Hospital observation stays leave a Medicare beneficiary in a “medical twilight zone,” Sen. Susan Collins (R-ME) said at the Senate Special Committee on Aging committee hearing Wednesday.

Too often, patients do not know the type of care they are receiving or for how long they have to be there, Collins said. Those under observation status can sometimes end up paying thousands in out-of-pocket costs, often when they land in post-acute care, she observed.

Typically, an observation stay is only supposed to last 24 hours, she noted. But the length of these stays have grown, sometimes exceeding 72 hours.

The growth of observation stays is not a coincidence, said Sen. Claire McCaskill (D-MO).

“My fear is that they [providers] are making decisions based on financial motives instead of the best clinical decision for the patient,” McCaskill said. “We need to be mindful of how this affects the beneficiaries because after all, they are the people we are trying to take care of.”

McCaskill said she has met with patients in many different states  “blindsided” by being classified under observation status.

While recent proposed legislation would have required hospitals to tell patients if they are under an observation stay for more than 24 hours, Collins noted it may take time to pass such a law, and urged CMS to pursue other courses of action. Sean Cavanaugh, deputy administrator and director for Centers for Medicare & Medicaid Services, said the agency has started encouraging hospitals to tell residents of their status immediately.

The hearing included testimony about recovery audit contractors, who “have targeted short inpatient stays in their audit efforts, resulting in denials of these claims on the grounds that the patient’s status as an inpatient was not appropriate,” according to Mark Miller, executive director of the Medicare Payment Advisory Commission.

The turnaround of the appeals has been slow, and most of the hospital overpayments denied by RACs are two years after the date of care, Miller said. When RACs start new audits on inpatient cases, CMS is going to require them look at it within six months, Cavanaugh said. Collins also encouraged the agency to look at providers with high rates of Medicare denials, rather than around appropriate hospital stays, which Cavanaugh agreed with.

“We also have started to get RACs to focus on the hospitals and providers with high denial rates,” he said.

The American Health Care Association applauded Sens. Collins and McCaskill for holding the hearing, noting it would continue to work on the issue of observation stays with members of Congress.