Our results suggest opportunities to improve hospitalists' ability to lead serious illness communication by increasing the time hospitalists have for discussions, improving documentation systems and communication between inpatient and outpatient clinicians, and targeted training on challenging communication scenarios.

BACKGROUND In response to growing concern over frequency and duration of observation encounters, the Centers for Medicare and Medicaid Services enacted a rules change on October 1, 2013, classifying most hospital encounters of <2 midnights as observation, and those ≥2 midnights as inpatient. However, limited data exist to predict the impact of the new rule. OBJECTIVE To answer the following: (1) Will the rule reduce observation encounter frequency? (2) Are short‐stay (<2 midnights) inpatient encounters often misclassified observation encounters? (3) Do 2 midnights separate distinct clinical populations, making this rule logical? (4) Do nonclinical factors such as time of day of admission impact classification under the rule? DESIGN, SETTING AND PATIENTS Retrospective descriptive study of all observation and inpatient encounters initiated between January 1, 2012 and February 28, 2013 at a Midwestern academic medical center. MEASUREMENTS Demographics, insurance type, and characteristics of hospitalization were abstracted for each encounter. RESULTS Of 36,193 encounters, 4,769 (13.2%) were observation. Applying the new rules predicted a net loss of 14.9% inpatient stays; for Medicare only, a loss of 7.4%. Less than 2‐midnight inpatient and observation stays were different, sharing only 1 of 5 top International Classification of Diseases, 9th Revision (ICD‐9) codes, but for encounters classified as observation, 4 of 5 top ICD‐9 codes were the same across the length of stay. Observation encounters starting before 8:00 am less commonly spanned 2 midnights (13.6%) than later encounters (31.2%). CONCLUSIONS The 2‐midnight rule adds new challenges to observation and inpatient policy. These findings suggest a need for rules modification. Journal of Hospital Medicine 2014;9:203–209. © 2014 Society of Hospital Medicine

BACKGROUND Outpatient (observation) and inpatient status determinations for hospitalized Medicare beneficiaries have generated increasing concern for hospitals and patients. Recovery Audit Contractor (RAC) activity alleging improper status, however, has received little attention, and there are conflicting federal and hospital reports of RAC activity and hospital appeals success. OBJECTIVE To detail complex Medicare Part A RAC activity. DESIGN, SETTING AND PATIENTS Retrospective descriptive study of complex Medicare Part A audits at 3 academic hospitals from 2010 to 2013. MEASUREMENTS Complex Part A audits, outcome of audits, and hospital workforce required to manage this process. RESULTS Of 101,862 inpatient Medicare encounters, RACs audited 8110 (8.0%) encounters, alleged overpayment in 31.3% (2536/8110), and hospitals disputed 91.0% (2309/2536). There was a nearly 3‐fold increase in RAC overpayment determinations in 2 years, although the hospitals contested and won a larger percent of cases each year. One‐third (645/1935, 33.3%) of settled claims were decided in the discussion period, which are favorable decisions for the hospitals not reported in federal appeals data. Almost half (951/1935, 49.1%) of settled contested cases were withdrawn by the hospitals and rebilled under Medicare Part B to avoid the lengthy (mean 555 [SD 255] days) appeals process. These original inpatient claims are considered improper payments recovered by the RAC. The hospitals also lost appeals (0.9%) by missing a filing deadline, yet there was no reciprocal case concession when the appeals process missed a deadline. No overpayment determinations contested the need for care delivered, rather that care should have been delivered under outpatient, not inpatient, status. The institutions employed an average 5.1 full‐time staff in the audits process. CONCLUSIONS These findings suggest a need for RAC reform, including improved transparency in data reporting. Journal of Hospital Medicine 2015;10:212–219. © 2015 Society of Hospital Medicine.

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