Three Observation Status Bills Have Been Introduced; Only Congressman Courtney’s Has Immediate Promise

>Hospitals' increasing use of observation status harms more Medicare beneficiaries daily as patients hospitalized for multiple days are denied coverage of subsequent care in a skilled nursing facility because their time in the hospital was labeled "outpatient," not "inpatient."[1]  Since the enactment of the Medicare program nearly 50 years ago, Medicare has limited payment for care in a skilled nursing facility (SNF) to individuals who spend at least three consecutive inpatient days in an acute care hospital.[2]  In 1970, the average length of stay in a hospital for a patient age 65 or older was 12.6 days;[3] in 2006, the average length of stay in a hospital for a patient age 65 or older was 5.5 days.[4]

Three bills in the House of Representatives (and one bill in the Senate) take different approaches to resolving this growing problem for patients. 

This Alert describes, compares, and then discusses the three bills.

Discussion

1. HR 1179/S. 569

The Improving Access to Medicare Coverage Act (H.R. 1179),[5] Congressman Courtney's bill, has bipartisan co-sponsorship in both the House and Senate and is supported by a broad array of national organizations.[6]  There is no organized opposition to the legislation.  The bill offers a simple and straightforward solution to the problem of observation status for patients – on which all stakeholders agree.

2. HR 3144

The Fairness for Beneficiaries Act (H.R. 3144),[7] Congressman McDermott's bill, seeks to modernize the traditional Medicare program by eliminating the three-day inpatient qualifying stay requirement.   While this major change in the Medicare program is an appropriate long-term goal, it is likely to require additional analysis and evaluation before it is enacted, and could prove more costly to the Medicare program.

3. 3531

The CARES Act (H.R. 3531),[8] Congressman Renacci's bill, eliminates the three-day hospital requirement if the patient goes to a SNF that achieves certain quality ratings, as described below, on CMS's Nursing Home Compare website. 

Nursing Home Compare provides information to the public about facilities that participate in the Medicare or Medicaid programs, or both.  Since 2008, the Centers for Medicare & Medicaid Services (CMS) has assigned star ratings to facilities (one star is the lowest rating and five stars the highest) for three individual domains – Health Inspections, Quality Measures, and Staffing.  An overall, or composite, measure combines the three individual scores (giving greatest weight to the health inspections domain).[9]  CMS uses different information to calculate each of the three domains.  It bases the health inspections domain on unannounced annual and complaint surveys conducted by state survey agencies over a three-year period, with more recent data weighted more heavily.  It bases the Quality Measures and Staffing domains on information provided to CMS by facilities. CMS does not audit or verify this self-reported information from facilities.

The Renacci bill eliminates the three-day inpatient requirement if a facility achieves an overall rating of 3 or a rating of 4 or 5 on either the facility's Quality Measures or Staffing ratings.

Unfortunately, as the Center for Medicare Advocacy (Center) has reported several times[10], nursing facilities are not reliable self-reporters for Quality Measures and Staffing. Facilities that are found to provide very poor care in annual surveys (and therefore receive low star ratings on the health inspections and on the overall rating), nevertheless often self-report information on resident assessments and staffing that gives them high ratings on the Quality Measures and Staffing domains.

For example, in September 2013, the Center looked at facilities in three geographically diverse states – Georgia, Illinois, and Oregon – that were given one star in the health domain.[11]  The Center found that many of the one-star facilities had four stars in the Quality Measures domain.  In Georgia, 29 of 57 one-star facilities (51%) had four stars in Quality Measures; in Illinois, 33 of 93 one-star facilities (35%) had four stars in Quality Measures; and in Oregon, two of five facilities (40%) had four stars in Quality Measures.

Similarly, the Center found that facilities labeled Special Focus Facilities (SFFs)[12] – a subset of one-star facilities that are identified as needing two surveys per year, instead of one, and enhanced enforcement activities – also receive high star ratings in their self-reported Quality Measures and Staffing.[13]  The Center looked at 47 facilities nationwide that were added to the SFF list, as of May 16, 2011.  Seventeen of the 47 facilities (36%) reported Quality Measures leading to four- and five-star ratings.

As currently proposed, the Center cannot recommend HR 3531 until Quality measures are fixed. 

Conclusion

Congressman Courtney's bill has broad bipartisan support in the House and Senate, and no opposition.  Congressman McDermott's bill requires new analysis and evaluation of the post-acute benefit.  Congressman Renacci's bill conflates the issue of observation status with quality of care concerns and would allow some poor quality facilities to admit hospital patients for care.  Congressman Courtney's bill, the Improving Access to Medicare Coverage Act (HR 1179/S. 569) has the most immediate promise as a solution to the problem of Observation Status.

For more information, contact attorney Toby S. Edelman (tedelman@medicareadvocacy.org) in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.