SHM Supports Clarification to Observational Status Loophole for Medicare Patients

Medicare requires beneficiaries to have at least three consecutive days as a hospital inpatient to qualify for Medicare-covered skilled nursing facility (SNF) care. As the use and duration of observation status continues to rise throughout the nation, patients have been getting caught more frequently within a policy trap: Even though they are physically within the hospital and generally receive care that is indistinguishable from the care received by other inpatients, Medicare is not covering their subsequent SNF stays.

Why? Observation status is considered “outpatient” by both the hospital and Medicare and, therefore, is not counted toward Medicare’s three-day rule.

This leaves seniors on the hook for their skilled nursing care costs, which often exceed their ability to pay. Further, this shortsighted policy might actually result in a net greater cost to Medicare and the health-care system. Faced with mounting costs, many seniors truncate or opt out of SNF care altogether, leaving them vulnerable to added health issues (e.g. dehydration, falls). With new conditions that were not present at the time of the original hospital stay, many of these seniors are at risk to return to the hospital and become another readmission statistic.

As key players in hospitals and, increasingly, in skilled nursing facilities, hospitalists are caught squarely in the middle of this policy. Transitions of care both in and out of these institutions should be guided by sound medical decision-making, not whether Medicare will cover the costs incurred. Although the three-day rule—and, indeed, observation status itself—was originally cast as a cost-containment policy, such policies should incorporate broader care process and delivery reforms that do not add burden to patients when they are at their most vulnerable.

SHM affirms that it is sensible for Medicare to provide coverage for skilled nursing care if a clinician recommends it as part of a treatment plan. Coverage determination should not be beholden to a patient status subject to other systemic pressures, but should reflect the best interest of the patient and the care ordered by providers.

The Improving Access to Medicare Coverage Act, sponsored by Rep. Joe Courtney (D-Conn.), Rep. Tom Latham (R-Iowa), and Sen. Sherrod Brown (D-Ohio), would clarify the law to indicate that Medicare beneficiaries in observation status are deemed inpatients in the hospital for the purposes of the three-day requirement for SNF coverage. This simple adjustment would ensure that patients are able to access the skilled nursing care they need and that providers do not have to worry about this systemic barrier to patient care.

SHM is actively supporting this legislation. A letter of support was sent to Courtney and Brown earlier this year, and membership was mobilized to take action through our Legislative Action Center (www.hospitalmedicine.org/advocacy). Hospitalists also plan to voice their support for the legislation during Hospitalists on the Hill, to be held this month in conjunction with HM13.

As one of only a few specialty medical societies that are active on this issue, SHM stands out as a leader on health-care-system reforms that improve access to care for patients and reduce administrative barriers to medically appropriate care.

Joshua Lapps is SHM’s government relations specialist.

Medicare requires beneficiaries to have at least three consecutive days as a hospital inpatient to qualify for Medicare-covered skilled nursing facility (SNF) care. As the use and duration of observation status continues to rise throughout the nation, patients have been getting caught more frequently within a policy trap: Even though they are physically within the hospital and generally receive care that is indistinguishable from the care received by other inpatients, Medicare is not covering their subsequent SNF stays.

Why? Observation status is considered “outpatient” by both the hospital and Medicare and, therefore, is not counted toward Medicare’s three-day rule.

This leaves seniors on the hook for their skilled nursing care costs, which often exceed their ability to pay. Further, this shortsighted policy might actually result in a net greater cost to Medicare and the health-care system. Faced with mounting costs, many seniors truncate or opt out of SNF care altogether, leaving them vulnerable to added health issues (e.g. dehydration, falls). With new conditions that were not present at the time of the original hospital stay, many of these seniors are at risk to return to the hospital and become another readmission statistic.

As key players in hospitals and, increasingly, in skilled nursing facilities, hospitalists are caught squarely in the middle of this policy. Transitions of care both in and out of these institutions should be guided by sound medical decision-making, not whether Medicare will cover the costs incurred. Although the three-day rule—and, indeed, observation status itself—was originally cast as a cost-containment policy, such policies should incorporate broader care process and delivery reforms that do not add burden to patients when they are at their most vulnerable.

SHM affirms that it is sensible for Medicare to provide coverage for skilled nursing care if a clinician recommends it as part of a treatment plan. Coverage determination should not be beholden to a patient status subject to other systemic pressures, but should reflect the best interest of the patient and the care ordered by providers.

The Improving Access to Medicare Coverage Act, sponsored by Rep. Joe Courtney (D-Conn.), Rep. Tom Latham (R-Iowa), and Sen. Sherrod Brown (D-Ohio), would clarify the law to indicate that Medicare beneficiaries in observation status are deemed inpatients in the hospital for the purposes of the three-day requirement for SNF coverage. This simple adjustment would ensure that patients are able to access the skilled nursing care they need and that providers do not have to worry about this systemic barrier to patient care.

SHM is actively supporting this legislation. A letter of support was sent to Courtney and Brown earlier this year, and membership was mobilized to take action through our Legislative Action Center (www.hospitalmedicine.org/advocacy). Hospitalists also plan to voice their support for the legislation during Hospitalists on the Hill, to be held this month in conjunction with HM13.

As one of only a few specialty medical societies that are active on this issue, SHM stands out as a leader on health-care-system reforms that improve access to care for patients and reduce administrative barriers to medically appropriate care.

Joshua Lapps is SHM’s government relations specialist.

Medicare requires beneficiaries to have at least three consecutive days as a hospital inpatient to qualify for Medicare-covered skilled nursing facility (SNF) care. As the use and duration of observation status continues to rise throughout the nation, patients have been getting caught more frequently within a policy trap: Even though they are physically within the hospital and generally receive care that is indistinguishable from the care received by other inpatients, Medicare is not covering their subsequent SNF stays.

Why? Observation status is considered “outpatient” by both the hospital and Medicare and, therefore, is not counted toward Medicare’s three-day rule.

This leaves seniors on the hook for their skilled nursing care costs, which often exceed their ability to pay. Further, this shortsighted policy might actually result in a net greater cost to Medicare and the health-care system. Faced with mounting costs, many seniors truncate or opt out of SNF care altogether, leaving them vulnerable to added health issues (e.g. dehydration, falls). With new conditions that were not present at the time of the original hospital stay, many of these seniors are at risk to return to the hospital and become another readmission statistic.

As key players in hospitals and, increasingly, in skilled nursing facilities, hospitalists are caught squarely in the middle of this policy. Transitions of care both in and out of these institutions should be guided by sound medical decision-making, not whether Medicare will cover the costs incurred. Although the three-day rule—and, indeed, observation status itself—was originally cast as a cost-containment policy, such policies should incorporate broader care process and delivery reforms that do not add burden to patients when they are at their most vulnerable.

SHM affirms that it is sensible for Medicare to provide coverage for skilled nursing care if a clinician recommends it as part of a treatment plan. Coverage determination should not be beholden to a patient status subject to other systemic pressures, but should reflect the best interest of the patient and the care ordered by providers.

The Improving Access to Medicare Coverage Act, sponsored by Rep. Joe Courtney (D-Conn.), Rep. Tom Latham (R-Iowa), and Sen. Sherrod Brown (D-Ohio), would clarify the law to indicate that Medicare beneficiaries in observation status are deemed inpatients in the hospital for the purposes of the three-day requirement for SNF coverage. This simple adjustment would ensure that patients are able to access the skilled nursing care they need and that providers do not have to worry about this systemic barrier to patient care.

SHM is actively supporting this legislation. A letter of support was sent to Courtney and Brown earlier this year, and membership was mobilized to take action through our Legislative Action Center (www.hospitalmedicine.org/advocacy). Hospitalists also plan to voice their support for the legislation during Hospitalists on the Hill, to be held this month in conjunction with HM13.

As one of only a few specialty medical societies that are active on this issue, SHM stands out as a leader on health-care-system reforms that improve access to care for patients and reduce administrative barriers to medically appropriate care.

Joshua Lapps is SHM’s government relations specialist.