Kodiak Solutions said its analysis of hospital inpatient and outpatient claims data suggests that payers are "continuing to apply their own criteria for inpatient admission and dismissing the two-midnight rule for Medicare beneficiaries."
The firm analyzed claims data from more than 1,900 hospitals between July 2023 and June 2024, according to the report. The analysis compares observation rates prior to and following the January 2024 implementation of the two-midnight rule for Medicare Advantage plans. Kodiak analyzed data for three health plan categories: commercial/managed care, Medicare Advantage and traditional Medicare.
The data shows that Medicare Advantage plans began classifying fewer observation stays starting in January, according to an Oct. 23 Kodiak news release. Observation rates for MA plans ranged between 18.1% and 20.2% of claims in the last six months of 2023, then fluctuated within a lower range of 14.4% and 16.1% in the first six months of 2024.
Observation rates in traditional Medicare also trended down over the 12-month period, but within a range of 5.2% to 3.7%, with the exception of a spike to 8.5% in December, according to the release.
"The gap in observation rates between MA plans and traditional Medicare suggests that MA plans are not fully complying with the federal rule requiring MA plans to offer members the same coverage as traditional Medicare," Kodiak's director of revenue cycle Matt Szaflarski said in the release. "Our data show the MA observation rates are similar to the rates among patients covered by commercial insurance and, of course, most of the MA plans are also providers of commercial insurance."
Mr. Szaflarski said that hospitals need to closely monitor payer behaviors regarding observation stays across all lines of business. Hospitals should reinforce their denial management practices to "ensure that documentation and case reviews are optimized to reduce the opportunity for MA plans to reclassify claims as observation visits." He added that revenue cycle leaders should also be on the lookout for the worst examples of these reclassifications to share with their advocacy organizations.
Read the full report here.