Observation Status, the Improvement Standard and Other Mysteries of Medicare Estate Planning Council November 18, 2014

The Legal Landscape Medicare Parts A and B Part A covers inpatient hospital care Part A covers post-hospital skilled nursing facility (SNF) care if there is a three-day inpatient hospital stay The “three midnight rule” Part B covers outpatient services Part B does not cover SNF care

Inpatient or Outpatient Why does it matter? Inpatients have an initial deductible, then 100% coverage of hospital Inpatients have all drugs covered while in hospital -- outpatients do not Outpatients have co-payments on all Part B services The BIG ONE: outpatient time does not count toward the three-day stay requirement

What is going on? More and more people who look like inpatients are being told that they are really outpatients Patients are being placed on observation status for longer periods of time Some inpatients are retroactively reclassified as outpatients The result: patients do not get SNF coverage even though they have spent more than three nights in the hospital

Inpatient? The Great Tautology The Medicare statute does not define inpatient The regulations do: a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. So an inpatient is an inpatient

Inpatient Services? The Medicare Policy Manual says they are: 1. Bed and board. 2. Nursing services and other related services. 3. Use of hospital or CAH facilities. 4. Medical social services. 5. Drugs, biologicals, supplies, appliances, and equipment. 6. Certain other diagnostic or therapeutic services. 7. Medical or surgical services provided by certain interns or residents-in- training. 8. Transportation services, including transport by ambulance.

It All Turns on Admission The Secretary leaves the classification to the discretion of doctors and hospitals by tying it to their determination as to whether formally to admit a beneficiary So we just have to make sure the doctor admits the patient as an inpatient, right? NOT SO FAST, BUDDY

How the Decisions are Really Made In theory, the determination is made by the admitting doctor alone. The reality, however, is that hospitals and doctors have been strongly pressured by Medicare to classify more and more people in the hospital as outpatient Medicare also relies on outside corporations' proprietary guidelines to determine whether inpatient admissions are "appropriate." It is these guidelines and Medicare's enforcement of them that determine admissions in reality.

You are an Inpatient—For Now Inpatient admissions can be reversed by hospital Utilization Review (UR) Committees Supposedly requires doctor to concur, but they are under pressure from hospital Recovery Audit Contractors – can reclassify hospital stays from Inpatient to Outpatient If this happens, hospital (traditionally) cannot rebill it as outpatient under Medicare B, so the hospital gets NOTHING The result – when in doubt, OUTPATIENT

Congratulations—You are on Observation Status “A well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital.” But they don’t have to tell you!

It Shouldn’t Last Very Long “In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours. In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours” --Medicare Manual

Midnight Madness Three midnights as an inpatient qualifies the beneficiary for SNF coverage Two midnights as an inpatient plus one (or two, or three…) nights on observation status—sorry, you lose (Landers v Leavitt)

But I Heard They Changed to Two Midnights CMS is instructing physicians to use a 2-midnight benchmark and order admission for beneficiaries expected to require hospital care crossing at least two midnights Seems like it should help, but studies of past admissions suggest it may make things worse DOES NOT CHANGE THE REQUIREMENT OF THREE MIDNIGHTS AS AN INPATIENT FOR SNF COVERAGE Some relaxation in re-billing rules may help

Is Anyone Trying to Fix This? Bagnall v. Sebelius – Class action challenging the entire “observation status” system – has lost in District Court (2013 WL 5346659) Decision based on Estate of Landers v. Leavitt, 545 F.3d 98, 104 (2d Cir.2008), which says you aren’t an “inpatient” unless formally admitted

Any Hope from the Courts? Bagnall is being appealed, but only on the limited issue of whether Medicare gives adequate notice of “observation status” and an adequate opportunity for review of the decision Argued October 22

Can’t Congress Do Something? The Improving Access to Medicare Coverage Act (H.R. 1179) Rep. Joe Courtney (D –CT) plus 110 co-sponsors (bi-partisan) Would count ALL time in hospital toward the three day requirement for SNF coverage

Dad is in the Hospital and Will Need SNF Care? Will it be Covered? 1. Find out his status 2. If its “observation”, try to get it changed. 3. Prepare for Discharge—will home health care work? Medicare should cover 4. Prepare for an appeal on SNF coverage—if he had “3 midnights” not in the ER 5. “Demand bill” 6. Gather records 7. Appeal everything http://www.medicareadvocacy.org/self-help-packet-for-medicare-observation-status/

The Improvement Standard Glenda Jimmo of Bristol, VT is blind and has had her right leg amputated due to complications from diabetes. She requires a wheelchair and has multiple home health care visits each week for various treatments for her complex condition Medicare denied coverage for these services, saying she was unlikely to improve  

Jimmo v. Sebelius Medicare Contractors (the people who actually make the decisions on claims) have long used the Improvement Standard as a rule of thumb This standard is not supported by Medicare statute or regulations Challenged in Jimmo, a nationwide class action filed in 2011 by the Center for Medicare Advocacy

The Jimmo Settlement A nationwide class certified – members can have re-review of claims Manual revisions – eliminate suggestions of need for “Improvement” – the need for skilled care is determinative Nationwide educational campaign for contractors, providers and adjudicators www.medicareadvocacy.org/

Peter Benjamin Litigation Director Community Legal Aid One Monarch Place, Suite 400 Springfield, MA 01144 413-686-9026 pbenjamin@cla-ma.org