Observation Stays

Over the last several years, hospitals are increasingly classifying Medicare beneficiaries as “outpatients” receiving observation services, rather than admitting them as inpatients. Beneficiaries are called outpatients despite the fact that they may stay for many days and nights in hospital beds and receive medical and nursing care, diagnostic tests, treatments, medications, just as they would if they were inpatients. However, beneficiaries in observation status are denied access to Medicare’s skilled nursing facility (SNF) benefit because they did not have a 3-day qualifying hospital inpatient stay, and they are also responsible for the SNF charges should they choose to receive them. 

Two Midnight Rule

On July 1, 2015, CMS released proposed updates to the “Two-Midnight” rule regarding when inpatient admissions are appropriate for payment under Medicare Part A.  These changes would continue CMS’ long-standing emphasis on the importance of a physician’s medical judgment in meeting the needs of Medicare beneficiaries.  These updates were included in the calendar year (CY) 2016 Hospital Outpatient Prospective Payment System (OPPS) proposed rule.  Additional background is available on the CMS website. 

Observation Stay

Observation Status Coalition Comments to CMS on Hospital Outpatient Prospective Payment Proposed Rule. The Coalition, of which NASL is a member, encourages CMS to address the revisions to the “two-midnight rule” and the methods for enforcing the rule.

Medicare.gov:  Are you an Inpatient or an Outpatient

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