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 Hearing Examines Impact Of Observation Status

The use of observation status for hospitalized Medicare recipients is as perplexing for U.S. lawmakers as it is for the unsuspecting patients, according to a Senate Special Committee on Aging hearing Wednesday afternoon.

During the hearing, titled “Admitted or Not? The Impact of Medicare Observation Status on Seniors,” led by Chairman Bill Nelson (D-Fla.), witnesses highlighted the absurdity of the now-widespread use of observation status and the archaic nature of the Medicare three-day stay requirement for nursing home eligibility.

Testimony given by the entire panel of witnesses, which included a nursing home administrator from Sen. Susan Collins’ (R-Maine) hometown of Caribou, almost uniformly demonstrated how Medicare ends up paying more in the end for patients who get caught up in observation status limbo.

An 83-year-old witness from Boston testified about her husband’s misfortune of having had two separate five-day stays in a hospital only to find out that his subsequent nursing home stay was not covered by Medicare because his status was considered observation on both occasions.

“When I think of the confusion already, to expect a beneficiary to understand whether or not they’ve been in a hospital bed is absurd,” said Sen. Collins, who is ranking member of the committee. “I can’t imagine that the vast majority of patients would notice any difference.”

Testifying on behalf of the American Health Care Association (AHCA) was Collins' fellow Mainer Bob Armstrong, vice president of elder care services for St. Mary’s Health System in Lewiston, Maine, and a long term care administrator for more than 29 years. Armstrong noted that he has seen seniors forgo their rehabilitation care at his nursing home because they realized they would have to pay thousands of dollars for it. The problem is, he added, “they end up going to the hospital again because they didn’t get the rehab care and go to the nursing home again anyway, and Medicare [still] ends up paying for it.”

Panelists also generated discussion about the Centers for Medicare & Medicaid Services’ (CMS’) year-old, two-midnight rule and concluded that it was confusing. Sen. Sheldon Whitehouse (D-R.I.) was bewildered about the issue and pointed out that a person’s timing of admittance to the hospital makes the two-midnight rule arbitrary.

“In is in, out is out,” Whitehouse posited to the panel before leaving for another hearing.

Other discussion centered on the creation of a short-stay modifier for hospital stays as a short-term solution. Some witnesses gave credit to CMS for how its accountable care organizations and bundled payment demonstrations have successfully eliminated the three-day stay requirement.

Toby Edelman, senior policy attorney for the Center for Medicare Advocacy, noted that CMS has no appeals process and there is no requirement that the patient be told of his or her observation or inpatient status. “There is no due process or opportunity for a hearing,” she said.

Sen. Collins noted that this issue reminded her of therapy caps, “which prevents people from regaining full function and makes no sense and costs the system more.”

Just one day ahead of Wednesday’s hearing, U.S. Reps. Lloyd Doggett (D-Texas) and Todd Young (R-Ind.) introduced a bill that requires hospitals to give formal notice to patients when they are classified as an inpatient or as an outpatient under observation.

The measure, called the Notice of Observation Treatment and Implication for Care Eligibility Act, or NOTICE Act, was praised by AHCA and National Center for Assisted Living (AHCA/NCAL) President and Chief Executive Officer Mark Parkinson as “a positive step forward” for the attention it draws to “a complex and critical issue hurting the nation’s seniors,” Parkinson said in a statement. “We applaud Congressmen Doggett and Young for serving as champions for seniors and those individuals who need our services the most.”

The NOTICE Act requires hospitals to give notice of patients’ outpatient status within 36 hours after the time of their classification.

AHCA/NCAL has also expressed its support for legislation introduced by Reps. Joe Courtney (D-Conn.) and Tom Latham (R-Iowa), along with Sen. Sherrod Brown (D-Ohio). The Improving Access to Medicare Coverage Act of 2013 requires all hospital days spent in observation to be counted toward the three-day stay requirement.

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