Federal officials are looking to scale back the use of long observation stays believed to be a response to Medicare auditors cracking down on inappropriate admissions.
Hospitals, though, say the proposed fix amounts to another pay cut, and advocates for beneficiaries say it won't help the higher costs seniors shoulder when they're not admitted.
The CMS' proposed rule for hospital inpatient services in 2014 includes significant changes on how to determine whether inpatient admissions are reasonable and necessary. According to the CMS, the number of Medicare beneficiaries who receive observation services for more than 48 hours increased to 8% in 2011 from 3% in 2006. Those stays are considered outpatient services that fall under Medicare Part B, even though patients might be unaware of the difference while they're in the hospital.
The agency noted in the proposed rule that hospitals have responded to the financial risk of admitting Medicare beneficiaries for inpatient stays that are later denied by recovery auditor contractors, or RACs, by treating them as outpatients under observation—often for a long period of time.
Officials also said in the rule that they're concerned by the trend of increasing observation stays because it means higher copayments for beneficiaries. And the issue can quickly become thornier and costlier for those patients, who 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.
To address the problem, the CMS proposed that Medicare's external contractors would assume hospital admissions are reasonable and necessary for those beneficiaries who stay in a hospital through two midnights. That policy change, the CMS estimates, would increase Medicare inpatient expenditures by $220 million.