OIG finds 'observation stay' problems, calls for reform

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People increasingly are spending days in the hospital as observation patients.
People increasingly are spending days in the hospital as observation patients.

Long-term care groups are among those hailing a federal study that raises critical questions about hospitals' apparent over-use of “observation stay” designations for patients.

An Office of Inspector General analysis of 2012 Medicare claims showed that more than 600,000 hospital stays of at least three nights were labeled observation stays.

As a result, thousands of otherwise eligible individuals did not qualify for Medicare nursing home coverage, which mandates 72 hours as an inpatient as a prerequisite.

“The OIG report is just one more argument in favor of changing these arcane laws and speeding care to thousands of seniors trapped in this no man's land of health care,” stated Mark Parkinson, president and CEO of the American Health Care Association/National Center for Assisted Living.

The Centers for Medicare & Medicaid Services proposed a rule change in April that would automatically qualify hospital stays of two nights or longer as inpatient stays, which ostensibly could ease beneficiaries' angst. 

But experts note that such a new rule still might not decrease the volume of observation nights. Time spent in an outpatient area of the hospital still would not count toward this “two-night presumption,” the OIG report cautions. 

Legislation introduced in Congress would present another option. It would allow nights spent in the hospital as an outpatient to count toward the three-night minimum needed for SNF coverage.

CMS, however, might need “additional statutory authority” to do this, the OIG acknowledged. 


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