Washington New requirements will take effect, over opposition from physicians and hospitals, that are intended to curtail the practice of long stays in observation. The rules will presume that Medicare patients who spend at least two midnights at the hospital are inpatients.
Groups representing physicians and hospitals said the approach added a new arbitrary element to the process and might give Medicare auditors more power to review short inpatient stays. Patient advocates also have voiced displeasure with the Centers for Medicare & Medicaid Services for not addressing directly the growing trend of beneficiaries spending days — and sometimes weeks — in observation and then having to pay large hospital and follow-up care bills.
CMS finalized language to clarify policy for admissions in an annual Medicare payment rule for inpatient services. A stay in a hospital spanning at least two midnights is presumed to be appropriate for Medicare coverage under the Part A benefit of the program. A formal admission order still is needed to begin inpatient status, but physicians can use all the time a patient spent in the hospital as an outpatient when considering if he or she will cross the two-midnight threshold.
That doesn’t sit well with hospitals. “We thought there should be a clinical solution,” said Jeffrey Micklos, an executive vice president at the Federation of American Hospitals. Instead, CMS will use the time-based scenario, the agency stated in the Aug. 2 final rule.
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The policy change is expected to cost $220 million to account for an increase in inpatient encounters. However, CMS will offset that increase with a 0.2% pay reduction for hospital services.
Recovery audit contractors and other program auditors also might be empowered under the new rules, Micklos said. Auditors may use the policy to scrutinize submitted claims for inpatient hospital visits when stays are less than two midnights.
Long stays in observation at a hospital can lead to large Medicare fees for patients and unexpected denial of coverage for postacute care services at skilled nursing facilities.
Medicare rejects pay for skilled nursing facility services when beneficiaries do not meet another time-based requirement that stays unchanged in the latest rule. CMS covers posthospital care in a nursing facility only when the patient has been an inpatient for 72 hours. Hospital stays in observation do not count toward that three-day requirement.
There were more than 1.5 million observation stays in 2012, according to the Health and Human Services Office of Inspector General. The majority of those stays spanned one night, but 11% had lasted at least three nights.
More than 600,000 hospital stays that lasted three or more nights did not qualify the patients for nursing facility coverage because they were held in observation, had long outpatient stays, or were held in observation for one or two nights and later admitted for fewer than three nights, the OIG said.
AMA had suggested fixes
The American Medical Association had opposed the new two-midnight stay and the new inpatient admission policies. Patients receiving services at the hospital during a period spanning less than two consecutive midnights would be considered outpatients by Medicare contractors processing claims unless a physician’s documentation supported an inpatient stay order.
Date: Aug. 19, 2013