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On August 4, CMS Administrator Seema Verma tweeted that beneficiaries wanting Medicare to pay for their stay at a skilled nursing facility (SNF) should make sure they are first admitted to the hospital for at least three days.[1] Writing, “Govt doesn’t always make sense,” she concludes, “We’re listening to feedback.”

Posted feedback supports addressing the issue of outpatient observation status, which results in the denial of Medicare Part A coverage of stays in SNFs for patients who had been hospitalized for multiple days.[2] For example, Nirav Patel, MD wrote: “No one knows if the patient would require 2 MNs at the time of admission. As a physician u know that diagnoses are not clear at the time of admission. It’s always an educated guess. Better start considering observation MNs towards the 3 MN rule for SNFs.” Robert Lambert, another commenter, wrote, “This needs to change and fast, hurting a lot of families and causing severe economic consequences.”

In a September 6 letter to the Administrator and HHS Secretary Alex Azar, Congressmen Joe Courtney (D, CT) and Glenn Thompson (R, PA) agree with the Administrator that the observation status rule is harmful to Medicare beneficiaries.[3] They describe their bipartisan “Improving Access to Medicare Coverage Act”[4] and cite the HHS Inspector General’s repeated concern that patients are treated differently for purposes of SNF coverage, depending on whether they are classified as inpatients or outpatients during their hospital stays. They note that in July 2019, the Inspector General listed the correction of observation status as one of his top unimplemented recommendations to reduce fraud, waste, and abuse in the Medicare program.[5]

The American Health Care Association’s (AHCA’s) August 26 letter to the Administrator describes observation status as a surprise medical bill for many beneficiaries.[6] AHCA cites (and attached to its letter) the Center for Medicare Advocacy’s legal memorandum (July 2014) that explains why CMS has authority under existing law to include all of a patient’s time in the hospital, regardless of inpatient or outpatient classification, toward meeting the three-day requirement for Medicare Part A coverage of a SNF stay.

The Administration has the authority to fix the problem of observation status. Do it now!

September 12, 2019 – T. Edelman

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[1] https://twitter.com/SeemaCMS/status/1158029830056828928?s=03.
[2] See the Center’s information on observation status at https://www.medicareadvocacy.org/?s=observation+status&op.x=0&op.y=0.
[3] https://www.medicareadvocacy.org/wp-content/uploads/2019/09/2019-09-06-CMS-HHS-letter-observation-status.pdf
[4] H.R. 1682, https://www.congress.gov/bill/116th-congress/house-bill/1682/text; S. 753, https://www.congress.gov/bill/116th-congress/senate-bill/753/text.
[5] HHS Inspector General, Solutions to Reduce Fraud, Waste, and Abuse in HHS Programs: OIG’s Top Recommendations, page 2 (Jul. 2019), https://www.oig.hhs.gov/reports-and-publications/compendium/files/compendium2019.pdf.  (“CMS should analyze the potential impacts of counting time spent as an outpatient toward the 3-night requirement for skilled nursing facility (SNF) services so that beneficiaries receiving similar hospital care have similar access to these services.”)
[6] https://www.ahcancal.org/advocacy/solutions/Documents/8.26.19%20Letter%20to%20CMS%20on%20Obs%20Stays%20Issue.pdf.

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