This week, NAHU sent letters of support to the lead sponsors of S. 568 and H.R. 1421, the Improving Access to Medicare Coverage Act of 2017. These bills address Medicare’s “two midnight” policy, and would allow observation stays to be counted toward the three-day mandatory inpatient stay for Medicare coverage of a skilled nursing facility. Currently, Medicare beneficiaries who are not officially admitted to a hospital may be classified under “Observation Status,” which is treated as an outpatient procedure for billing purposes. This may lead patients, many who are extremely sick and spend many days in the hospital, to be charged for services that Medicare would have otherwise paid had they been admitted. Further, Medicare coverage is only provided for nursing home care for patients who have a 3-day inpatient hospital stay.
The issue partly stems from policies designed to prevent unnecessary hospital readmissions, where Medicare would penalize hospitals when patients would be re-hospitalized within a month of being discharged. Hospitals with readmission rates above the national average would receive lower Medicare reimbursements, thereby incenting hospitals to adequately treat patients the first time and avoid re-admissions. However, in response to the policy, some hospitals increasingly placed patients under “observation status,” allowing them to provide care for patients whose conditions were not poor enough to be admitted without the hospital being penalized for a re-admission. Regardless if care was performed in the inpatient unit, these visits would be classified as outpatient procedures and billed under Medicare Part B, which could result in higher cost-sharing for the patient.
As frequency of beneficiaries receiving extended observation services increased as well as high error rates for hospital services that were performed as inpatient instead of outpatient, in 2013, the Center for Medicare and Medicaid Services (CMS) issued guidance designed to determine which hospital stays should be billed for Medicare Part A and which should qualify as outpatient. Beginning in October of 2013, if a physician expected a patient to stay fewer than two midnights, then the services would be classified as outpatient and billed under Medicare Part B. CMS later delayed the enforcement of this policy through March 31, 2015.
This legislation would help close this loophole and provide an important consumer protection for Medicare beneficiaries who may be placed under observation status. This would allow for patients who are placed under observation status to count their stay towards the three-day mandatory inpatient stay under the two-midnight policy for Medicare coverage of skilled nursing facility services, and prevent patients from being denied Medicare benefits. Beneficiaries could also avoid receiving unexpected bills for services, such as prescription medications, that otherwise would have been covered under a hospital admission.
Senators Sherrod Brown (D-OH), Susan Collins (R-ME), Bill Nelson (D-FL) and Shelley Moore Capito (R-WV) are the primary sponsors of S. 568. Representatives Joe Courtney (D-CT) and Glenn Thompson (R-PA) are the primary sponsors of H.R. 1421.