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Inside Health Policy: CMS To Look At Hospital Short Stay Policy In Outpatient Pay Rule

CMS To Look At Hospital Short Stay Policy In Outpatient Pay Rule

Posted: April 22, 2015

CMS says it plans to address a broad set of issues around short inpatient stays and the two-midnights hospital admissions policy in the hospital outpatient pay rule this summer, including recent recommendations from Congress’ Medicare payment advisers and hospitals’ complaints.

The agency acknowledges that stakeholders for years have raised concerns about short inpatient hospital stays, long outpatient stays with beneficiaries under observation, and “Medicare policies with respect to when payment for short hospital stays is appropriate under Medicare Part A.” The agency says that even though CMS has taken steps to address these concerns, like shortening the RAC look-back period for patient status reviews and laying out a series of improvements the agency plans to implement once new RAC contracts can be implemented, hospitals and doctors still are still upset.

“Despite these planned alterations to the Recovery Audit Program, we note that hospitals and physicians continue to voice their concern with parts of the 2-midnight rule,” the agency states in the proposed inpatient rule issued Friday (April 17). “Therefore, we are considering this feedback carefully, as well as recent MedPAC recommendations, and expect to include a further discussion of the broader set of issues related to short inpatient hospital stays, long outpatient stays with observation services, and the related -0.2 percent IPPS payment adjustment” in the 2016 outpatient pay rule slated to be published this summer.

MedPAC at its April meeting voted in favor of reforming the RACs, withdrawing the two-midnights rule, notifying some beneficiaries under observation of their outpatient status and counting some time spent in observation toward Medicare’s required three-day nursing home eligibility requirement. Commissioners also voted to have HHS evaluate establishing a penalty for hospitals with excess rates of short inpatient stays to substitute, in whole or in part, for RAC reviews of short inpatient stays. MedPAC staff said the commission plans to run its own evaluation of such a penalty system, as well.

The American Hospital Association expressed disappointment in a statement that “[n]otably absent from [Friday’s inpatient] rule is a further discussion of the two-midnights policy and reform of the recovery audit contractor (RAC) program. We also urge the agency to examine fundamental RAC reforms, including the contingency fee structure that encourages RACs to deny claims.”

However, AHA also told Inside Health Policy it appreciates CMS’ consideration of the issue. Both AHA and the Association of American Medical Colleges say further RAC reform should also be considered.

Allison Cohen, senior policy and regulatory specialist with AAMC, said teaching hospitals are glad CMS is listening to the fact the two-midnights policy is causing problems.

AAMC would like CMS to consider withdrawing the two-midnights policy for stays shorter than two midnights that are automatically considered outpatient stays. However, Cohen said stays longer than two midnights should still not be subject to audits.

Cohen said AAMC would like to see more more deference to clinical judgment when considering whether hospital admissions are appropriate. The Diagnosis-Related-Group (DRG) system could be refined in such a way, either with short and long-stay DRGs or a targeted subset of lower acuity DRGs, that it is less disruptive than the two-midnights policy.

Hospitals also have encouraged CMS to look at reversing the cuts that were implemented alongside the two-midnights policy.

The Council for Medicare Integrity, which represents RACs, also said it is looking forward to more clarity in the program.

“While waiting for key policies to be ironed out, rampant waste continues to drain the Medicare Trust Fund. We continue to be alarmed by the $46 billion in Medicare Fee-For-Service funds lost this year alone due to improper billing, and seek to get recoveries back on track to maintain the integrity of the program,” the council said. — Michelle M. Stein

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