Wednesday, July 8, 2015

Updates Relating to Observation Stays Coalition One-Pager and Two-Midnight Rule

Dana Halvorson and James Michel

As you may know, “observation status” in a hospital does not count toward satisfying the three-day inpatient hospital requirement for coverage of skilled nursing care services under Medicare. Often, patients remain under ‘‘observation status’’ in the hospital for several days. These days are not counted toward the three-day inpatient stay requirement because they are considered outpatient. Increasingly, patients have no idea what their status is in a hospital, or the importance of it, which can lead to thousands of dollars in out-of-pocket medical expenses should they need skilled nursing center care following their hospital stay.

In addition to placing a financial burden on seniors and their families, this anomaly in Medicare rules can cause unnecessary spend-down, accelerating the time frame in which seniors will have to turn to programs such as Medicaid to pay for their care. AHCA/NCAL is part of the observation stays Coalition, which currently consists of 26 national organizations such as AARP, the National Committee to Preserve Social Security & Medicare, and the Catholic Health Association of the United States. The Coalition supports the bipartisan Improving Access to Medicare Coverage Act (S. 843/H.R. 1571) that would count a patient’s time in observation toward the 3-day hospital inpatient stay requirement.  The updated observation stays Coalition one-pager is available online. For more information about observation stays and the three-day stay requirement, please visit the AHCA/NCAL website.    

In addition, on July 1, CMS released its 2016 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System proposed payment rule. CMS included in its proposed rule the modification of the “two-midnight” rule. According to a July 1 article from Modern Healthcare by Virgil Dickson, “the Obama administration said it plans to allow physicians to exercise judgment to admit patients for short hospital stays on a case-by-case basis. The CMS also said it would remove oversight of those decisions from its administrative contractors and instead ask quality improvement organizations to enforce the policy. Recovery audit contractors, meanwhile, would be directed to focus only on hospitals with unusually high rates of denied claims.” The article goes on to include that, “under the two-midnight rule, the CMS directs its payment contractors to assume a hospital admission was appropriate if a patient's stay spanned two midnights and otherwise should have been billed as an outpatient observation visit.” AHCA/NCAL is currently analyzing the proposed rule. If you have any questions, please don’t hesitate to contact AHCA’s Dana Halvorson or James Michel.

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