Is your hospital really a hospital? For the vast majority of this blog's readers it may seem like a silly question. But for some, it’s not a silly question at all. In fact, it could be the most important question that needs answered; and that answer will dictate whether your “hospital” is appropriately participating in the Medicare program.

The healthcare industry has seen an explosion of “micro-hospitals” in the past few years. These are often entities with large outpatient services such as emergency care, surgery, and diagnostic procedures (endoscopy, etc.). In addition, they have a few beds that are allocated for inpatients and overnight stays. These entities often enroll in Medicare as hospitals. Why? Because reimbursement is often better than if the entity operates solely as an ambulatory facility.

Licensure and certification are not the same thing
While a facility may have a State license to operate as a hospital, that facility may still not meet the Medicare definition of a hospital. The criteria used by a State to determine that a hospital meets the requirements for State licensure is not the same criteria used to define a hospital for the purpose of participation in Medicare.

If an entity wishes to participate in Medicare as a hospital, it must meet the definition of same as outlined in Section 1861(e) of the Social Security Act. Among other criteria; to be considered a hospital the entity must be “primarily engaged” in providing inpatient care. And this is where micro-hospitals often get in trouble. Having the capacity or potential capacity to provide inpatient care is not the equivalent of actually providing such care.

What does being ‘primarily engaged’ mean? The definition of a hospital and the issue of whether an entity is primarily engaged are not applicable to a Critical Access Hospital (CAH). CMS considers multiple factors in making a determination as to whether or not an entity is considered primarily engaged in inpatient care.

Such factors include, but are not limited to;

• Average daily census (ADC)
• Average length of stay (ALOS)
• The number of off-campus outpatient locations
• The number of provider based emergency departments. An unusually large number of off-campus ED’s may suggest that a facility is not primarily engaged in inpatient care and is instead primarily engaged in providing outpatient emergency services.
• The number of inpatient beds related to the size of the facility and scope of services offered. For example, a facility with 4 inpatient beds, 6-8 operating rooms, 20 emergency department bays and a 10 bed ambulatory surgery outpatient department is most likely not primarily engaged in inpatient care.
• Volume of outpatient surgical procedures compared to inpatient surgical procedures. If an entity considers itself to be a “surgical” hospital, are procedures mostly outpatient? Are surgeries routinely scheduled early in the week, and does it appear that all or most patients are being discharged prior to the weekend?
• Staffing patterns. A review of staffing schedules should demonstrate that nurses, pharmacists, physicians, etc. are scheduled to work to support 24/7 inpatient care versus staffing patterns that support outpatient operations.

Hospitals are not required to have a specific inpatient to outpatient ratio in order to meet the definition of primarily engaged.

How does CMS define an inpatient?
Generally, an inpatient is formally admitted with the expectation that he or she will require hospital care that is expected to span at least two midnights. The expectation is that the intent of the physician was that the patient be admitted to the hospital for an inpatient stay as opposed to that of observation status which is an outpatient service. Therefore, inpatient ALOS of two midnights would be one of the benchmarks considered by CMS for certification as a hospital.

How many inpatients does a hospital have to have?
If an entity does not have at least two inpatients at the time of a survey, an initial review of admission data will be performed by surveyors while onsite to determine if the hospital has had an ADC of at least two and an ALOS of at least two midnights over the last 12 months. In order to be considered primarily engaged in providing inpatient services, prospective hospital providers and currently participating hospitals should also be able to maintain an ALOS of two midnights or greater.

What happens if CMS concludes that a hospital is not primarily engaged in inpatient care?
CMS has the final authority to make the determination of whether or not an entity has met the statutory definition of a hospital. In addition, approval by the Medicare administrative contractor of an enrollment application does not convey hospital status for CMS purposes. Hospital status is only conveyed and approved by CMS. If CMS concludes that an entity is not primarily engaged in inpatient care, its status as a hospital would be denied/revoked.

Rick's clinical background is in critical care nursing with a focus in cardiovascular and trauma service lines. He has held both clinical and executive management level positions in Quality, Risk, Education, Infection Control, and Regulatory Compliance.

Rick is a regular speaker at numerous state and national conferences on the federal regulations and accreditation standards, and is host of CIHQ's popular monthly webinars addressing key compliance challenges in today's environment.

Rick is nationally certified in healthcare accreditation, and serves as Chair of the Board of Examiners for the Healthcare Accreditation Certification Program (HACP). Rick has a degree in Nursing with a Master's Degree in Health Services Administration.