New CMS Rule On Observation Status Could Cost Providers
By Greg Bengel, contributing writer
New CMS rule will affect how hospitals are reimbursed for patients under observation care
The “two midnight” rule from CMS went into effect on October 1. According to an article from Buffalo Business First, the new rule will have a huge impact on how hospitals are reimbursed – possibly a multi-million dollar impact.
The rule affects how hospitals are reimbursed for observation status, when patients are admitted for fewer than two days. “The rule increases scrutiny from CMS on the types of patients that require inpatient hospitalization versus outpatient observation care,” explains Buffalo Business First. “Outpatient care is reimbursed at a different level from CMS than inpatient care, which will result in hospitals receiving less money for care and patients having to pay more out-of-pocket.”
In the Buffalo Business First article, a couple of providers weigh in to voice their displeasure. First to do so is Joseph Koessler, CFO of Kaleida Health hospitals. “Once you admit a patient, they consume the same resources as an inpatient would, so all they’re doing is cutting the reimbursements,” he is quoted. “We have probably 1,000-1,300 cases that would fall into this category.” He says later, “They’re basically over-riding the physicians’ judgment in regard to when they should be admitted. CMS isn’t saying to the physicians they can’t admit, but they’re only going to pay for outpatient care.”
Also quoted in the article is Dr. Michael Edbauer, vice president of medical affairs at Catholic Health. “Sometimes there’s a gap between what’s needed for the patient and the documentation describing that, and that’s been a challenge for us across the health-care system,” says Edbauer. “It will be a greater burden of justification that the person belonged in the hospital. This is an example of where this creates an increased administrative burden and people are spending more time documenting rather than trying to spend more time on direct care.”
Last week Medicare announced that they would be delaying enforcement of the new rule for at least 90 days. Healthcare Finance News has more on the delay. The government will not audit hospitals until at least January 1, 2014, but the rule still is in effect. In the meantime, “Medicare auditors will review a small sample of hospital admission records to insure that hospitals are working to properly implement the new standards but will not penalize mistakes,” explains Healthcare Finance News.
In a statement from the American Hospital Association, AHA president and CEO Rich Umbdenstock says “too many aspects [of the rule] are fundamentally flawed” and that “Unfortunately, the agency’s guidance only raises new questions and lacks clarity.”