Some readers may not be familiar with what is referred to as observation status for hospital patients -- its a very controversial issue (see: Medicare covers less when a hospital stay is an observation, not an admission). Here's a brief description of it:
An increasing number of seniors who spend time in the hospital are surprised to learn that they were not “admitted” patients — even though they may have stayed overnight in a hospital bed and received treatment, diagnostic tests and drugs. Because they were not considered sick enough to require admission but also were not healthy enough to go home, they were kept for observation care, a type of outpatient service. The distinction between inpatient status and outpatient status matters: Seniors must have three consecutive days as admitted patients to qualify for Medicare coverage for follow-up nursing home care, and no amount of observation time counts for that three-day tally. That leaves some observation patients with a tough choice: Pay the nursing home bill themselves...or go home without the care their doctor prescribed and recover as best they can.
What you may not know about observation status for a patient is that it's not the patient's physician who frequently makes the call (see: Hospital observation status: The truth must come out). Here's an excerpt from a blog note written by a physician about this topic:
The observation status problem has continued to grow both larger and worse. My hospitalist colleagues and I are caring for patients in hospital beds in the exact same way as other patients in the hospital, but we are told that we must give them the designation called observation status. CMS recognizes observation status as outpatient care,like seeing a patient in a walk-in clinic. We don’t decide to make a patient observation status. When a patient is admitted to us, someone else (who is usually not a physician) has already decided the patient is observation status. Hypothetically, we can write an order to change that status, but we are being watched very closely, and our decision to change the status will be challenged in (almost) a heartbeat.
We are being watched by people paid by our hospitals to make sure that no patient is given acute inpatient status who might possibly be called observation status by someone else. That someone else is the recovery audit contractor (RAC) program. The RAC auditors are paid by the Centers for Medicare & Medicaid Services (CMS) only if they find patients that we cared for in hospital beds just like all the other patients in the hospital who we “fraudulently” called inpatients. They audit patient after patient, with each audit requiring intensive time and resources to prepare for. If our hospitals don’t have the resources to adequately prepare, or the resources or time ...to appeal the decisions, our hospitals sometimes just give up. This is deemed another successful finding of fraud by the RAC, resulting in CMS paying them for their find, and delivering financial penalties on our hospital.
Here's a definition of the recovery audit contractor (RAC) program from the CMS web site (see: Recovery Audit Program):
The Recovery Audit Program’s mission is to identify and correct Medicare improper payments through the efficient detection and collection of overpayments made on claims of health care services provided to Medicare beneficiaries, and the identification of underpayments to providers so that the CMS can implement actions that will prevent future improper payments in all 50 states.
Obviously the goal of the RAC program is to reduce Medicare expenditures for inappropriate or unnecessary nursing facility admissions. I am not close enough to this problem to express an opinion about whether this is an example of governmental overreach or just appropriate monitoring for abuse of the system. I do know that the RAC program is a cause for extreme irritation among hospital clinicians.
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