Senate hears providers' concerns about observation status crisis

In a hearing this week, a hospital sector representative told the U.S. Senate's Special Committee on Aging that the observation status problem has left healthcare providers in the "untenable position" of trying to meet patient needs while complying with Medicare payment policies.

The Senate committee heard testimony last July about how the issue can negatively affect seniors, as in many cases Medicare will deny coverage for follow-up nursing home stays if patients are admitted to the hospital "under observation," FierceHealthcare has reported. During that hearing, ranking committee member Sen. Susan Collins (R-Maine) pointed out that seniors entering hospitals for observation has increased 69 percent in the last five years, in addition to lengthening observation stays.

Indeed, the practice has come under increasing scrutiny for its impact on out-of-pocket healthcare costs, and some advocates have accused hospitals of using observation status as a loophole to avoid Medicare admissions penalties at the expense of patients.

But in his remarks to the Senate committee Wednesday on behalf of the American Hospital Association, Jyotirmaya Nanda, M.D., highlighted the catch-22 current Medicare policies create for hospitals.

"Hospitals are doing their best, both to comply with Medicare payment policies and to address the confusing and difficult issue of patient status with patients and their families," he said.

Ranking committee member Sen. Claire McCaskill (D-Mo.) echoed these concerns, saying "CMS describes observation care as 'a well-defined set of specific, clinically appropriated circumstances.' I can't find that well-defined set of clinically appropriated circumstances."

Nanda also said that a variety of factors have fueled the uptick in use of observation status, including "evolution of medical practice patterns, changes in Medicare payment policy, activities of Medicare audit contractors and hospitals' legitimate concerns about enforcement actions." He was particularly critical of recovery audit contractors, whom he said often second-guess and penalize physicians' decisions regarding inpatient stays months or even years after the fact.

Centers for Medicare & Medicaid Services (CMS) Deputy Administrator and Director Sean Cavanaugh said in his remarks that the agency is working to reform its auditing program to "reduce provider burden and diversify the kinds of compliance issues Recovery Auditors investigate."

CMS also attempted to "protect the beneficiary" with its two-midnight rule, Cavanaugh said, which requires physicians to deem a patient's condition serious enough to warrant two overnight hospital stays in order to qualify for Medicare inpatient reimbursement. However, hospitalists have panned the policy, leading to court challenges and delayed implementation.

To learn more:
- check out the hearing
- read Nanda's testimony
- read Cavanaugh's testimony

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