Why a Medicare Advisor program makes sense

By Melissa Buchner-Mehling, MD, CHCQM | Associate Chief Medical Officer, Physician Advisory 

In today’s world of hospital-based medicine, every dollar counts.  

It’s the rare hospital — if any hospital at all — that’s experiencing particularly strong financials and an absence of staffing challenges. Since the onset of the pandemic four years ago, hospitals have faced shortages across the board: physicians, case management, cash flow. 

With belt-tightening the norm, hospitals continue to face the challenge of cutting costs amid razor-thin margins. Adding to the regulatory overwhelm of things, the Centers for Medicare and Medicaid Services (CMS) determined that hospitals must follow the two-midnight rule not only with traditional Medicare patients but also with Medicare Advantage patients. This rule, though passed in June 2023, largely went into effect at the start of 2024. The implication of this is that physicians will need even more rigor around documentation in determining if a patient should be discharged or admitted as an inpatient from observation status before two midnights. 

As a physician advisor with Sound Physician Advisory services, I can tell you that hospitals across the country sometimes may misunderstand the two-midnight rule, which can lead to noncompliance. And yet others are slow, hesitant, or afraid to embrace it. Why? The rule adds yet another layer of burden to clinicians who are focused most on treatment, less on admission status. And with greater scrutiny from insurance companies comes greater risk of denial. In their calculation of potential time and money lost, it doesn’t seem worth it.

This calculation, however, is leaving considerable money on the table, so to speak. 

Just how much? Millions of dollars.

The cost of not changing status 

Based on our experience with our partners and in the industry, we know hospitals tend to keep patients under observation status longer than they should. In fear of coming up against a denial, many don’t convert a patient from observation to inpatient status because if that decision is later denied by insurance, the hospital faces the cost to appeal in dollars and time — a fight few want to devote their precious resources to. Further, trying to understand the nuances of CMS rules while in the flow of giving and transitioning care can be a lot to navigate. 

The cost of doing business that way, however, can be steep. 

On average, the payment to a hospital for a patient’s observation status stay is $2,300. The average payment to a hospital for a medical inpatient stay is $8,300. It costs hospitals between $1K and $3K per day to take care of a patient. So, hospitals are missing out on significant reimbursement when they do not convert patients to inpatient status when appropriate.

Now consider that difference of $6K across 100 patients. That’s no small sum.

This is what we see, again and again: opportunities missed or not taken to move a patient into the appropriate status for the appropriate reimbursement. 

Experts in our field 

Our team of physician advisors know the ins and outs of documentation and status determination to help our hospital partners maintain compliance and maximize efficiency.  

Our Medicare Advisor program integrates with hospital medicine teams to make sure no Medicare or Medicare Advantage patient is overlooked, monitoring them in real time to determine their appropriate status based on medical necessity and the CMS two-midnight rule.  

And our work gets results: 

• We’re able to recover lost revenue from untimely decisions — with a $1M average return per hospital.  

• We see, on average, a 36 percent drop in observation discharges longer than two midnights, which results in improved length of stay for both patients in inpatient and observation status. 

• Our status conversion rate is nearly 60 percent. 

• We free up time lost to case management inquiries and let case managers focus their attention on other important matters.  

• Patients at hospitals where we partner report a better overall experience. 

• Medicare Part A covers inpatient-status patients, so patients have a set inpatient copay, compared to Medicare Part B, which covers patients in outpatient observation status and may result in a significantly higher financial responsibility for the patient. 

And for our partners who already have a physician advisor, we work alongside them to make their lives a little bit easier by focusing our attention on Medicare and Medicare Advantage patients who sometimes slip through the cracks. 

We’re your safety net 

Whether or not you have staffing issues, even if you have a robust program, we’ve found time and again that hospitals still have challenges with the two-midnight rule. And our physician advisory teams can identify these patients before they fall through the cracks. As a 365-days-a-year service, we have every opportunity to ensure your Medicare and Medicare Advantage patients end up where they belong, when they belong there. 

Our technology allows us to comb through patient cases and pull those whose status needs attention. This allows us to manage timing and status more intentionally, which in turn improves the hospital’s regulatory compliance and decreases their audit risk.  

To learn more about Medicare Advisor, read our white paper.