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OPPS Comments Focus on Observation Status

 |  By Margaret@example.com  
   September 06, 2012

At the close of the public comment period, the proposed rule from the Centers for Medicare & Medicaid Services for the 2013 Outpatient Proposed Payment System garnered almost 300 comments.

Although the proposed rule made significant changes in how CMS calculates ambulatory payment classifications (APC) and how it reimburses hospitals for payable drugs and biologics, the lion’s share of the comments address the effect that assigning patients observation status could have on Medicare benefits.

A patient on observation status in an acute care hospital is classified as an outpatient even though the patient occupies a bed, stays overnight, and receives medical care. The outpatient classification could affect Medicare coverage of any subsequent stay in a skilled nursing facility (SNF) because CMS requires three days of inpatient status before covering an SNF stay.

In requesting comments on observation status CMS indicated that it is considering changing or clarifying its policies on that matter. It is conducting a Medicare Part A-to-Part B rebilling demonstration project.

Many comments from hospital, physicians, and private citizens shared the opinion that every day spent under observation should count toward the three-day minimum stay required for post-acute care coverage under Medicare.

 

In its comments Premier, a healthcare alliance of more than 2,600 hospitals, stated that "beneficiaries in this outpatient status face the possibility that their aggregate copayments for all outpatient services received will exceed the inpatient hospital deductible."

It noted that observation is often "used for complex cases when it is not clear what level of service the patient needs." Premier asked CMS to consider providing physician education on medical necessity and the changing trends in the standards of care.

The American Academy of Otolaryngology recommended that CMS "automatically define anyone who has received care in the facility setting for more than 48 hours as an inpatient." It asked CMS to "increase the transparency of patient status for both patients and physicians" and implement an appropriate and consistent payment policy for both outpatient and short inpatient hospital stays.

The New Jersey Hospital Association noted that clear guidance from CMS is necessary so hospitals and physicians "have more certainty that they are making the right decisions" so the "risk of audits and denials is minimized."

It also stated that "the treating physician's judgment, which takes into consideration both the patient's conditions and other risk factors, should be the primary determining factor for inpatient admission decisions, not external rules and criteria."

The American Hospital Association pointed the finger at recovery audit contractors (RAC) and Medicare administrative contractors (MACs), which it contends have started to "inappropriately second guess physician judgment, declaring that some patients who were admitted should not have been." It adds that "patients who thought they were admitted are surprised to learn that they were actually receiving outpatient services."

While the AHA is supportive of time-based admission policies where an observation outpatient would automatically be deemed inpatient status after one or two days, it cautioned that the system would expose hospitals "to increased risk of retrospective review and audit by RACs and MACs."

It noted that implementing a time-based policy also would "require a comprehensive review and revision of other Medicare requirements including other payment regulations and Medicare conditions of participation."

Among the AHA recommendations is that CMS implement a policy so that observation time beyond a specified time limit would not trigger an automatic admission but would become a new decision point for the attending physician to decide whether to admit the patient.

APC calculations
CMS proposes to change the way it calculates APC relative weights by shifting from median cost data to geometric mean cost. CMS contend that the new system will better capture the ranges of costs of services.

The AHA supports the proposal but urged CMS to proceed "cautiously and transparently to ensure that there are no unintended consequences for hospitals and their patients."

Outpatient drugs
Comments generally favored the CMS proposal to reimburse hospitals for separately payable drugs and biologicals without pass-through status at average sales price plus 6%.

The move has the strong support of the AHA, which commented that the change "would improve stability of drug and biological payments" and is less cumbersome that the current system which "involves complex calculations and an annual overhead adjustment in which costs are redistributed from packaged drugs to separately payable drugs."

American Academy of Otolaryngology also supports the change, which "more accurately reflect the actual costs incurred by hospitals in providing and administering drugs and biologics."

CMS is expected to release the final OPPS rule in November.

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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