Provider groups are pushing the Centers for Medicare & Medicaid Services to change what some consider an outdated and punitive rule regarding observation status.
Medicare currently does not pay for the hospital care a patient gets if that patient is under observation status (rather than admitted) and transferred to a skilled nursing facility (SNF) in a subsequent stay. CMS requires three days of inpatient status before covering an SNF stay.
"The problem is there are no clear clinical guidelines for when a patient should be kept under observation," Howard Gleckman, community hospital board member and Forbes contributor, wrote in yesterday's column. "As a result, many observation decisions are driven, not by doctors, but by Medicare fraud auditors who can deny payments for patients they deem improperly admitted."
CMS, concerned with the rise in observation status, proposed changes to the payment system. Observation stays at hospitals jumped 25 percent from 2007 to 2009, according Brown University researchers in a Health Affairs study this summer. Yet, inpatient admissions declined, suggesting that hospitals may be using the loophole in the payment system--classifying patients on "observation" rather than "admission" to avoid audits and denials that target short-stay admissions.
But by doing so, patients might be the ones eating the costs. Called the "twilight zone of observation status," according to Julian Gray and Frank Petrich, attorneys at Gray Elder Lawin Pittsburgh in the Pittsburgh Post-Gazette, some patients' hospital status may change even during the stay, swapping from observation to admission without their knowledge.
Patient advocates have taken the issue to the courts. The Center for Medicare Advocacy and the National Senior Citizens Law Center in November filed suit against U.S. Department of Health & Human Services Secretary Kathleen Sebelius, arguing that inappropriate use of observation status illegally denies patients Medicare coverage and burdens them with high-cost hospital bills.
The American Health Care Association (AHCA) is asking CMS to reconsider the three-day rule, arguing that all days an individual spends in a hospital should count toward the requirement for Medicare coverage of post-acute skilled nursing care.
"This is not just a dilemma of nomenclature. When Medicare coverage is denied to those individuals who desperately need skilled nursing care, it forces an unfair decision on those beneficiaries to either to pay for care out of pocket or forgo the care they need to continue their health recovery," AHCA President and CEO Mark Parkinson said in a statement Monday.
Similarly, Sentara Williamsburg (Va.) Regional Medical Center also says all hospital days should count toward payment.
"Sentara's position is that doctors should have the leeway to manage the care of patients in the most appropriate setting at the most appropriate time," hospital spokesperson Kim Van Sickel told the Virginia Gazette. "Specific to the current CMS regulations, Sentara believes that all hospital days should count toward the three-day hospital requirement. More broadly however, Sentara supports the elimination of this gatekeeping requirement."
Meanwhile, the Federation of American Hospitals is asking CMS for more guidance on the observation policy.
"The reality of the current situation is hospitals find themselves caught in the middle, which ultimately has the consequence of limiting access to care for beneficiaries."
FAH also suggested possible solutions, in which case managers play a greater role in patient status determination and, in the longer term, that CMS use a pre-authorization process for inpatient admissions like those used by commercial insurers.
For more information:
- read the proposed rule in the Federal Register (.pdf)
- here's the AHCA statement
- read the Forbes column
- see the Virginia Gazette article
- see the FAH statement (.pdf)
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