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CMS Makes Headway in Observation Stay Conundrum  
CMS Makes Headway in Observation Stay Conundrum
Potential Solution Eliminates Costly Loophole for Seniors
Contact: Michael Cowden


​Washington, DC – The American Health Care Association (AHCA) applauds the Centers for Medicare and Medicaid Services (CMS) in its initiation of a three-year Part A to Part B Rebilling (AB Rebilling) Demonstration for up to 380 hospitals as part of an effort to streamline access to care. With more patients put under observation status in recent years, threatening their Medicare coverage for post-acute care in a skilled nursing facility, AHCA is encouraged to see CMS taking steps to encourage more proper classification.

This demonstration reduces risk for hospitals as they assign patients inpatient or observation status.  Hospitals participating in this demo will receive 90 percent of payment for patients whose status are later challenged. Currently, Medicare can deny an entire payment if the hospital incorrectly classifies a patient as inpatient, prompting hospitals to classify patients as under observation. However, the Medicare program requires that patients who are sent to skilled nursing facilities for post-acute care after a hospital stay meet a three-day hospital inpatient status threshold. If the patient is classified as under observation, those days do not count toward the minimum stay and Medicare coverage is denied. Under this demo, a patient is more likely to be properly classified, thus avoiding being saddled with outrageous billing because they failed to meet Medicare’s minimum three-day inpatient stay. 

“At the heart of this issue are the patients who have suffered financially because their classification at the hospital forced them to pay for the quality, post-acute care they required in a time of need,” said AHCA President & CEO Mark Parkinson. “CMS’ demo is an important first step in distinguishing the differences in patient classification and allowing proper access to care. The next step is passing legislation that will easily fix this injustice for Medicare beneficiaries.”

Last week, Congressman Joe Courtney (D-CT) spoke to residents at a rehabilitation center regarding the Improving Access to Medicare Coverage Act of 2011 that would rectify the policy that leaves seniors hanging in uncertainty regarding their healthcare delivery. The bill, co-sponsored by Rep. Tom Latham (R-IA) and Senators John Kerry (D-MA) and Olympia Snowe (R-ME), ensures that time spent under observation status in a hospital counts toward satisfying the three-day inpatient hospital requirement for coverage of skilled nursing facility services under Medicare.

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) represents more than 14,000 non-profit and proprietary skilled nursing centers, assisted living communities, sub-acute centers and homes for individuals with intellectual and development disabilities. By delivering solutions for quality care, AHCA/NCAL aims to improve the lives of the nearly 5 million seniors and individuals with disabilities who receive long term or post-acute care in our facilities each year. For more information, please visit or​​