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 Association Urges CMS to Count Observation Stays Toward Medicare Three-Day Rule

Leaders of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL) on Aug. 28 urged federal regulators to preserve Medicare beneficiaries’ access to necessary skilled nursing care following a hospital stay, regardless of whether that stay was classified as inpatient or outpatient observation.

In a letter to Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma, AHCA/NCAL President and Chief Executive Officer Mark Parkinson and NCAL Executive Director Scott Tittle urged her to use the agency’s authority to count time spent under “observation status” in a hospital toward satisfying the three-day inpatient requirement for Medicare beneficiaries seeking access to needed skilled nursing care. 
 
“AHCA/NCAL was encouraged by your recent comment on Twitter by about the three-day stay issue and government not always making sense,” the letter said. “You also noted you were listening and taking feedback on this red tape issue. We wanted to be sure to share with you again our position on this issue, which we have been advocating for years.”
 
Parkinson and Tittle told Verma that AHCA/NCAL is part of a national coalition of 33 provider and beneficiary organizations working on legislative and regulatory changes related to the issue of the three-day stay.
 
“As you know, under current law, a Medicare beneficiary must spend at least three days as a hospital inpatient for Medicare to cover a subsequent stay in a skilled nursing center (known as the ‘Skilled Nursing Facility 3-day rule’),” the letter said. 
 
Because of this requirement, each year thousands of beneficiaries are unable to access their skilled nursing benefit because of the administrative classification of their hospital stay, even if the stay is deemed medically necessary, and even if the stay spans three days or more, Parkinson and Tittle wrote.
 
Hospitals’ use of observation stays and the amount of time patients spend in observation status are both increasing, AHCA/NCAL said. In December 2016, the Inspector General reported that 748,337 long hospital stays were called outpatient, including 633,148 outpatient stays of three or more days in Fiscal Year 2014.
 
In the letter Parkinson and Tittle also said that the Office of Inspector General July 2019 report called for CMS to analyze the potential impact of counting time spent as an outpatient toward the three-night requirement for skilled nursing facility (SNF) services so that beneficiaries receiving similar hospital care have access to these services. 
 
“AHCA/NCAL believes that CMS already has the authority needed to implement the solution to this issue,” the letter said. 
 
In closing, the association asked CMS to take action and eliminate what the SNF profession regards as a “confusing policy barrier that each year needlessly prevents thousands of Medicare beneficiaries from accessing their benefit to high-quality, post-acute care.”

Read the complete letter here​. ​
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