Bill to Clarify Three-Midnight Rule for Medicare Patients Gains Support from Congress, Hospitalists


In 2010, my office received a call from a Norwich, Conn., family whose 89-year-old father had fallen and broken his hip. After he was treated in the local hospital for four days, his doctor prescribed follow-on skilled nursing facility (SNF) care. Upon his arrival at the nursing home, his family was informed that they would have to pay more than $10,000 up front to cover the cost of his care: Because he had never been admitted to the hospital as an inpatient, Medicare would not cover the prescribed rehabilitative care that he needed to return home safely.

I know that hospitalists are already far too familiar with stories like this. Together, we can work to make sure it doesn’t happen again.

Support Is Growing

For me, that family’s story was a call for action. Shortly after speaking with the family, I introduced the Improving Access to Medicare Coverage Act (H.R. 1179). The bill is simple: It would restore the three-day hospital stay standard for SNF coverage, whether the stay is coded as inpatient under Part A or outpatient observation under Part B. Two Congresses later, support for the proposal is growing. In the 113th Congress, the bill has 137 bipartisan cosponsors, an indication of how widespread this problem is for Medicare beneficiaries.

The outdated Medicare law on skilled nursing care coverage is creating financial and healthcare dilemmas for families across the country. Under current law, beneficiaries must have a hospital inpatient stay of at least three days in order to qualify for Medicare coverage SNF benefits; however, more and more patients are being coded under observation status, and access to post-acute SNF care is diminishing. Patients are suffering, and healthcare providers are caught in the middle.

In fact, the Office of the Inspector General at the Department of Health and Human Services released a report last fall that showed that Medicare beneficiaries in 2012 had more than 600,000 hospital stays that lasted three nights, yet none were admitted as inpatients. Even though these beneficiaries likely received the same care inpatients received, their observation status designation disqualified them from Medicare coverage of the SNF benefit. For their families, prescribed follow-on SNF care would have an out-of-pocket cost averaging more than $10,000. For seniors on fixed incomes, that is a devastating financial penalty for a service that should be covered by their health plans.

Three days in the hospital—whether as an inpatient or under outpatient observation—should count for three days in the hospital when Medicare determines eligibility for skilled nursing coverage.

—Rep. Joe Courtney

Administrative Oversight

There are many reasons for the growth in observation status treatments, but a primary driver is increasing scrutiny of admitting practices by recovery audit contractors (RACs). The consequences of RAC review processes have created difficult situations for hospitals, because admitting decisions are reviewable for three years, and hospitals can be hit with claw-back penalties for payments on behalf of patients RACs determine were incorrectly admitted. To prevent costly penalties and protracted appeals of individual cases, many hospitals feel an understandable amount of pressure to err on the side of treating patients under outpatient observation status covered under Part B.

The original intent of the three-day inpatient stay requirement was to serve as a tangible measure of medical necessity of SNF care. And, when the three-day inpatient stay prerequisite was written into law, long-term hospital observation stays were nonexistent. This intent has been lost in a changing system of hospital oversight under RACs and admitting practices.

The impact on patients and families is tragic.

Ann Sheehy, MD, MS, FHM, a hospitalist speaking on behalf of the Society of Hospital Medicine on a recent conference call I hosted, detailed the scenes she sees every day with her own patients. She described how doctors, knowing that a patient lacks the means to pay for rehabilitative care out of pocket and the support system to recover safely at home, sometimes keep the patient in the hospital longer, at a higher cost to Medicare. In other cases, Dr. Sheehy noted that patients end up back in the hospital soon after being discharged, having foregone expensive SNF care and subsequently suffered preventable injuries and illnesses. Both of these outcomes are bad for patients—and bad for Medicare expenditures.

Three-Day Fix

While the problem of observation status treatment is complex, the solution is simple.

As observation status becomes more ingrained in the healthcare lexicon, a legislative fix to restore the three-day hospital stay standard is needed now more than ever. Three days in the hospital—whether as an inpatient or under outpatient observation—should count for three days in the hospital when Medicare determines eligibility for SNF coverage.

My bill, H.R. 1179, is the most direct solution to rectify the flaw that leaves hundreds of thousands of beneficiaries wondering how their stay in the hospital does not “count” and scrambling to figure out how to pay for care—or foregoing it entirely. The strong support in the advocacy community for this legislation—especially from SHM—and the sway of outside groups cannot be overstated. In Washington’s current climate, the only thing that moves bipartisan issues forward is outside pressure.

Together, I hope hospitalists and members of Congress will reach the critical mass needed to pass this legislation and ensure that Medicare beneficiaries are covered for medically necessary care.

Joseph “Joe” Courtney is the U.S. Representative for Connecticut’s second congressional district, serving since 2007. The district includes most of the eastern third of the state, including Norwich and New London.

How to Get Involved

SHM has prioritized Rep. Courtney’s legislation addressing observation status and SNF care. Join the effort to pass this legislation by:

  • Telling your members of Congress to support H.R. 1179 through SHM’s Legislative Action Center at www.hospitalmedicine.org/advocacy. It is quick, easy, and effective.
  • Sharing your perspectives on and experiences with observation status with the SHM Government Relations team at [email protected].
  • Learning from other hospitalists about how they handle status determinations, SNF coverage, and other observation care issues on HMX at connect.hospitalmedicine.org.

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