MedPAC calls for loosening of '3-day' qualifying stay, RAC auditing reforms

The Medicare Payment Advisory Commission is recommending allowing nursing home coverage for beneficiaries who have spent as little as one day in hospital inpatient status, combined with up to two days in observation status.

The existing threshold dictates that no observation stay days may count toward the three-day hospital stay requirement for Medicare nursing home coverage. Critics have complained that hospitals have grossly expanded use of the “observation stay” tag, causing confusion and leaving many beneficiaries unqualified for nursing home care.

The congressional advisory panel also voted unanimously to recommend changes to the Recovery Audit Contractor program, and how its auditors operate and are rewarded.

A MedPAC fact sheet outlines an array of recommendations commissioners made in their 267-page June 2015 "Report to the Congress: Medicare and the Health Care Delivery System."

Among notables for skilled nursing operators:

  • The “two-midnight rule” should be withdrawn, and RACs should focus on hospitals with the highest rates of short, inpatient stays. Penalties should be evaluated for those with the highest rates.
  • Each RAC's contingency fees should be based, in part, on its claim denial overturn rate. The panel also said that the RAC look-back period should be shorter than the Medicare rebilling period for short, inpatient stays.
  • In addition, hospitals should have to inform patients who spend more than 24 hours in observation status as to how their eligibility for post-acute care stands, MedPAC commissioners voted.

All of these short-stay hospital recommendations are positions long-term care lobbyists have fought hard to have adopted. MedPAC recommendations are non-binding on lawmakers, who may vote as they wish on proposed rules and legislation.

MedPAC commissioners also recommended policies be better aligned across Medicare's three payment models: fee-for-service, Medicare Advantage plans, and accountable care organizations.

“In each model, Medicare has different — and sometimes conflicting — policies concerning payment, risk adjustment, quality measurement, and other issues,” report authors wrote.