Observation Stays Policy Update

Empty Hospital Bed

Last week, the Department of Health and Human Services’ Office of the Inspector General (OIG) released a memorandum report that focused on the Centers for Medicare and Medicaid Services’ (CMS) proposed rule regarding hospitals’ use of observation stays and short inpatient stays for Medicare beneficiaries. The report found that hospitals varied in patient admission placement, despite similar patient symptoms. The lack of clarity in the distinction between an inpatient and observation stay complicates issues for patients, and the report supported counting observation days towards the three-day inpatient stay minimum requirement.

On Friday, August 2, CMS released its FY 2014 inpatient payment rule.  Unfortunately, this final rule does not count days spent in observation specifically toward meeting the three-day stay requirement nor does it adjust the definition of inpatient itself to include beneficiaries receiving observation services.  Its major focus is to clarify Medicare coverage of so-called short inpatient stays.  AHCA/NCAL will continue to urge CMS and the Hill to count observation stays towards meeting the three-day minimum inpatient stay needed to qualify for subsequent SNF services.  To learn more about this topic, please click here.