Hospital and nursing home providers are pleading with the Centers for Medicare & Medicaid Services to dump its 48-hour limit "observation" status—a Medicare billing category for patients not sick enough to qualify for acute admission but too sick to be sent home.
The problem is, after these beneficiaries are discharged, or if they are admitted to the hospital but for less than three consecutive days (the three-day rule), Medicare will not pay for subsequent care in a skilled nursing facility or for self-administered prescription drugs – some of which are extremely expensive.
That often surprises, frightens, and disappoints patients and their families, many of whom can't afford to pay for care they think should be covered. And the policy is creating intolerable problems for hospitals which see the policy as interfering with the trust patients place for their care.
That's what dozens of providers lined up to tell officials for the Centers for Medicare & Medicaid Services who held a special "listening session" on the controversy in Baltimore last week.
"Even though the patients have been educated that they are basically in on an outpatient basis, and they have outpatient liability with self-administered drugs, they don't think it's right," said one provider from Asante Health System in Medford, OR.
"They don't understand it, and they think the hospital is doing something wrong," she said. "It becomes a huge financial liability to the patient, and it also becomes a problem with the patient's relationship with the hospital."
Nevertheless, more and more patients are being placed on "observation status" which some hospital officials said has been known to last as long as 13 days, and even include surgery. That may be, many speakers said, because hospital officials are afraid that if they admit these patients, Medicare Recovery Audit Contractor (RAC) committees will audit and reject claims because the patients' symptoms and conditions didn't meet strict admission criteria.
"Observation is a time to make a decision on whether a patient needs to be admitted, but that's not really how it's used in practice," said Steven Meyerson, an internist at Baptist Hospital in Miami. "In reality these are sick patients who need to be admitted."
But according to "arbitrary definitions, which are very vague and difficult to understand and apply, we have to decide who's an inpatient and who's an outpatient when sometimes the distinction can be two or three points in their sodium level or the amount of IV fluids they're receiving."
Toby Edelman, an attorney for the non-profit Center for Medicare Advocacy told the CMS panel that the number of patients being rejected from coverage after an "outpatient" stay has dramatically increased in the last 11 months.
While technically, a patient who is in observation status is considered an "outpatient," that distinction is lost on the patient who has been in the hospital 13 days, she said. "They went through the emergency department, they have a wrist band, they got tests and medication and food, and they were seen by physicians and nurses.
"Then, the beneficiaries and their families end up paying tens of thousands for nursing home care that Medicare would be paying for otherwise, except for this outpatient (observation) status," she said.
"Some people can't afford to pay privately and are going to inappropriate places, or they go home where they get no care at all, or they're going to assisted living or nursing home briefly and have to leave because they can't afford it."
Additionally, she believes hospitals are actually incentivized to put patients in observation status so they won't count as an inappropriate readmission if the patient had previously been in the hospital.
"As more hospitals begin to create observation units, the quality of care will decline even further for beneficiaries because people will see they are there only for observation, as opposed to being an inpatient," she said.
Last week's listening session was called by Jonathan Blum, deputy administrator and director for CMS' Center for Medicare, in part because the agency has noticed a "small but growing trend in (hospitals') use of observation status that is of concern to the agency," he said.
"We're here to understand why this trend is growing, and how can CMS better educate beneficiaries."
Some of those speaking at the session asked for changes to Interqual and Milliman guidelines used by hospitals to determine what illnesses should result in a patient's hospitalization.
Others suggested Medicare stick with the observation category, but roll it in to help patients qualify for followup coverage under the three-day rule.
"Stay determination should not be made based on a list or a fear of a claim denial," said a representative from the American Healthcare Association.
In a joint address during the listening session, Roslyne Schulman, director for policy the American Hospital Association, spoke on behalf of the Association of American Medical Colleges and the Federation of American Hospitals. She said the three organizations think because CMS is becoming more strict about which patients merit admission, many more kinds of care are considered appropriately provided in an outpatient or observation setting.
"We are sympathetic to and understand the implications to Medicare beneficiaries that result from extended observation services, including possible increases in out-of-pocket costs and difficulties in meeting the minimum inpatient stay requirements for skilled nursing care," she said.
"However, hospitals must operate within the policies that govern them. And we do not believe that discharging a patient from observation services at an arbitrary time limit of 48 hours is clinically appropriate, simply because the patient does not qualify for inpatient care."
More than 2,000 providers participated in the listening session. It can be heard until Sept. 8 by calling 1-800-642-1687. CMS is accepting comments in writing here.
See Also:
RAC: The Problem with the Three-day Rule
8 Three-Day Rule Tips for Hospitals
Hospitals Face Three-Day Payment Window Changes