Progress in the hospital 'observation stay' chaos

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

When you complain about bizarre government conditions or regulations, as columnists are wont to do, you usually have to assume you're just whispering into a stiff 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. Hospitals have kept patients for absurd lengths of time, only to designate these stays as “observation” periods.

This has had negative ramifications. Many have wound up learning, for example, that they haven't satisfied a 72-hour inpatient requirement to qualify for Medicare nursing home coverage.

A new OIG report, however, calls these practices into question. Its authors urge officials to allow these observation periods to count toward nursing home qualification. Right on.

It appears a lid has been blown off a stinking mess.

The timing wasn't coincidental. The Centers for Medicare & Medicaid Services was expected to post final regulations that could address some of the problems not long after the OIG report's July 30 release. CMS reportedly was going to propose that a two-night or longer stay in a hospital would automatically trigger an “inpatient” designation. 

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 also 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.)

The OIG report took the bull by the horns — and shifted part of the focus to lawmakers. Some 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 as of press time, 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, this report was a step in the right direction. 


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