CMS Final Rule Defining Inpatient Hospital Stay
In its final rule [CMS-1599-F] updating fiscal year 2014 (effective with dates of service starting Oct. 2013) Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital Prospective Payment System (LTCH PPS), CMS has attempted to clarify those factors that determine whether a patient’s status is “inpatient” versus “observation.” Prior to this rule, hospitals relied upon whether the patient was receiving a certain menu of services to make that determination. Confusion has arisen as two patients may receive a similar array of services, but one is designated inpatient and the other observation. The concern as raised by consumer groups and the federal Office of the Inspector General is that patients are being unfairly denied Medicare Part A hospital coverage. In other words, patients who from a practical point of view are indistinguishable from inpatients are denied Part A coverage simply because they were designated as “under observation”. This problem has extended over to the post-acute care setting where a 3-day inpatient hospital stay is a technical qualifier for receiving Medicare Part A. Nursing homes and other post-acute care providers have seen a significant increase in the use observation stays by hospitals, resulting in Part A coverage denials.
According to the CMS Fact Sheet: “The final rule modifies and clarifies CMS’s longstanding policy on how Medicare contractors review inpatient hospital admissions for payment purposes. Under this final rule, in addition to services designated as inpatient-only, surgical procedures, diagnostic tests and other treatments are generally appropriate for inpatient hospital admission and payment under Medicare Part A when the physician (1) expects the beneficiary to require a stay that crosses at least two midnights and (2) admits the beneficiary to the hospital based upon that expectation.”
CMS also finalizes provisions that allow payment to hospitals for additional inpatient services under Medicare Part B for hospital inpatient admissions denied as not medically necessary under Part A. A hospital also can bill and be paid for these inpatient services under Part B if after the patient has been discharged the hospital determines that the patient, in fact, should have not been admitted as an inpatient.
As noted above, this problem has extended over to long-term and post-acute care providers. For example, patients are admitted from the hospital to the nursing home from what appears to have been an inpatient hospital stay, only to discover that Medicare Part A coverage is denied because technically the individual was only in an observation stay. Even hospitals stays in excess of three days may not meet the technical three-day stay requirement, if the individual is never officially admitted. LeadingAge NY members are reporting a significant increase in such situations, resulting in a significant financial hardship for both the beneficiary and the post-acute care provider.
While the expectation is that this new rule will significantly increase the ability of beneficiaries to receive hospital inpatient Medicare Part A coverage status, it remains to be seen if this will translate into increased Medicare Part A coverage in the post-acute setting. We are hopeful that this will have a positive impact and LeadingAge NY and our national affiliate are carefully monitoring the situation. Our main advocacy, however, remains focused on eliminating the 3-day hospital stay technical requirement as it now stands. For more details, please refer to the CMS Fact Sheet referenced above.
Contact: Patrick Cucinelli, pcucinelli@leadingageny.org, 518-867-8827