Growing concern over the impact of hospital observation status on Medicare patients in skilled nursing facilities has led to talk of a change in policy.
It’s not that emergency doctors are to blame when a quick diagnosis is unclear. And, perhaps they are being cautious in order to avoid retroactive in-patient denials due to lack of medical necessity. But, placing their Medicare patients under observation for several days until the diagnosis is apparent, rather than admitting them to the hospital, can lead to financial challenges for these patients. Medicare considers patients under observation to be outpatients, and requires them to pay some of the cost for each hospital service delivered, with no limit on the total they may owe in the end. By comparison, hospitalized patients typically only pay the deductible, which, in 2015, averaged $1,260. (Source: Observation Status Financial Implications for Medicare Beneficiaries, AARP, April 2015 research report.)
It becomes increasingly challenging for patients who must follow up with skilled nursing facility (SNF) care. Medicare requires incoming SNF patients to spend at least three consecutive days as a hospital inpatient to cover the skilled nursing facility costs. Observation beneficiaries, however, often receive large hospital bills, followed by additional bills for the skilled nursing facility.
The American Health Care Association/National Center for Assisted Living (AHCA/NCAL) points to a 2012 study (Zhanlian Feng, Brad Wright and Vincent Mor, “Sharp Rise in Medicare Enrollees Being Held in Hospitals for Observation Raises Concerns About Causes and Consequences,” Health Affairs, 31, no. 6 (2012), 1251-1259), which found a 34 percent increase in the ratio of observation stays to inpatient admissions between 2007 and 2009. Not only did it appear that observation status was replacing inpatient status, at the same time, more patients were found to have remained in observation status for at least 72 hours – well past Medicare’s recommended 24-48 hours for this status.
Then, in July 2013, the Office of the Inspector General reported that in 2012, observation beneficiaries had 617,702 hospital stays that lasted at least three nights, but that did not include three inpatient nights. Hence, these beneficiaries did not qualify for skilled nursing center services under Medicare, according to AHCA/NCAL.
Growing concern – and increased support for counting time spent in observation status toward the three-day prior inpatient stay – has led to bipartisan support in both the House and Senate for a newly introduced bill – the Improving Access to Medicare Coverage Act of 2015 (S.843/H.R. 1571), which would deem time an individual spends under observation status eligible to count toward satisfying the three-day stay requirement. Incorporating time spent under observation toward the three-day stay requirement would lead to better alignment of the nation’s healthcare policies with the goal of achieving a more person-centered, seamless health care system, says AHCA/NCAL.
Knowing the facts
- Medicare covers up to 100 days of skilled nursing center care per episode of care, following a qualifying three-day inpatient hospital stay.
- Medicare beneficiaries’ access to skilled nursing center care is being constrained by the increased use of extended stays in observation status.
- The observation status used by hospitals technically is deemed an outpatient service, even when seniors are in the hospital for several days.
- If Medicare skilled nursing center coverage is denied due to extended time spent in observation status, the average post-acute skilled nursing center stay could result in a senior’s out-of-pocket costs totaling many thousands of dollars.
- 843/H.R. 1571 would deem an individual on observation status as an in-patient with regard to the Medicare three-day stay requirement.
Source: The American Health Care Association/National Center for Assisted Living.