OIG wants skilled-nursing access for all Medicare beneficiaries

HHS' office of the inspector general is urging the CMS to make sure that Medicare beneficiaries have the same access to skilled-nursing services after they leave the hospital, regardless of how their stay is coded on the claim.

The OIG reached that conclusion in a 20-page analysis of hospitals' use of observation stays and short inpatient stays in 2012. Congress and the CMS have raised concerns about how hospitals use observation stays—the short-term services and evaluations in outpatient settings that determine if patients should be admitted as inpatients—and short inpatient stays. The topic is also a hot-button issue for patients-rights groups like the Center for Medicare Advocacy, which argue that patients often end up paying for skilled-nursing care after they leave the hospital because Medicare covers those services only after inpatient hospital stays of at least three days. A group of Medicare beneficiaries has filed a proposed class-action lawsuit in federal court in Connecticut over the costs they incurred because hospitals reclassified their stays as observation after they were admitted. Federal officials have filed a motion to dismiss it, and both sides are waiting for the judge's ruling.

In the spring, the CMS tried to address some of the concerns when it proposed that Medicare contractors presume that inpatient hospital stays lasting two nights or more are reasonable and necessary. The draft policy is intended to relieve some of the pressure on hospitals to avoid having their admissions second guessed by Recovery Audit Contractors.

The OIG noted that its recent findings could be helpful to the CMS as the agency considers policy changes in this area. “Our results indicate that under the policies proposed in the (notice of proposed rulemaking), the number of short inpatient stays would be significantly reduced,” the study noted. “However, the number of observation and long outpatient stays may not be reduced if outpatient nights are not counted toward the two-night presumption.” The report adds that other hospitals, “given strong financial incentives and few barriers,” would respond by admitting patients as soon as possible in order to meet that two-night presumption.

For its study, the OIG examined Medicare Parts A and B hospital claims from 2012 as well as skilled-nursing facility Part A claims for beneficiaries who received those hospital services. Researchers found that Medicare beneficiaries had 1.5 million observation stays and commonly spent one or more nights in the hospital during those stays. They also found that beneficiaries had more than 600,000 hospital stays that lasted three nights or more but did not qualify them for SNF services because at least a portion of those stays were coded as observation or outpatient. For 4% of those hospital stays, Medicare inappropriately paid $255 million for skilled-nursing services.

“Allowing nights spent as an outpatient to count toward the three nights needed to qualify for SNF services may require additional statutory authority,” said the OIG report, which was addressed to CMS Administrator Marilyn Tavenner. It suggested that Congress might have to intercede. “Ensuring that controls are in place so that Medicare does not inappropriately pay when beneficiaries do not qualify for SNF services is also critical.”

The report said the OIG will send another memo to the CMS indicating those SNFS that received inappropriate payments “so that CMS can look into recoupment.”

The American Health Care Association and the National Center for Assisted Living cheered the OIG's findings. The Washington-based organization supports the Improving Access to Medicare Coverage Act, a law that would consider the time an individual spends under observational status to count towards satisfying the three-day hospital stay requirement.

“The OIG report is just one more argument in favor of changing these arcane laws and speeding care to thousands of seniors trapped in this no man's land of healthcare,” Mark Parkinson, president and CEO of the AHCA/NCAL, said in a statement. “We hope this federal affirmation by the Inspector General will echo around Capitol Hill as lawmakers consider our proposed legislation. The time for Congress to pass this bill is now.”

Follow Jessica Zigmond on Twitter: @MHjzigmond