MedPAC Wants to Eliminate Observation Stays

In a November 6, 2014 meeting, the Medicare Payment Advisory Commission (MedPAC) reported that observation stays should be eliminated as a way of classifying patients. In recent years, hospitals have increased the number of observation stays due to increased audits by RACs for one-day inpatient admissions. This significant rise in observation stays has had a negative impact on a Medicare beneficiaries ability to have a skilled nursing facility (SNF) admission covered by the Medicare program.

In order for a SNF admission to be covered under a beneficiaries Part A benefits, they must have had a qualifying 3-day hospital inpatient admission. Days spent in observation status do not count towards any of the required 3 days of hospital inpatient admission. MedPAC determined that 11,000 hospital stays in 2012 were discharged to a SNF without SNF coverage due to not meeting the 3-day threshold of inpatient admission.

MedPAC did provide a policy option to be considered that consists of 3 components: