“For at least the past three years, CMS has repeatedly expressed concern about Medicare beneficiaries' increasingly lengthy stays in hospitals as outpatients,” a statement from the center says. “Unfortunately, this has not yet translated into action that resolves the issue for beneficiaries.”
Observation care began as a way to allow hospitals to observe patients for a day or two before deciding whether to admit them for care—for example, patients who complain of chest pain and are awaiting the outcome of lab tests. But it morphed into a way to provide inpatient levels of care for less reimbursement while avoiding scrutiny from Medicare auditors who aggressively target short hospital stays that in retrospect may look medically unnecessary.
The Center for Medicare Advocacy filed a class-action lawsuit in 2011 against the CMS alleging that the rapid increase in hospital use of observation status was financially harming Medicare patients, who must pay 20% Part B copayments for observation care. On top of that, observation care does not qualify Medicare patients for any coverage of skilled-nursing care, which elderly patients typically need and which often costs them more than $10,000 out of pocket.
Last month, lawyers for the CMS said in a legal filing that the publication of a new rule on observation care supports their contention that the lawsuit should be dismissed. The rule says that hospitals will be presumed to be protected from auditors' scrutiny over short hospital stays as long as the admitting doctor documents at the beginning of the process why the patient is likely to need hospital care for a period that extends over at least two midnights.
In other words, a patient admitted Friday afternoon would have to be in the hospital until at least Sunday morning to qualify the hospital for the presumption. But under the rule, patients admitted for less than two midnights still will be presumed to have needed observation care.
The CMS legal filing didn't say precisely why that rule would render the Medicare patients' lawsuit moot. But a federal judge in Connecticut may rule any day on the government's motion to dismiss the case.
“The center doesn't think it solves the problem, certainly for beneficiaries,” said Ali Bers, an attorney at the Center for Medicare Advocacy.
In particular, the new rule says that if a patient is admitted for outpatient observation care and then switched to inpatient status based on test results, the patient can't use their time in observation to qualify for Part A coverage of skilled-nursing care. The CMS requires patients to have a three-day stay in the hospital to qualify for post-acute skilled-nursing services.
A July 29 report (PDF) on the existing and new rules on observation care by HHS' Office of Inspector General recommended the CMS publish clearer rules to ensure that Medicare patients with similar health conditions are entitled to the same kinds of rehabilitation benefits, because the “two midnight” rule still may not achieve the goal of bringing consistency to hospitals' admissions decisions.
Follow Joe Carlson on Twitter: @MHJCarlson
