Ann Sheehy, MD, MS, FHM, Outlines To Lawmakers Hospitalist Concerns about Two-Midnight Rule, Medicare Policies


In a recent visit to Capitol Hill, Ann Sheehy, MD, MS, FHM, gave Congressional lawmakers the hospitalist perspective on how such Medicare policies as the two-midnight rule, patient observation status, and Recovery Audit Contractor (RAC) program impact patient care, physicians, and hospitals.

These issues are "so important and I am passionate about [them]," says Dr. Sheehy, a physician at the University of Wisconsin School of Medicine and Public Health (UW) in Madison who addressed the House Committee on Ways and Means' Subcommittee on Health on May 20. "I saw what was happening to patients, and it just did not make any sense at all."

Under the Centers for Medicare & Medicaid Service's two-midnight rule, most patients who stay in the hospital fewer than two days must be considered outpatients or under observation.

Observation status leaves them on the hook for the costs of any chronic condition medications they receive in the hospital, and patients under observation, or considered to be outpatients, are not eligible for skilled nursing facility (SNF) care coverage.

"Because of our clinical work and extensive experience in the hospital setting, hospitalists have a firsthand view of what observation care looks like to patients, physicians, and hospitals," Dr. Sheehy told the committee in her testimony [PDF].

SHM actively supports the Improving Access to Medicare Coverage Act (H.R. 1179), bipartisan legislation sponsored by Rep. Joe Courtney (D-Conn.), aimed at ensuring Medicare beneficiaries classified under observation are considered inpatient for the purposes of accessing SNF care.

Dr. Sheehy also addressed problems with Medicare's RAC program, telling Congress that "RAC auditors are paid exclusively on contingency as a percent of the Medicare dollars they recover for the federal government on cases audited," according to her testimony. "Unfortunately, these contingency incentives favor aggressive auditing, without transparency, accountability, or repercussions for cases that should never have been audited." She added "hospitals spend an enormous amount of resources on determining patient status, and then preparing cases for audit and appeal, for very little benefit."

At the Congressional hearing, Dr. Sheehy used her experience at UW and findings based on two studies about observation status in hospitals she and colleagues published last year in JAMA Internal Medicine to build a backstory around the issues.

In one of her studies, Dr. Sheehy and colleagues found that nearly half of UW patients would have been assigned observation status rather than inpatient under the two-midnight rule based on their hospital arrival time.

Additionally, Dr. Sheehy told Congress that RAC audits of 299 patient charts at UW found that 21% had improper payments. The hospital appealed 58 of the 63 audit decisions and had won each of them as of May 14.

Dr. Sheehy hopes her testimony will lead to meaningful changes.

"Our understanding is that [Ways and Means committee members] were going to draft legislation out of the hearing, and we hope we have comprehensively addressed [patient] observation and the auditing programs that enforce it," Dr. Sheehy says. "Hopefully, we provided the backstory and evidence for a comprehensive bill everyone can get behind."

For SHM, Dr. Sheehy's testimony demonstrates that hospitalists are taking leadership roles when it comes to critical issues that impact patients, physicians, and hospitals.

"The hearing shows the strength of hospital medicine as a specialty and a movement in healthcare: hospitalists and SHM are not standing on the sidelines when it comes to flawed Medicare policies such as the two-midnight rule and observation care in general," says SHM president Burke Kealey, MD, SFHM, medical director of hospital specialties at HealthPartners Medical Group in St. Paul, Minn.

"These policy discussions are critical to the care our patients receive," Dr. Kealey adds. "Congress is clearly interested in and listening to the hospitalist perspective. Dr. Sheehy represented the nation's 44,000 hospitalists with the expertise, confidence, and compassion that are hallmarks of the specialty." Th

Visit our website for more information on Medicare's two-midnight rule.

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