MedPAC rules out RAC program as cause of increase in observational care

The rise in observational care in hospitals, which nursing home providers have criticized in recent weeks, is not the fault of the Medicare Recovery Audit Contractor program, according to a new report from the Medicare Payment Advisory Commission (MedPAC).

Report authors say there is no documented evidence that the RAC program is to blame for the growth in observational care use. The RAC program took effect in 2005 as a three-year, six-state demonstration program designed to identify and correct improper Medicare patients, according to the Bureau of National Affairs. Only 20% of the hospitals with the most significant increase in observational care use were RAC hospitals, the MedPAC report said. Between 2006 and 2008, hospital observational care claims in the United States rose by more than 70%, according to the report.

Because observational care is classified as outpatient care, this hospital status does not count toward the three-day hospital stay policy that qualifies patients for Medicare-reimbursed skilled nursing care. Provider groups had argued that the increased use of observational care was due to hospital concerns over potential claims rejections from Medicare Recovery Audit contractors.