The provider groups argue that the problems are a result of unclear and evolving CMS expectations for determining whether a patient is classified as an inpatient or an outpatient on observation status, with the decision carrying potentially big implications for hospitals, SNFs and patients. The CMS declined to comment as a matter of policy regarding pending rulemaking.
“Because of this weird payment structure, everyone's in an awkward position,” said Marsha Greenfield, vice president of legislative affairs for LeadingAge, an association for not-for-profit nursing homes that submitted a comment letter.
For hospitals, the AHA argues in its comment letter, increasing aggressiveness in challenging short-stay inpatient Medicare claims by designated recovery audit contractors and Medicare audit contractors is causing fewer patients to be classified as inpatients though that may be the more appropriate designation. Whether a patient is considered to be an admitted inpatient or on observation status—a classification that can apply to patients in the hospital for days—has direct payment implications for hospitals, since that will determine whether they are paid through Medicare Part A or Part B. Physicians make that decision, but second-guessing from auditors has created ambiguity about who decides what constitutes an appropriate admission, the AHA letter said.
Meanwhile, the time spent under observation in a hospital does not count toward a three-day minimum requirement for that patient to qualify for Medicare-covered SNF care. Greenfield said LeadingAge officials have no interest in how hospitals are paid for such patients, but they do want a patient's time in the hospital to count toward the three-day minimum, allowing for SNFs to provide care. The nursing home group American Health Care Association makes a similar request in its comment letter.
Patients are getting hurt financially by the confusion, as they generally pay higher out-of-pocket costs for the outpatient-care classification that goes with being on observation, and may miss out on needed SNF care if tabbed as an outpatient, the provider groups argue. Medicare patients often don't understand the difference. “They find out they weren't in the hospital even though they were in the hospital,” Greenfield said.