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Center for Medicare and Medicaid Services Observation Status ~ Let Your Voice Be Heard!

Let Your Voice Be Heard!

Learning of unexpected expenses related to “in-patient” vs. “observation” hospital status leaves many hospitalized patients and their families confused and upset. And, when they find out that a “three overnight stay” in the hospital did not count as a pre-condition of payment of care in a skilled nursing facility when rehab is needed, the related expenses can rapidly deplete hard earned savings. The Centers for Medicare and Medicaid Services (CMS) issued notice of proposed rulemaking published in the Federal Register on July 30, 2012, and is asking for public comment. Take the opportunity to share your experience with observation status and to recommend changes that you believe would improve access to medically necessary hospital and skilled nursing facility care!

Proposed changes to observation status policy include addressing time limits, clinical conditions or prior authorization, payment methodology and hospital responsibility. Comments must be received by CMS no later than 4:00 pm CST on September 4, 2012. (See below)

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medicareadvocacy.org http://www.medicareadvocacy.org/2012/08/09/3805/

CMS Invites Public Comment on Observation Status || CMA
As part of a notice of proposed rulemaking published in the Federal Register on July 30, 2012, the Centers for Medicare & Medicaid Services (CMS) asks for public comment on potential policy changes related to observation status. This is an excellent opportunity for all who have been or continue to be affected by CMS’s current policy to voice their real life concerns and to describe the real harm it
has caused and continues to cause.

All those affected and those advocating for those affected should respond to the proposed rule. Comments are due by no later than 5:00 p.m. (Eastern Time), September 4, 2012. The request for comments was published in the Federal Register at 77 Fed. Reg. 45061, 45155-45157 (July 30,2012). This can be found on the web at http://www.gpo.gov/fdsys/pkg/FR-2012-07-30/pdf/2012-
16813.pdf.

In addition, the Center for Medicare Advocacy has written many articles on observation status. These can be found at http://www.medicareadvocacy.org/medicare-info/observation-status/.

Background

Observation status refers to the classification of a patient in a hospital as an outpatient, even though, just like a patient classified as an inpatient, the person is placed in a bed, stays overnight, and receives medically reasonable and necessary hospital care. The hospital stay as an outpatient will be paid for by Medicare; however, subsequent care at a skilled nursing facility (SNF) probably will not be
covered. This is because Medicare requires three days of hospital care on inpatient status (notcounting the day of discharge) as a precondition for payment of care in a SNF.[1] This consequence forces many patients leaving the hospital to pay “out of pocket” for very expensive SNF care or to go home without receiving the needed care, putting them at very high risk for rehospitalization.
Proposed Changes to Observation Status Policy CMS identifies several possible policy changes for observation status:

Time limits. CMS asks whether it should “redefine ‘inpatient’ using parameters in addition tomedical necessity and a physician order that we currently use, such as length of stay or othervariables.” Id. 45157. Under current instructions, CMS anticipates that a decision to admit a patient to inpatient status should be made within 24 to 48 hours, although it does not expressly limit a patient’s time in observation. Some hospitals have suggested that CMS identify “more
specific criteria for patient status in terms of how many hours the beneficiary is in the hospital, or provide a limit on how long a beneficiary receives observation services as an outpatient.” Id.

Center Comment: The Center assumes that CMS would set some number of hours, likely 24 hours, as the dividing line between outpatient and inpatient care and that CMS would count all time after 24 hours as inpatient time. Clearly, any such delineation is arbitrary and demonstrates that there is no distinction between hospital inpatient care and the care given to patients while they are receiving
observation services in a hospital. Since the distinction is fictitious and causes great harm to Medicare beneficiaries, it should obviously be eliminated. And further, not counting a patient’s first day in a hospital as inpatient care would continue to bar many beneficiaries from Medicare coverage of their
SNF stay due to failure to meet the qualifying three-day inpatient hospital stay rule.

Clinical conditions or prior authorization. CMS asks if it should establish “more specificclinical criteria for admission and payment, such as adopting specific clinical measures orrequiring prior authorization for payment of an admission.”

Center Comment: The identification of specific clinical measures to determine inpatient status wouldonly exacerbate the current problem. Whether a patient needs to be admitted to a hospital should bebased primarily on the professional judgment of the treating physician. Only that physician can properly
evaluate the patient’s overall and presenting medical condition. Similarly, prior authorization, whichmeans that a beneficiary would need advance approval for inpatient status, could create an additional barrier limiting access to medically necessary hospital care.

Payment methodology. CMS asks “how aligning payment rates more closely with theresources expended by a hospital when providing outpatient care versus inpatient care of shortduration might reduce payment disparities and influence financial incentives and disincentives to admit.” CMS provides no further clarification of this proposal.

Center Comment: Changing payment methodology might help hospitals, but the proposal continues observation status, basically as is, and would not resolve beneficiaries’ problem of being unable to achieve a three-day inpatient stay.
Hospital responsibility. CMS asks commenters to “consider the responsibility of hospitals to utilize all of the tools necessary to make appropriate initial admission decisions.” Id. Having case management and utilization review staff available in hospitals “outside of regular business hours may improve the accuracy of admission decisions.” Id.

Center Comment: This proposal also continues the use of observation, but requires hospitals to devote even more staff to utilization review functions. It does not address beneficiaries’ concerns.  In addition to these proposed solutions, CMS invites members of the public to offer any other suggestions they have “while keeping in mind the various impacts in terms of recently observed increases in the length of time for which patients receive observation services, beneficiary liability,
Medicare spending, and the feasibility of implementation of any suggested changes for both the Medicare program and hospitals.”

Comments from the Center for Medicare Advocacy

The Center supports changes to observation status that are embodied in the bipartisan legislation pending in Congress and in the Center’s litigation challenging observation status. The “Improving Access to Medicare Coverage Act of 2011, H.R. 1543 in the House and S. 818 in the Senate, counts all time in the hospital toward meeting the three-day qualifying hospital stay. Bagnall v. Sebelius[2] challenges observation status as violating the Medicare statute and the Administrative Procedures Act. On behalf of a nationwide class, the lawsuit seeks to prohibit use of observation status or, alternatively, to require CMS to give beneficiaries notice and appeal rights at the time they are placed
in observation. Accordingly, the Center opposes the various CMS proposals, for the reasons described above.

How to Submit Comments

Those who submit comments to CMS about their experience with observation status should identify the state where they live and describe the circumstances of the beneficiary’s hospitalization, the length of time the person remained in the hospital, and the cost and duration of the subsequent SNF stay. If advocates or beneficiaries have other experiences with observation status, they can describe those as well.

Comments must be received by CMS no later than 5:00 p.m. EST on September 4, 2012. In submitting comments, it is important to refer to file code CMS-1589-P.

CMS authorizes four different ways to submit comments:

Electronically.
Go to http://www.regulations.gov and follow the instructions under the “submit a
comment” tab.

By regular mail: Mail written comments to:
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Attention: CMS-1589-P
P.O. Box 8013
Baltimore, MD 21244-1850

By express or overnight mail to:
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Attention: CMS-1589-P
Mail Stop C4-26-05
7500 Security Boulevard
Baltimore, MD 21244-1850

By hand or courier. Deliver to:
Centers for Medicare & Medicaid Services
Department of Health and Human Services
Room 445-G
Hubert H. Humphrey Building
200 Independence Avenue, SW
Washington, DC 20201
Or to:
Centers for Medicare & Medicaid Services
Department of Health and Human Services
7500 Security Boulevard
Baltimore, MD 21244-1850

Conclusion

Like the Center for Medicare Advocacy, please take this opportunity to share your experience with observation status and to recommend changes that you believe would improve access to medically necessary hospital and skilled nursing facility care. Remember, comments must be received by no later than 5:00 p.m. on September 4, 2012.
[1] 42 C.F.R. §409.30(a)(1).
[2] No. 3:11-cv-1703 (D. Conn., filed Nov. 3, 2011).

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