Under the rule, Medicare’s external review contractors would presume that inpatient admissions were necessary for patients who require more than one Medicare utilization day (or 2 "midnights" in the hospital). The policy would also assume that hospital stays of less than 2 midnights should be classified as observation status.
Dr. Sheehy said it’s a positive move that Medicare wants to move away from the status quo. "But it’s hard to know how the rule change might play out," she added. "Only time will tell if these rules are going to be beneficial or not."
Dr. Greeno predicted that the issue isn’t going to fade away. The Center for Medicare Advocacy, a consumer group, has filed a class action lawsuit against the CMS on behalf of 14 Medicare beneficiaries seeking to remove the observation status designation. In Bagnall v. Sebelius, filed in November 2011, the Center for Medicare Advocacy states that the use of observation status violates federal law and beneficiaries’ constitutional right to due process.
In the meantime, hospitalists will continue to struggle with how to abide by Medicare rules, while still looking out for the best interests of patients.
"People feel terrible because they know when they’re writing that order that they are inflicting a significant financial burden on that patient and their family," Dr. Greeno said.
Dr. Sheehy said that patients will sometimes ask if they can be admitted as inpatients when they find out that they are in observation status and will be paying more out of pocket. "The honest answer is, we can’t," she said.
Physicians can insist on admitting patients that the hospital’s case manager says don’t meet Medicare criteria, Dr. Greeno said, but the likelihood is that the hospital will later be denied payment by Medicare.
"So what it does is it puts the doctor between the patient and the hospital," Dr. Greeno said. "That’s a bad position to be in for a hospitalist. You’re trying to do right by both and you can’t."