HHS wants hospital observations credited toward
Medicare nursing home coverage
Seniors kept for observation varies by hospital;
Medicare doesn't pay for expensive follow-up nursing home care for
By Susan Jaffe, KHN
Aug. 1, 2013 - Medicare patients' chances of being
admitted to the hospital or kept for observation depend on what hospital
they go to - even when their symptoms are the same, notes a federal
watchdog agency in a report released Tuesday, which also urges Medicare
officials to count those observation visits toward the
three-inpatient-day minimum required for nursing home coverage.
conducted by the Department of Health and Human Services Inspector
General, was based on 2012 Medicare hospital charges. Its findings,
which underscore several
years of complaints that the distinction between an inpatient
and observation stay isn't always clear, come just days before the
Centers for Medicare and Medicaid Services (CMS) is expected to issue
final regulations intended to address the problem.
proposed in April, would assume that patients who stay two nights or
longer in the hospital are inpatients. Those who have shorter stays
would receive observation care, an outpatient service. However, the IG
report said the proposal, which has been criticized by hospital,
physician and consumer groups, would not reduce the number of
An observation patient can be treated in the
emergency room or on an inpatient unit in the hospital. CMS does not
require hospitals to tell patients they are receiving observation
services, which the IG's analysis said can include some of the same
procedures provided to admitted patients.
"Some hospitals used short inpatient stays for less
than 10 percent of their stays while others used them for over 70
percent," according to the report.
But the difference can have a big effect on
"For people who go to the hospital with similar
symptoms, hospitals make different decisions about their status, whether
they are inpatient or observation, and that results in different
post-hospital coverage options available to them," said Judy Bartlett,
an IG team leader.
Medicare doesn't pay for expensive follow-up
nursing home care for observation patients or the
routine maintenance drugs the
hospital provides patients with chronic conditions, such as diabetes or
high blood pressure. As a result, they can end up with thousands of
dollars of medical bills that Medicare would cover if they had been
admitted. Others who can't afford the care doctors ordered may go
without it, prolonging their recovery.
Although the IG study did not compare 2012
observation cases to previous years, federal data show the proportion
has increased by about 69 percent from 2006 through 2011, while
hospitals admissions declined slightly.
Even Medicare officials may not fully understand
the difference between observation and inpatient status. Investigators
found that Medicare mistakenly paid $255 million for nursing home
services in 2012. In these instances, the care should not have been
covered because the patients did not have the required three consecutive
inpatient days. The report urges that Medicare institute better controls
to prevent such payments.
These beneficiaries were just a small fraction -- 4
percent -- of the 618,000 who were not eligible for nursing home
coverage because they were never considered inpatients, even though
they may have spent at least three days in the hospital.
Last year, there were a total of 1.5 million
observation visits, with 78 percent beginning in the emergency
department. The IG report found that six of the top 10 reasons for
observation -- chest pain, digestive disorders, fainting, nutritional
disorders, irregular heartbeat and circulatory problems -- were also
among the 10 most frequent reasons for a short inpatient hospital stays
of one night or less.
Hospitals may also have trouble distinguishing
between the two classifications. On Monday, Beth Israel Deaconess
Medical Center in Boston agreed to reimburse Medicare $5.3 million to
settle charges that it overcharged the agency by admitting patients who
should have received less expensive observation or outpatient care. The
hospital submitted improper inpatient claims from June 2004 through
March 2008 but did not acknowledge any wrongdoing.
Although the IG encouraged CMS "to consider how to
ensure that beneficiaries with similar post-hospital care needs have the
same access" to follow-up nursing home care, it did not provide costs
for extending that care to observation patients.
However, lawyers at the Center
for Medicare Advocacy who filed a lawsuit of
behalf of 14 Medicare observation patients argued in federal court in
May that observation status was created by Medicare officials and are
asking a judge to order them to eliminate it. Government lawyers want
the case dismissed.
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