payers fight to maintain profits by challenging hospital billing practices. In contrast, hospitals contend with new regulations designed to reduce fraud and waste. Cheryl’s insights and ongoing thought leadership reinforce a clear message: revenue integrity is a team sport, and success depends on breaking down silos in favor of unified, strategic, measurable action. The future of hospital financial health lies in the seamless integration of UR, CDI, coding, and Physician Advisors, ensuring hospitals remain viable, compliant, and focused on delivering high-quality patient care.

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Dr. Patel’s Career Journey and Path to Leadership

Dr. Patel’s passion for medicine began early, inspired by a blend of scientific curiosity and a desire to serve his community. After medical school at the American University of the Caribbean and clinical rotations in New York, he completed his residency in Chicago, where he first assumed a leadership role as chief resident. His career then took him to New England, where he practiced as a hospitalist before being tapped for a dual clinical and administrative role. The shift to physician advisory work was motivated by a need for stability as he started a family, but also by recognition of his strong interpersonal skills and attention to detail. As Dr. Patel shares, “It worked out perfectly cause my wife and I were expecting our first child later that year. So that was more stability, and that was one of the primary reasons that I took it.” Eventually, Dr. Patel joined Brundage Group, seeking broader exposure to healthcare systems and the flexibility of remote work.

The Role and Impact of Physician Advisors

Physician Advisors serve as the essential bridge between clinical teams and hospital administration. Dr. Patel describes their role as translating the realities of bedside care into actionable insights for the C-suite, ensuring that both patient care and financial sustainability are prioritized. As Dr. Patel puts it, “The importance of why we need to document this way, and the connection between the clinical side and the financial side is lacking.” Their work impacts everything from documentation practices to regulatory compliance and revenue cycle management. By speaking the language of both clinicians and administrators, Physician Advisors help align hospital operations with the realities of patient care, reducing denials and improving outcomes.

Collaboration Between Physician Advisors and Executive Leadership

A central theme in Dr. Patel’s journey is the importance of strong alignment between Physician Advisors and hospital executives, particularly the Chief Medical Officer. Dr. Patel emphasizes that “when leadership delivers unified messages, physicians benefit from clear and consistent direction, minimizing confusion and allowing them to prioritize patient care.” Productive partnerships are rooted in transparent communication, reliance on data-driven strategies, and mutual respect. Dr. Patel believes, “hospitals that empower Physician Advisors and involve them in strategic planning see measurable gains in critical metrics such as length of stay and denial rates, resulting in positive outcomes for both patients and the organization.” This collaborative approach nurtures a culture of shared responsibility and informed decision-making, ultimately elevating both patient care and overall hospital performance.

Future of the Physician Advisor Role

Looking ahead, Dr. Patel envisions the Physician Advisor role as an evolving career path within the medical profession. As he reflects, “I think that it will possibly become a new career path. You go through your medical schooling, you do your training, some bedside rounds or bedside years and then maybe even during your training there’s some portion incorporated, but I see it almost as a dual business administrative and medical degree. This perspective underscores a future where advisory experience is integrated earlier in training, blending clinical expertise with business acumen to prepare future leaders who can navigate both patient care and hospital operations effectively.

Dr. Patel’s journey illustrates the profound impact Physician Advisors can have, not just on individual patients, but on entire hospital systems. His advice to healthcare leaders is clear: prioritize alignment and collaboration between Physician Advisors and the C-suite to drive better outcomes for all. In Dr. Patel’s words, “the true value of this role lies in helping hundreds or thousands of patients by ensuring hospitals remain strong, sustainable, and patient-focused.”

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Breaking Barriers and Leading by Example

Entering medicine in the 1990s, Dr. Geoffrion faced a workforce dominated by men. She quickly learned that respect and equal pay were not freely given to women physicians. Her promotion to chief resident marked a pivotal moment, affirming her place in the field and her ability to lead. Dr. Geoffrion recalls confronting sexism directly, including a memorable incident in which she challenged a colleague’s dismissive nickname in the operating room, earning applause from peers. Throughout her career, she has consistently demonstrated the importance of setting a high standard for others to follow. “I like to be an example. I like to be the person who’s doing the job better than everybody and lead by example,” Dr. Geoffrion said. Her commitment to excellence and leadership has paved the way for others, inspiring colleagues and mentees to strive for their best.

Balancing Career and Family

Balancing a demanding career with family life, Dr. Geoffrion became one of the country’s first hospitalists, working night shifts for 15 years so she could raise her three children. Reflecting on the experience, she said, “I had three children under the age of five, and I was able to work nights and then still be, you know, like a stay-at-home mom for them with a lot of help, family support. So, for me it was a career where I could do two things that I love the most, right? To be a mom and a doctor. As a matter of fact, my license plate is ‘Doctor Mom.’ I just wanted to be able to have a family, but at the same time have a career that was challenging.” Dr. Geoffrion credits her supportive spouse and careful planning to help her prioritize quality family time, even when quantity was limited.

Meaningful Impact and Continued Advocacy

Throughout her career, Dr. Geoffrion found profound meaning in caring for patients during their most vulnerable moments, cherishing the opportunity to comfort families, advocate for patients, and make a difference in critical times. As her journey progressed, she transitioned into the role of Physician Advisor and expanded her advocacy by helping hospitals navigate complex systems and ensuring patients receive the care they needed. Joining Brundage Group in 2022, marked a new chapter, bringing renewed inspiration through collaboration with passionate colleagues. On this environment, Dr. Geoffrion said, “I think it’s great to be around people that all have the same passion to, you know, help hospitals. You know, I think I would say that it inspires me every day. We just learn something new every day at this job.” The intellectual stimulation and sense of shared purpose at Brundage Group continue to motivate her each day.

Progress for Women in Medicine

Dr. Geoffrion has witnessed significant progress for women in medicine, noting that women now outnumber men in medical school classes and are increasingly taking on leadership roles. She has played an active part in building supportive communities, from organizing networking groups to mentoring young physicians. Dr. Geoffrion believes women physicians excel at networking and supporting one another, creating spaces for growth and shared success. She fondly recalls, “We started a women physicians potluck and we did it every other week, and we would all meet and just talk about the challenges of medicine and leadership.” These gatherings offered camaraderie and a valuable space for sharing experiences and supporting one another, helping female physicians navigate the unique obstacles they faced in the medical field.

Advice for Future Generations

Her advice to future generations is clear: pursue medicine with empathy, passion and perseverance. Dr. Geoffrion encourages women not to take shortcuts, and to embrace the challenges and rewards of a fulfilling career. “I love teaching, and so I always encourage women to go into medicine. I don’t tell people not to do it. I think it’s a fantastic career.” Dr. Geoffrion believes medicine is a calling, and those who feel drawn to it will find satisfaction and purpose.

A Lasting Legacy

Dr. Cheryl Geoffrion’s legacy is one of resilience, leadership and unwavering commitment to her patients, colleagues and family. As we celebrate National Women Physicians Day, Dr. Geoffrion stands as a role model and inspiration — showing what is possible when determination meets compassion in the world of medicine.

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On January 27, 2026, CMS announced that 2027 Medicare Advantage (MA) reimbursement rates will remain nearly unchanged from 2026, marking a significant development for the healthcare revenue cycle. This decision is so consequential that U. S. News and World Reports estimate U.S. health insurer shares would lose about $80 billing in market value.  

Healthcare finance operates as a zero-sum game. When reimbursement stagnates, payers protect margins by any means necessary, which may include increasing denials. With minimal base rate growth and ongoing pressure to control medical cost inflation, insurers will increasingly use denials and utilization management tactics to maintain profitability.

Payers Have Already Gone “All In” on the Risk Model Adjustment  

Over the past decade, managed care plans, especially those with a significant Medicare Advantage (MA) presence, have positioned themselves to benefit from MA’s risk-adjusted payment model.

Payers have invested in: 

• Proprietary technology platforms that aggregate, analyze, and stratify risk data; AI-enabled algorithms to optimize risk adjustment; and automated denials workflows. 
• Ownership or affiliation with physician practices.

This strategy increased revenue share. However, with CMS proposing a 0.09% net increase for 2027, well below expectations, the approach now faces a critical turning point. 

Flat Reimbursement and HCC Scale Back Doesn’t Reduce Cost — It Reduces Margin 

Flat reimbursement does not reduce costs. Inflation in labor, pharmaceuticals, chronic care, and outpatient utilization persists. At the same time, changes to Hierarchical Condition Category (HCC) scoring and risk adjustment are expected to further reduce revenue needed to maintain margins. 

With limited growth in capital income, payers will likely respond with stricter claim adjudication. The healthcare industry is also likely to see more health plans implement reimbursement policies that reduce hospital payments like Aetna’s decision to reduce inpatient hospital payments using MCG criteria. Expect more medical-necessity denials, aggressive plan edits, tighter pre-authorization requirements, and increased pre- and/or retrospective reviews are expected to increase. Hospitals should prepare for rising denials as payers shift focus from growth to margin protection. 

What This Means for Hospitals 

• Longer revenue cycle timelines, 
• A higher volume of complex and contested denials,
• The need to investment in technology and staffing to minimize revenue leakage and appeal denials.

Hospitals, especially those with large Medicare and Medicare Advantage populations, face two main concerns: 

1. Expense inflation continues to outpace revenue growth. 
2. Reimbursements remain flat, widening the cost-to-care gap.

Strengthening revenue integrity through efficiency and expertise is now essential. External Physician Advisor experts can help hospitals anticipate payer tactics. 

Why External Physician Advisor Support Matters 

As Medicare Advantage pressure increases, hospitals need more than reactive denial management. They need proactive clinical and revenue protection. 

A Physician Advisor team that understands both patient care and payers’ tactics can help hospitals: 

• Spot denial trends early, so problems are addressed before they impact revenue. 
• Strengthen documentation to clearly support medical necessity, and appropriate DRG assignments.
• Reduce preventable denials by aligning revenue cycle decisions with payer rules from the start. 
• Support physicians in real time with guidance on status, utilization, and documentation.
• Protect earned revenue by improving claim defensibility and appeal success. 
• Reduce the administrative burden placed on bedside providers associated with defending admission orders. 

Instead of constantly playing defense, hospitals gain a proactive Physician Advisor partner at Brundage Group who helps protect revenue, strengthen clinical decision-making, and helps hospitals play offensive to stay ahead as payer scrutiny intensifies. 

The post Why Flat MA Reimbursement = More Denials and Financial Strain  appeared first on Physician-Led Advisory & Revenue Cycle Analytics.

• The Hospital Readmission Reduction Program (HRRP)
• The Hospital Inpatient Quality Reporting Program (IQR)

The Hospital Inpatient Quality Program (IQR) includes a hybrid hospital-wide all-cause readmission measure (HWR). A hybrid measure incorporates both data pulled directly from the electronic medical record (EMR) and claims data, which is used to define the measure population.

HWR uses core clinical data elements (CCDE) from the EMR, such as laboratory tests and vital signs. This data will be used to improve case mix risk adjustment in conjunction with condition categories that are part of the Hierarchical Condition Categories methodology used to determine CMS payments to MA (Medicare Advantage) plans.

Like the HRRP measures, all unplanned readmissions are included regardless of cause. The HWR measure also uses the same algorithm as the HRRP to determine an unplanned readmission.

Core Clinical Data Elements

Abstraction of core clinical data elements will be automated through the EMR. Measure logic will extract the first set of HWR-specific CCDE differently for patients who receive hospital services prior to admission and those who are direct admits.

• If the patient was a direct admission, the logic supports extraction of the FIRST resulted.
  • Vital signs within 2 hours after the start of the inpatient admission.
  • Laboratory tests within 24 hours after the start of the inpatient admission.
• If the patient has values captured prior to admission, the logic supports extraction of the FIRST resulted vital signs and laboratory tests within 24 hours PRIOR to the start of the inpatient admission.

The specific values that will be extracted from the EMR, which varies by specialty cohort, include:

• Bicarbonate
• Creatinine
• Glucose
• Heart rate
• Hematocrit
• Oxygen saturation (by pulse oximetry)
• Potassium
• Respiratory rate
• Sodium
• Systolic blood pressure
• Temperature
• Weight
• White blood cell count

HWR Exclusions

This measure is different than those included in the HRRP because it is not limited to a few diagnoses or procedures. Potentially all Medicare patients could be included in the population unless one of the following exclusion criteria are met:

• Discharged against medical advice.
• The patient expires during the indexed admission.
• Admitted for:
  • Primary psychiatric diagnoses
  • Rehabilitation
  • Medical treatment of cancer
  • With a principal diagnosis of code of COVID-19 or a secondary diagnosis code of COVID-19 that is present on admission claim.
• Transferred from one short-term acute care hospital (STAC) to another.
  • Only the last admission in a series of transfers eligible for inclusion in the cohort so the measure will be associated with the receiving hospital.

Patients who have an unplanned readmission and expired within 30 days of discharge from the indexed admission will be included as long as they meet criteria.

Specialty Cohorts

A predicted readmission rate is calculated by cohort, which is then divided by the expected readmission rate resulting in a standardized readmission ratio (SRR) for each cohort. The cohorts are:

• Cardiorespiratory
• Cardiovascular
• Medicine
• Neurology
• Surgery/gynecology

The volume-weighted geometric mean of SRR for each cohort results in a combined SRR, which is compared to the national readmission rate to procedure the risk-standardized readmission rate (RSRR).

CMS assigns hospitals to a performance category for HWR by comparing each hospital’s RSRR interval estimate to the national observed readmission rate as follows:

• “Better than the National Rate” if the entire 95% interval estimate surrounding the hospital’s rate is lower than the national observed readmission rate.
• “No Different than the National Rate” if the 95% interval estimate surrounding the hospital’s rate includes the national observed readmission rate.
• “Worse than the National Rate” if the entire 95% interval estimate surrounding the hospital’s rate is higher than the national observed readmission rate.

There are several measures included within the IQR. Overall hospital performance under the IQR program can result in:

• Hospitals receiving full Annual Payment Update (APU) – hospitals that satisfactorily met the requirements.
• Hospitals not receiving full APU – hospitals that did not satisfactorily meet criteria or do not participate receive a reduction by one-fourth of the applicable market basket update.

The CMS annual market basket update payment refers to the adjustments made to Medicare payments based on the cost-of-living increases. The increase in IPPS operating payment rates for general acute care hospitals that successfully participate in the IQR program and are meaningful electronic health record users under the Medicare Promoting Interoperability Program is 2.6% for FY 2026.

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• The Hospital Readmission Reduction Program (HRRP)
• The Hospital Inpatient Quality Reporting Program (IQR)

Hospital Readmission Reduction Program

The Hospital Readmission Reduction Program (HRRP), implemented in Fiscal Federal Year (FY) 2013, was designed to reduce payments to IPPS hospitals with excess readmissions in specified patient populations. This overview explains the program’s key components and its impact on hospital reimbursements.

An indexed admission occurs when a claim is billed to Medicare Part A with one of the following conditions reported as the principal diagnosis or procedures as specified within the measure.

• Acute myocardial infarction (AMI)
• Chronic obstructive pulmonary disease (COPD)
• Heart failure (HF)
• Pneumonia
• Coronary artery bypass graft surgery (CABG)
• Total hip or total knee arthroplasty (THA/TKA)

The measures are designed to capture unplanned readmissions that arise from acute clinical events requiring urgent rehospitalization within 30 days of discharge. Penalties for poor performance reduce the MS-DRG payment for all Medicare FFS payments during the applicable FY.

Types of Admissions that Contribute to HRRP Performance

Readmission to the same or another short-term acute care (STAC) hospital following an indexed admission are included in the HRRP. The following types of readmissions are not included in the program:

• Planned readmissions (as determined by CMS).
• Same-day readmissions to the same hospital for the same condition.
• Observation stays and emergency department visits.
• Admissions to facilities other than STAC hospitals (hospice, rehabilitation, psychiatric, long-term acute care, or skilled nursing).
• Admissions at an eligible STAC hospital to a unit (hospice, rehabilitation, psychiatric, etc.) that bills under a separate CMS Certification Number.

Defining an Unplanned Readmission

All unplanned readmissions are included regardless of cause. In other words, the second admission does not have to be for the same condition or even related to the indexed admission. Making inferences about the quality-of-care based solely on the documented cause of the readmission is difficult. For example, a patient with systolic heart failure who develops a hospital-acquired infection may be readmitted for sepsis. In this context, sepsis would be related to the care received during the indexed admission for systolic heart failure.

Unfortunately, hospitals cannot designate a readmission as planned through documentation or discharge status codes. Admissions for acute illnesses or complications of care are never considered planned by CMS. CMS uses an algorithm to identify planned readmissions. Medicare considers the following types of care as planned:

• Transplant surgery.
• Maintenance chemotherapy or immunotherapy.
• Potentially planned procedures
  • The procedure is in a category considered planned regardless of the principal diagnosis.
  • The principal diagnosis category that is considered planned.
  • The procedure is one of the defined potentially planned procedures AND principal diagnosis is not on the list of defined acute discharge diagnoses.

Payment Reductions

Payment reductions are the weighted average of a hospital’s performance across the readmission measures during the applicable performance period (July 1, 2021, to June 30, 2024, for FY 2026). The payment adjustment factor determines if, and by how much, payments are reduced up to a maximum 3%. In FY 2026 the following penalties are being assessed:

• 21.8% (641) of hospitals will not be penalized under the HRRP.
• 70.1% of hospitals will face penalties < 1%.
• 8.1% (240) of hospitals will face penalties > 1%.
• Hospitals with the highest proportion of dual-eligible patients have an average penalty of 0.33%.
• Hospitals with the lowest proportion of dual-eligible patients have an average penalty of 0.35%.

It is anticipated payment reductions will grow in FY 2027 as Medicare Advantage beneficiaries are included in the measure population. An Advisory Board daily briefing estimates between 75% and 82% of hospitals will be penalized in 2027 with the average penalty increasing to 0.44%.  

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Billing Requirements for Readmissions:

Many payers, including Medicare, have billing requirements that address clinically related admissions. These policies require related admissions that occur within a specified period (usually up to 30 days) to be combined into a single claim.

Medicare Fee-for-Service (FFS) and Medicare Advantage plans required related admissions that occur on the same calendar day to be combined. These are referred to as readmission reviews and may have three distinct categories of outcomes:

• Same-day readmission for a related condition (the claims must be combined)
  • Patient requires follow-up care or elective surgery
  • Leave of absence, with expectation of readmission
• Same-day readmission for an unrelated condition (the claims do not need to be combined)
  • An example of unrelated conditions is the patient who was admitted for chronic obstructive pulmonary disease (COPD) and experiences a traumatic injury due to a car wreck on the way home after being discharged from the hospital. 
• Planned readmission/leave of absence as documented in the initial admission indicating a planned readmission will occur during the same episode of illness (even if it occurs on a different date than what was originally planned).
  • Situations where surgery could not be scheduled immediately
  • Specific surgical team was not available
  • Bilateral surgery was planned
  • When further treatment is indicated following diagnostic tests but cannot begin immediately

30-Day Readmission Reviews: Preventable Readmissions

Another category of readmission reviews, which are much more prevalent than one day reviews, are Quality Improvement Organization (QIO) Readmission Reviews for the Medicare FFS population and preventable readmissions by MA plans.

QIO Readmission Reviews

42 CFR 476.71(a)(8) gives QIOs responsibility over determining if hospitals have misrepresented admission or discharge information that results in unnecessary multiple admissions. For example, when the two confinements occurring within thirty-one calendar days from the date of discharge, could be related. Readmissions should be denied when:

• Medically unnecessary.
• Result from premature discharge from the same hospital.
• Result from circumvention of the Prospective Payment System by the same hospital
  • A patient is discharged, who required further testing or treatment; or was not medically stable at discharge.
  • A patient is readmitted to a hospital for care that would have been medically appropriate and could have been provided during the first admission.

Medicare Advantage Plan Preventable Readmission Reviews

Medicare Advantage (MA) plans also have Readmission Review Programs consistent with CMS guidance. The primary difference between QIO reviews and those performed by MA plans is that MA plans only perform readmission reviews when the subsequent admission is to the same facility.

To determine whether a patient’s discharge was preventable, the multiple factors will be considered including, but not limited to,

• Premature discharge
  • Discharge prior to establishing the safety or efficacy of a new treatment regimen.
• Inadequate discharge planning
  • Inadequate outpatient follow-up or treatment.
  • Failure to address rehabilitation needs.
• Clinical instability at the time of discharge (or failure to address signs and symptoms.
• Discharge to an inappropriate destination.

Partner with Brundage Group to strengthen your readmission review process. Our experts identify when admissions within 31 days should be combined into one claim—helping your organization reduce denials and stay compliant.

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By Ben Kartchner, MD

Dr. Ben Kartchner has worked as a Physician Advisor for almost a decade and previously served in the roles of associate medical director of care management and medical director of utilization management at various health systems. 

Despite the Two-Midnight Rule passing its 11-year mark, there’s still confusion about when to place an inpatient order for patients initially placed in outpatient status with observation.

I see the same case reviewed by multiple Physician Advisors, with different outcomes. The American College of Physician Advisors (ACPA) publishes an observation case in its monthly newsletter. There is always nuance in how the Two-Midnight Rule should be applied, which can result in differing opinions. This year, much of the conversation revolves around how Medicare Advantage (MA) plans should respect the rule, but from what I’ve seen, compliance is still inconsistent.

However, I’d like to refocus on the basics – and possibly provide a different perspective. While the differing opinions can be academic, hospitals have real cases, real audits, and real revenue, so it is kind of a big deal. This has major implications for both original Medicare and Medicare Advantage, especially as we work to hold MA plans accountable.

Regardless of the payer, all Medicare beneficiaries should be managed consistently, so our rationale and perspective from which we make decisions must remain uniform.

Let’s consider the same patient presenting to three hospitals with chest pain. Initial and repeat troponins are negative, but due to risk factors, the ED physician calls the hospitalist, who places an order for observation.

Hospital A

The patient is monitored on telemetry, has a stress test, and is discharged the next day after negative results.

Hospital B

A cardiology consult is ordered, and on hospital day 2, a note indicates that the patient is awaiting the consult, with no mention of discharge.

Hospital C

The physician orders an echo on day 2, and the note implies that the patient won’t be discharged until the echo is completed.

Should an inpatient order be placed for any of these patients? Two of the three are suspected to have passed a second midnight in the hospital.

Let’s review the relevant regulation found at 42 CFR 412.3, starting in paragraph (D)(1):

“Except as specified in paragraphs (d)(2) and (3) of this section, an inpatient admission is generally appropriate for payment under Medicare Part A when the admitting physician expects the patient to require hospital care that crosses two midnights.

• The expectation of the physician should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration.”

I frequently hear that American Medical Association (AMA) definitions of discharge, death, or rapid improvement are referred to as exceptions. As the chair of the ACPA Certification Committee and Exam, I have received complaints regarding a question that addresses this issue (hint: this is on the exam). This is a misunderstanding of the Two-Midnight Rule.

Unforeseen circumstances are not exceptions. The rule is about expectation. Patients with unforeseen circumstances still must have a two-midnight expectation when the order is placed, and the documentation must support that expectation. This same principle is vital in deciding who should be upgraded to inpatient status. The rule hinges on the expectation of a two-midnight stay, which must be documented. Conversely, an observation order identifies that the physician does not expect the patient to require greater than two midnights of hospital care. This is absolutely critical.

Another helpful quote can be found in the Two-Midnight Rule itself, Rule 1599-F. It states:

“The crux of the medical decision is the choice to keep the beneficiary at the hospital in order to receive services or reduce risk or discharge the beneficiary home because they may be safely treated through intermittent outpatient visits or some other care.”

Let’s apply this to our scenarios, recognizing that the “admitting” physician did not expect the patient to require hospital care that crossed two midnights when he/she placed an order for observation:

Hospital A

There was no expectation of a two-midnight stay, and the patient was discharged the next day – this is a classic observation case.

Hospital B

The patient is waiting for a cardiology consult. Despite the extra day, no documentation supported a change in the initial expectation of fewer than two midnights. It just took the hospital more than that long to perform the evaluation. Therefore, inpatient status is not appropriate.

Hospital C

The physician orders an echo on day 2, but inpatient status wouldn’t be appropriate without a documented clinical change to justify a longer stay. Counting midnights without documentation supporting a change in expectation is not compliant with the regulation and will lead to significant denials with managed plans.

So, what does this all mean, and how can it be applied to reviewing cases and educating physicians on documentation? First, when reviewing observation cases, focus on clinical changes. Observation is intended to extend the workup time and determine if the patient needs ongoing hospital care or can be safely treated with intermittent visits or other care.

A lack of clinical changes or specific documentation to alter the expectation of a stay of fewer than two midnights likely means inpatient status is not warranted.

Physicians must be educated on the importance of documentation on hospital day 2. It is not enough to continue the initial plan, as that plan expected fewer than two midnights. When an inpatient order is placed, that day’s progress note becomes the admission note, and needs to support the expectation of a stay beyond two midnights. The regulation states,

“The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration.”

I recommend physicians specifically document why the patient requires hospital care, including why the same care could not be safely provided via intermittent outpatient visits or some other care. When done correctly, denials are reduced, and peer-to-peer overturn rates improve.

Above all, you will be confident that your facility is compliant – and receiving the revenue it rightfully deserves.

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