by Professor Barbara Gilchrist, St. Louis
Two Medicare payment policies have received attention recently – the “improvement standard” applied to coverage of skilled services and “observation status” which refers to a patient in an acute care hospital being classified as an outpatient. The improvement standard is being improved; observation status stays the same.
A settlement was approved by the U.S District Court, D. Vermont, in Jimmo v. Sebelius (No. 5:11-cv-17 (D.Vt.)) on January 24, 2013. Jimmo is a class action suit in which plaintiffs sought declaratory and injunctive relief from the application of the improvement standard, the basis of many denials of Medicare coverage for persons needing physical therapy, wound care, and other forms of skilled care for chronic conditions and disabilities. Medicare’s decades-old position has been that payment will not be approved if a patient’s condition is stable, chronic, not improving, or that the services are for “maintenance only.”
Under the terms of the settlement which are in effect now, CMS will revise the Medicare Benefit Policy Manual and other manuals. New policy provisions will state that skilled nursing and therapy services necessary to maintain a person’s condition can be covered by Medicare. CMS will also institute a nationwide Educational Campaign for providers, contractors and adjudicators.
* * * * *
CMS, for a second time, asked for public comments this past summer, about inpatient and outpatient status for hospital patients, specifically “observation status,” a phrase that refers to patients who come to a hospital for care and who receive care, but are not admitted as an inpatient.
Current Medicare payment policies put hospitals at financial risk if a patient is admitted, but the Medicare Part A claim is later denied because the inpatient care is deemed not reasonable and necessary. A hospital can re-classify a patient from inpatient to outpatient and bill under Part B, but this must be done before the patient is discharged. Thus, it is financially safer to not admit, provide care and then discharge.
The financial consequence for the patient can be significant. A Medicare beneficiary admitted to a hospital is responsible for a one-time deductible, has no copayments for the first 60 days, and is not charged for self-administered drugs. As an outpatient, the beneficiary is responsible for a copayment for each service received and, while no one copayment can exceed the hospital deductible, the cumulative total may be more. An outpatient can also be charged for self-administered drugs and the time spent under “observation” does not count toward the 3-day hospital stay prerequisite for Medicare coverage in a skilled nursing facility.
In final rules published November 15, 2012 (77 FR 68426), CMS declined to make any policy changes, despite evidence of a growing trend of nonadmission. The Center for Medicare Advocacy has indicated that it is pursuing litigation and that it hopes legislation will be reintroduced that would require that all time spent in a hospital, no matter whether as an inpatient or an outpatient, count toward the three-day qualifying hospital stay.
Back to Front Page