The Centers for Medicare & Medicaid Services (CMS) recently issued a Final Rule for the Inpatient Prospective Payment System, which guides payment and programs associated with inpatient hospitalizations. In this year’s rule, CMS adjusted the criteria for inpatient admissions in an attempt to simplify and clarify the decision-making process.
The policy would allow physicians to admit a patient if they reasonably expect and document in the medical record that a beneficiary will need to stay in the hospital for more than two midnights. Admissions based on this time-limited expectation will be presumed to be appropriate for Medicare Part A payment. CMS cited concerns about the growing trend of longer observation stays to support this change.
With observation stays, there are two major financial concerns for patients: whether the hospital stay is paid under Medicare Part A or Part B, and whether Medicare will pay for post-acute care in a skilled-nursing facility (SNF). Medicare Part A reimburses for inpatient admissions, with a one-time deductible for the benefit period. Outpatient services, such as observation care and physician services, are covered under Medicare Part B, which has copays and co-insurance that greatly increase the costs for beneficiaries. In addition, SNF coverage through Medicare Part A is determined by the three-day rule; a patient must be an inpatient for three days to qualify for coverage.
While the long-term impacts of this regulatory change to the admission criteria remain to be seen, SHM is concerned that the rule does not adequately address the broader problems associated with inpatient and observation status. As we note in our comments to CMS on the new rule:1
Even with these changes, the central tension created by the bifurcation in admission status still remains.…Other policies and programs, such as the attempts to reduce admissions, may inadvertently add pressure to the admission decision.
Indeed, for beneficiaries, the barrier to SNF coverage remains. CMS takes care to note that, while time under emergency care and observation care count toward the two-midnight presumption for inpatient admission, it does not count toward the three-day rule for SNF coverage. This is particularly problematic; as advances in medicine allow for the treatment of higher-acuity and -severity conditions with observation stays or shorter inpatient stays, patients might not be getting the follow-up care they need. This puts them at risk for additional complications and, ultimately, readmissions to the hospital.
In an era of seeking value in the healthcare system, it seems like an opportunity lost to streamline and coordinate care across settings and to ensure that patients are getting the follow-up care they require. It is for this reason that hospitalists continue to push for passage of the Improving Access to Medicare Coverage Act, a bill sponsored by Rep. Joe Courtney (D-Conn.), Rep. Tom Latham (R-Iowa), and Sen. Sherrod Brown (D-Ohio) that would count observation status as time toward the three-day requirement for SNF coverage.
A recent Office of Inspector General (OIG) report for the U.S. Department of Health and Human Services on observation status sums up the problem succinctly.2 The OIG states that “CMS should consider how to ensure that beneficiaries with similar post-hospital care needs have the same access and cost-sharing for SNF services.”2
Joshua Lapps is SHM’s government relations specialist.
- Society of Hospital Medicine. SHM submits comments in response to FY2014 inpatient prospective payment system proposed rule. Society of Hospital Medicine website. Available at: http://www.hospitalmedicine.org/AM/Template.cfm?Section=Letters_to_Congress_and_Regulatory_Agencies&Template=/CM/ContentDisplay.cfm&ContentID=34044. Accessed Sept. 9, 2013.
- Office of Inspector General. Memorandum report: Hospitals’ use of observations stays and short inpatient stays for Medicare beneficiaries, OEI-02-12-00040. U.S. Department of Health and Human Services website. Available at: http://oig.hhs.gov/oei/reports/oei-02-12-00040.pdf. Accessed Sept. 9, 2013.