Ask the payment expert ... about the observation stay loophole

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Ask the payment expert ... about the observation stay loophole
Ask the payment expert ... about the observation stay loophole

We've had problems with residents being caught in the hospital “observation stay loophole.” What can we do to ensure they qualify for coverage at our facility?

This is definitely a problem for many facilities. We have seen an increasing number of hospitals using observation days instead of admitting patients for an inpatient stay.

Some hospitals have used up to seven days of observation stays and then attempted to transfer the resident to a nursing facility. According to a New York Times blog, this has become a national issue resulting in a class action suit being filed in 2011 against the federal Department of Health and Human Services, as well as the introduction of bills in both houses of Congress.

The Centers for Medicare & Medicaid Services did publish an online brochure to help patients and families understand their coverage for inpatient versus outpatient stays. Also, according to many articles published about this issue, hospitals have had denials based on patients not meeting CMS criteria for inpatient care, so many of them have become very conservative in their admission criteria rather than face denials.

The key to this issue is that you need to protect your facility. You have to have processes in place to ensure the days in the hospital were actually inpatient days and not observation days.

You need to know who to contact at the hospital to verify that the hospital days were actual inpatients days. You need to make sure that the billing for the residents stay is inpatient and not classified as outpatient. In most nursing facilities, this responsibility would fall on the admissions or social service department.

It is suggested that you document the name of the person who verified the information from the hospital.