Draft bill proposes counting observation stays for SNF coverage, limiting RAC oversight

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Rep. Kevin Brady (R-TX)
Rep. Kevin Brady (R-TX)

Hospital observation stays would count toward establishing Medicare eligibility for post-acute services, under comprehensive reforms in a new draft bill from the House Committee on Ways and Means.

The Hospitals Improvements for Payment (HIP) Act of 2014 proposes a new hospital prospective payment system to be in place by fiscal year 2020. Its goal is to address problems with how short stays are reimbursed. Medicare auditors have aggressively challenged claims for short inpatient stays in recent years, leading to a surge in appeals and a huge backlog, as well as a spike in hospitals categorizing people as outpatients under observation, rather than as inpatients.

Under the proposed system, observation stays that stretch overnight would be categorized as Part A inpatient hospital services. These stays also would count toward the three days that people need to spend as an inpatient to qualify for Medicare coverage of follow-up skilled nursing services.

The bill would prohibit Recovery Audit Contractors from auditing short-term hospital stays until the new payment system is established. It would place other restrictions on RAC activity, including limiting additional documentation requests and reducing the maximum look-back period from four years to three. The government also would have to beef up monitoring of RAC activity. It also would put in place alternative settlement processes intended to cut down on the current appeals logjam.

The draft bill was put forward Wednesday by Rep. Kevin Brady (R-TX), chairman of the Ways and Means Subcommittee on Health. He called on “all stakeholders” to review the draft and provide “timely, real-world feedback.”

The Federation of American Hospitals applauded the bill, calling it “serious and thoughtful.” The American Coalition for Healthcare Claims Integrity — an auditor association — expressed concern about the proposed RAC moratorium, saying it would lead to substantial monetary losses for the Medicare Trust Fund.

Click here to access the complete discussion draft. Click here for a section-by-section summary. Comments can be submitted by emailing  HDDWAMR@mail.house.gov.