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Friday, August 9, 2013

Did CMS Solve Its Observation Status Problem?

by Nathaniel Weixel

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The HHS OIG issued a report recently examining hospitals’ use of observation status in 2012, and it coincided with CMS finalizing its FY 2014 inpatient prospective payment system final rule, which included a policy meant to curb the use of observation status. But neither advocates nor hospital groups were happy about the new policy.

CMS has been concerned with the overuse of observation status by hospitals. Medicare beneficiaries may find themselves being placed in observation status -- an outpatient category— even if they received inpatient-type care. CMS policy says observation services are usually needed for 24 hours or less, but OIG reported concerns about "beneficiaries spending long periods of time in observation stays without being admitted as inpatients,” which would make the patients ineligible for Medicare reimbursement if they need subsequent care in a skilled nursing facility.

Under the final rule, released Aug. 2, CMS would institute a time-based presumption period for medically necessary inpatient care; Medicare contractors would be instructed to define that period as “two midnights.” Hospital groups blamed contractors for the rise in observation status, saying they often second guess the decisions of treating physicians. On the patient side, the Center for Medicare Advocacy said the regulations “are internally inconsistent and confusing about whether and how, if at all,” time spent in observation status counts toward qualifying a patient for a Medicare SNF stay.
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