By Tom Tinsman, MD

For physicians performing utilization review for AFMC, it is critically important to clearly understand and properly use Medicaid Observation status. This understanding is also helpful for all physicians to ensure they use the correct admission status when admitting patients.

Medicaid Observation status differs considerably from Medicare Observation. The level of care ordered for the patient determines whether Medicare Observation is chosen.

With Medicaid Observation, the only thing that matters is the anticipated duration of the patient’s stay. At the time the admitting physician writes the admission order, if he or she can reasonably expect the patient to remain in the hospital less than 24 hours, then the physician must admit the patient to Medicaid Observation status. Medicaid Observation must end at exactly 24 hours.

If the patient has not done as well as expected, and has a legitimate, documented reason to remain in the hospital, then Medicaid Observation can be changed to Acute Care. This change should happen automatically at 24 hours and is called a “deemed” admission. However, this rule is applied somewhat inconsistently. It is better if the attending physician places an actual order to convert the admission to Acute Care.

The attending physician must be aware of when the patient’s Observation status expires. If the physician simply fails to discharge a stable patient prior to the end of Observation status, that is not a legitimate reason to convert the stay to Acute Care.

The corollary to the 24-hour rule is that, if the admitting physician has good reason to believe that the patient will be in the hospital for more than 24 hours, then that physician should admit the patient directly to Acute Care. If it is reasonable to presume the patient will require more than 24 hours of hospital care, but the patient does better than expected and is discharged in less than 24 hours, that outcome cannot be used to retrospectively deny the apparent necessity of an Acute Care admission.

The time of day of the admission can also be factored into the calculation of how long the patient will be in the hospital. If the patient is admitted at 3 a.m., it is not reasonable to discharge that patient at 3 a.m. the following morning to adhere to the strict 24-hour time limit. In such a case, the thinking process must be, “I’m admitting this patient at 3 a.m. Is it likely that this patient will be ready for discharge by a reasonable hour this evening?” If the answer is no, then an Acute Care admission should be used.

Admitting physicians can help the review process by briefly documenting the patient’s anticipated duration of stay, with a brief description of how that determination was reached. Considerable weight should be given to the opinion of the admitting physician as to the patient’s expected duration of stay, if that opinion is expressed at the time of admission.

It is also important to note that Medicaid Observation is a billing convention, not a description of the level of care provided, nor a limitation on the level of care that can be provided. It is entirely possible and reasonable to admit a patient to Medicaid Observation status, but place that patient in the ICU in certain clinical settings. Any hospital that has agreed to be a Medicaid provider, by specific Medicaid regulation, must have the capacity to bill for Medicaid Observation status when ordered by the physician. Hospital or staff by-laws, rules, regulations or other policy may not be used to prevent the admission of a patient to Medicaid Observation status, if that facility wishes to remain a Medicaid provider.

Dr. Tinsman is the associate medical director, team lead for AFMC.