Progress in trying to undo the hospital 'observation stay' mess

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James M. Berklan, McKnight's Editor
James M. Berklan, McKnight's Editor

What is this world coming to? When you complain about bizarre government conditions or regulations, you usually have to assume you're just whispering into the wind.

But now comes word that no less than the Office of Inspector General of your Department of Health and Human Services is jumping on the bandwagon to change the hospital “observation stay” madness. As readers of this space know, I've been critical of the way hospitals have kept patients for absurd lengths of time, only to designate these stays as “observation,” and not inpatient, periods.

This has had negative ramifications for many who wind up finding they haven't satisfied a 72-hour inpatient requirement to qualify for Medicare nursing home coverage.

The OIG issued a report Tuesday that called into question these practices. Allow these observation periods to count toward nursing home qualification, report authors urge. They have it right.

As one astute reader pointed out, hospitals could be ramping up their use of “observation” designations or even keeping patients longer in an effort to head off rehospitalization penalties down the road. There are reasons for what they're doing — some of them valid — if only due to self-defense instincts.

But not always. Tuesday's report also noted that the same symptoms are coded differently by different hospitals.

One way or another, it appears a lid has been blown off a stinking mess.

The timing isn't coincidental. Soon, the Centers for Medicare & Medicaid Services is expected to post final regulations that could address some of the problems. CMS reportedly will propose that a two-night or longer stay in a hospital will automatically trigger an “inpatient” designation. Yet it still might not stem the use of "observation" periods.

Around 600,000 Medicare beneficiaries were not allowed nursing home coverage even though they spent three or more days at a time in a hospital in 2012, OIG investigators found.

It should be noted that report authors urged prompt reclamation of more than $250 million that was improperly paid for nursing home services last year. But that represented just 4% of those affected by the observation stay anomaly. Report authors also are urging CMS to expand access to follow-up nursing home care. Nobody knows how the additional nursing home care would be paid for, however.

Tuesday's report shifts part of the focus to lawmakers, some of whom are supporting legislation to qualify observation stays as building blocks for nursing home eligibility. With 17 sponsors in the U.S. Senate and 88 in the House, however, more muscle will be needed. Maybe.

A group of Medicare beneficiaries has filed a lawsuit, arguing that Medicare officials created the observation stay designation, so they should be able to strip it. Government lawyers are trying to get the case tossed.

Will the courts or Congress fix this problem? Nobody knows.

But one way or another, Tuesday's report was a step in the right direction.

James Berklan is the editor of McKnight's Long-Term Care News. Follow him on Twitter at @LTCEditorsDesk.

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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Marty Stempniak.

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