Pilot would close 'observation loophole'

Share this content:
Faced with growing complaints about the “observation stay loophole,” the Centers for Medicare & Medicaid Services is launching a pilot program that ultimately could let more beneficiaries qualify for nursing home care.

Long-term care groups say hospitals too often classify patients as being in under observation, rather than as an inpatient. There's an incentive for hospitals to do so: If Medicare decides the hospital has billed it for the inpatient treatment of someone who should have gotten observation services, the agency can deny the entire payment.

However, Medicare beneficiaries must stay three days in the hospital as an inpatient — not under observation care — in order to qualify for nursing home coverage.

The three-year pilot program allows 380 participating hospitals the ability to re-bill for observation services if claims for inpatient care are rejected.

The American Health Care Association applauded the pilot, with President and CEO Mark Parkinson calling it “an important first step in distinguishing the differences in patient classification and allowing proper access to care.”