CMS officials know that Medicare patients spend too much time with the murky status of outpatient observation, which leaves them on the hook for higher out-of-pocket costs.
But a rule going into effect Oct. 1 may do little if anything to reverse the trend. Experts warn it may prompt hospitals to find new ways to balance the goals of increasing payments and reducing Medicare auditor scrutiny.
It all depends on how hospitals, admitting physicians and auditors react to the new “two midnight” rule that was included last month in the 2014 Medicare inpatient payment policy. The rule says hospitals will get the benefit of the doubt on physicians' decisions to admit a patient for full-blown hospital care covered by Medicare Part A if the patient's stay lasts more than two midnights.
The rule was intended to decrease the aggressive auditing of short inpatient hospital stays that led to the spike in observation care. The increase stems from the fact that observation care, which pays hospitals less, is not subject to the same level of scrutiny as one- or two-day inpatient care. The number of observation patients per 1,000 Medicare beneficiaries increased 27% between 2007 and 2011, according to CMS data analyzed by Modern Healthcare and the American Hospital Directory.