[Senate Hearing 113-905]
[From the U.S. Government Publishing Office]
S. Hrg. 113-905
ADMITTED OR NOT?
THE IMPACT OF MEDICARE
OBSERVATION STATUS ON SENIORS
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HEARING
BEFORE THE
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC
__________
JULY 30, 2014
__________
Serial No. 113-27
Printed for the use of the Special Committee on Aging
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-917 PDF WASHINGTON : 2023
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SPECIAL COMMITTEE ON AGING
BILL NELSON, Florida, Chairman
ROBERT P. CASEY JR, Pennsylvania SUSAN M. COLLINS, Maine
CLAIRE McCASKILL, Missouri BOB CORKER, Tennessee
SHELDON WHITEHOUSE, Rhode Island ORRIN HATCH, Utah
KIRSTEN E. GILLIBRAND, New York MARK KIRK, Illinois
JOE MANCHIN III, West Virginia DEAN HELLER, Nevada
RICHARD BLUMENTHAL, Connecticut JEFF FLAKE, Arizona
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
JOE DONNELLY Indiana TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts TED CRUZ, Texas
JOHN E. WALSH, Montana
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Kim Lipsky, Majority Staff Director
Priscilla Hanley, Minority Staff Director
C O N T E N T S
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Page
Opening Statement of Senator Bill Nelson, Chairman............... 1
Opening Statement of Senator Susan M. Collins, Ranking Member.... 2
Opening Statement of Senator Richard Blumenthal, Committee Member 3
Opening Statement of Senator Elizabeth Warren, Committee Member.. 4
Opening Statement of Senator Tammy Baldwin, Committee Member..... 5
PANEL OF WITNESSES
Sylvia C. Engler, Medicare Beneficiary, (accompanied by Toby
Edelman), Senior Policy Attorney, Center for Medicare Advocacy,
Framingham, Massachusetts...................................... 5
Marna Parke Borgstrom, Chief Executive Officer, Yale-New Haven
Hospital, President and Chief Executive Officer, Yale-New Haven
Health System, New Haven, Connecticut.......................... 7
Bob Armstrong, Vice President, Elder Care Services, St. Mary's
Health System, Lewiston, Maine................................. 9
Ann M. Sheehy, M.D., Chief, Division of Hospital Medicine,
University of Wisconsin School of Medicine and Public Health,
and Member, Public Policy Committee, Society of Hospital
Medicine, Madison, Wisconsin................................... 11
APPENDIX
Prepared Witness Statements
Sylvia C. Engler, Medicare Beneficiary, (accompanied by Toby
Edelman), Senior Policy Attorney, Center for Medicare Advocacy,
Framingham, Massachusetts...................................... 31
Marna Parke Borgstrom, Chief Executive Officer, Yale-New Haven
Hospital, President and Chief Executive Officer, Yale-New Haven
Health System, New Haven, Connecticut.......................... 34
Bob Armstrong, Vice President, Elder Care Services, St. Mary's
Health System, Lewiston, Maine................................. 40
Ann M. Sheehy, M.D., Chief, Division of Hospital Medicine,
University of Wisconsin School of Medicine and Public Health,
and Member, Public Policy Committee, Society of Hospital
Medicine, Madison, Wisconsin................................... 43
Statements for the Record
Toby Edelman, Senior Policy Attorney, Center for Medicare
Advocacy....................................................... 59
U.S. Department of Health and Human Services, Office of the
Inspector General.............................................. 67
Joyce A. Rogers, Senior Vice President, Government Affairs, AARP. 72
ADMITTED OR NOT?
THE IMPACT OF MEDICARE
OBSERVATION STATUS ON SENIORS
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WEDNESDAY, JULY 30, 2014
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The Committee met, pursuant to notice, at 1:57 p.m., Room
418, Russell Senate Office Building, Hon. Bill Nelson, Chairman
of the Committee, presiding.
Present: Senators Nelson, Whitehouse, Blumenthal, Baldwin,
Warren, and Collins.
Also Present: Senator Brown.
OPENING STATEMENT OF SENATOR
BILL NELSON, CHAIRMAN
The Chairman. Good afternoon.
Forty-nine years ago today, President Johnson signed the
Medicare bill into law. Times have changed, but we are
constantly trying to strengthen and improve this important
program so that seniors and folks with disabilities get the
care they deserve, and, as part of that process of continuing
to improve Medicare, today's topic impacts a lot of Medicare
beneficiaries financially, more than we realize, and that is
the impact of Medicare's hospital observation status.
Now, most folks, after spending the night in the hospital,
would say that they had been admitted to the hospital, but, now
we find out that they really have not been admitted, that they
were there under observation, even though everything, save for
the two words' difference, ``admitted'' and ``observation,''
everything else is the same.
In observation status, it can cost less than Medicare's
inpatient deductible, even when a beneficiary has copayments
for outpatient services, but, the real problem comes when a
senior citizen learns that they are the one that after their
observation status in the hospital, they need nursing home
coverage, and, despite staying in the hospital for the required
three days or more, Medicare will not cover that nursing home
stay because the beneficiary was never admitted, instead, was
under observation, and, it is a coding change in Medicare that
can add up to big out-of-pocket expenses.
Well, we ought to do better by our Medicare beneficiaries.
They deserve better than being in this back and forth rigmarole
of terminology.
Senator Brown, one of our colleagues, has introduced a bill
that Senator Collins and I support to count any three days a
beneficiary stays in the hospital as eligible for nursing home
coverage. That is one way to get at this problem.
Medicare officials are at a critical juncture right now to
determine payment rules for both inpatient and outpatient
services for the coming year, and so we need to shine a
spotlight on the importance of this issue to the beneficiaries
around the nation, and that is the essence of the discussion
today.
Senator Collins is going to take over the Committee when I
have to go to a classified briefing on the Ukraine, of which I
am headed to the Ukraine in another week and a half. Senator
Collins, thank you for offering to do that.
Senator Collins.
OPENING STATEMENT OF SENATOR
SUSAN M. COLLINS, RANKING MEMBER
Senator Collins. Thank you very much, Mr. Chairman.
I appreciate you calling this hearing to highlight the
increasing use of hospital observation stays and the financial
implications for Medicare patients and their families.
Medicare originally intended observation stays as a way to
give hospital physicians more time to run tests or do lab work
in order to decide whether or not a patient should be admitted
to the hospital or is stable enough to go home. These
observation stays, which Medicare considers to be outpatient
care, usually lasted between 24 and 48 hours. Hospitals,
however, are increasing their use of observation stays and they
are also keeping Medicare patients in observation status
longer.
The number of seniors entering the hospital for observation
increased by nearly 70 percent over five years, to 1.6 million
in 2011. Moreover, eight percent of Medicare patients had
observation stays longer than 48 hours in 2011, up from three
percent in 2006.
According to the HHS Inspector General, in 2012, Medicare
beneficiaries had more than 600,000 observation stays that
lasted three nights or more. Many of these patients find
themselves in kind of a Medicare twilight zone, where they may
be in a hospital bed for days, receiving care and treatment
from doctors and nurses, but still have not been officially
admitted to the hospital as an inpatient.
The financial consequences can be severe for seniors. For
example, they are held responsible for outpatient copayments
and prescription drug costs that they would not have incurred
as an inpatient. There also is no out-of-pocket cap on these
costs.
More important, as the Chairman has mentioned, if a
Medicare patient is not formally admitted as an inpatient,
Medicare will not pay for any subsequent skilled nursing or
rehabilitation care. A Medicare patient must spend three
consecutive midnights in the hospital as an admitted patient in
order to qualify for coverage for care in a skilled nursing
facility. As a consequence, if a patient who has been on
observation status needs follow-up nursing home care, they must
pay the entire cost themselves, even if they have spent the
last three midnights in a hospital bed being cared for by the
hospital's doctors and nurses. How confusing is that.
Many patients on observation stays may not even realize
that they have never been admitted officially as an inpatient.
They just know that they are in the hospital. If they are
admitted later to a skilled nursing facility for follow-up
care, they may be shocked to learn that they will be liable for
out-of-pocket costs totaling thousands of dollars.
I recently heard from a woman from Portland, Maine, whose
mother-in-law went to the ER complaining of chest pain. She was
put in the hospital on observation status, where she remained
for five days. During that time, she became very weak, had
difficulty swallowing, and lost 20 pounds. She was discharged
to a nursing facility, where she stayed for nearly a month for
follow-up care. Her family had been told that she was being
observed while she was in the hospital, but they had no idea
what that meant. They were, therefore, stunned to learn that
they would have to pay more than $9,000 because Medicare would
not cover the skilled nursing care. This imposed a huge
financial burden for this family.
Mr. Chairman, I am also concerned that many beneficiaries
may be foregoing needed skilled nursing or rehabilitation care
simply because they cannot afford the out-of-pocket costs, and,
as you mentioned, you and I have both cosponsored a bill to
resolve this situation by deeming time spent in hospitalization
observation status as inpatient care for the purpose of
Medicare's three-day prior hospital stay requirement.
In closing, I also want to take this opportunity to welcome
Bob Armstrong from Maine, who will be testifying on our panel
this afternoon. Bob and I happen to be from the same hometown
in Maine, Caribou, Maine, and he has a long and stellar career
in long-term care administration and advocacy. He currently
serves as Vice President of Elder Care Services for St. Mary's
Health Care Systems in Lewiston, Maine, and I look forward to
hearing his perspective as well as that of the remainder of our
excellent panel of witnesses.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Collins.
Senator Blumenthal, would you do the honors of introducing
Ms. Borgstrom.
OPENING STATEMENT OF SENATOR
RICHARD BLUMENTHAL, COMMITTEE MEMBER
Senator Blumenthal. I would be delighted, Mr. Chairman, and
I very much appreciate your giving me that honor.
Before I do so, just let me join in thanking you for having
this hearing. The issues that are going to be addressed by our
panel today and by your questions, I think, are profoundly
important to the future of health care in America.
I apologize that I have to leave to chair a hearing of
another committee that we share, the Commerce Committee, on
some important consumer issues, so, I just want to say to our
entire panel of experts, thank you for being here.
Thank you especially to Marna Borgstrom, who has ably led
the Yale-New Haven Health System. It is really a tribute to her
work that she is here today. I have read her testimony. Her
observations about the harm and the costs of the so-called
``two-midnight'' policy, I think, are a very instructive set of
information for this hearing to consider.
As President and CEO of Yale-New Haven Health System, whose
flagship is the Yale-New Haven Hospital, she has been a leader
not only in that hugely important institution, but also for our
entire State and, indeed, the nation. Just to give you some
idea of the scope of Yale-New Haven, it deals with about 18,000
employees and a medical staff of 5,675, with more than 90,000
discharges in 2012 alone and $2.6 billion in revenue, so, it
has examples and lessons for us in this here and many, many
others, and, she has been a leader in health care delivery
reform, reducing costs, improving the quality of health care in
a way that has set a model for the nation and certainly for our
State.
I welcome her here, and thank you for being here.
The Chairman. Senator Warren, I will give Harvard equal
time.
Senator Blumenthal. Wait a minute. If I had known that, I
would have gone on----
The Chairman. Do you want to introduce Mrs. Engler?
OPENING STATEMENT OF SENATOR
ELIZABETH WARREN, COMMITTEE MEMBER
Senator Warren. I am very pleased to have Mrs. Engler here
today and to say thank you very much for being here. We welcome
hearing from you and hearing the personal story that you have
to tell. You know, it is powerfully important here.
I want to thank the Chairman and the Ranking member for
holding this hearing. This is a serious problem and it is a
problem that is getting worse. According to a 2012 study
published in Health Affairs, the number of Medicare patients
who are in the hospital for more than three days under
observation status increased by 88 percent just from 2007 to
2009, and, the Inspector General reported that over a quarter
of the 1.5 million Medicare observation stays in 2012 lasted
for more than two nights.
The reasons for this increase are complex, and this
afternoon, we are going to talk a lot, I know, about billing
and coding and admissions and prospective payments systems and
audits and all the ways that we can fix every one of those,
but, while we talk about those things, I know that we are going
to work hard to stay focused on what is really important here,
and it is making sure that seniors get the care they need and
can afford that care. That is the promise of Medicare, and if
we are letting some of our seniors down, then we need to fix
it.
Thank you all very much for being here. Thank you, Mrs.
Engler, for being here. We very much appreciate it. It is so
important to hear personal stories about how this affects
people.
Thank you, Mr. Chairman.
The Chairman. Mrs. Engler is accompanied by Toby Edelman
from the Center for Medicare Advocacy. Thank you for coming.
All right. Senator Baldwin, to introduce our final
panelist. Please, do the honors for Dr. Sheehy.
Senator Baldwin.
OPENING STATEMENT OF SENATOR
TAMMY BALDWIN, COMMITTEE MEMBER
Senator Baldwin. Thank you, Chairman Nelson, Ranking Member
Collins, for holding this incredibly important hearing on such
an important and timely issue.
I am honored to get the opportunity to introduce Dr. Ann
Marie Sheehy, head of the Division of Hospital Medicine at the
University of Wisconsin School of Medicine and Public Health.
With a strong background in academic medicine, Dr. Sheehy
conducts research on health care disparities and the effect of
health care policy on patient care in the hospital, and, as a
practicing hospitalist, she experiences firsthand the impact of
observation status on Wisconsin's seniors and physicians. She
received her M.D, and a Master's in Clinical Research from the
Mayo Medical School and Graduate School and completed her
residency at Johns Hopkins Hospital.
Dr. Sheehy, welcome to the Committee and thank you for
joining us here today to share your experience. We very much
appreciate it.
The Chairman. We will go in the order of Mrs. Engler, Ms.
Borgstrom, Mr. Armstrong, and Dr. Sheehy.
Mrs. Engler.
STATEMENT OF SYLVIA C. ENGLER, MEDICARE
BENEFICIARY, (ACCOMPANIED BY TOBY EDELMAN),
SENIOR POLICY ATTORNEY, CENTER FOR
MEDICARE ADVOCACY, FRAMINGHAM, MASSACHUSETTS
Mrs. Engler. Committee Chairman Nelson, Ranking Member
Collins, and members of the Committee, thank you for the
opportunity to tell you the story of my family and the Medicare
observation rules.
My name is Sylvia C. Engler, age 83. I am still employed in
the medical field and still working. I live in Framingham,
Massachusetts. My husband, Harold, age 92, and I have been
married for 60 years. He was Vice President of Sales and
Marketing for the Convention and Traveling Industry. He worked
until age 90.
For most of his life, the only medical conditions Harold
had was COPD and asthma, which have been controlled for years.
Five years ago, at age 87, Harold had a heart triple-bypass,
went back to work in three months. Three months later, he had
urgent hernia surgery. The doctor told him that it was
required. He was in the hospital for only two-and-a-half days
and was classified as inpatient. There was no problem with
that. He recovered and then continued to work.
Last year, on March 28, 2013, at age 91, he again urgently
needed hernia surgery. This time, it was a double hernia. His
doctor told me to take him to the emergency room at Beth Israel
Hospital in Boston. He had emergency surgery, stayed in the
hospital for five days as complications set in. He was
bleeding, passing clots in his urine. For the first time, he
had to have a catheter. Five days later, on April 2, 2013, he
was discharged home with the catheter still in place.
He was only home for two days when he had to return to the
hospital. On April 4th, he woke up vomiting bile, with
diarrhea, and had a high temperature. He was sent back to the
same Boston hospital by ambulance. He had fluid in his lungs, a
temperature of 101, and possible pneumonia. Again, he had blood
in his urine. I was told that he had contracted a virus in the
hospital. They had to tap fluid from his lungs. He stayed in
this hospital for another five days.
On April 10th, 2013, he was sent home again, unable to walk
or stand alone. The Foley catheter was still in place. He could
not get out of the automobile. My daughter and I actually had
to try to pull him from the car, as he could not walk by
himself. Harold had to use a walker while I helped balance him.
He sat down on our bed and collapsed. His complexion turned
gray. He had chest pains, shortness of breath, and severe pain
from the catheter. Thinking it was his heart, I gave him a
nitroglycerin pill, which made his condition worse.
I called the local ambulance and he was taken to the local
hospital. The ER doctor stated that, ``If he was my patient, he
never would have been sent home in this condition.'' Harold
could not walk or stand up on the same day that he was released
from the Boston hospital the second time. After a total of ten
days in the hospital, he was sent from the local ER to a local
nursing home for rehab.
I thought Medicare would pay for Harold's nursing home care
because he had been in the hospital for ten days and he needed
rehab. I learned from the nursing home that Harold had never
been admitted to the hospital as an inpatient. The nursing home
told me that Harold was ``medical observation'' when he was in
the hospital. This did not make sense to me, because Harold was
on a floor with other inpatients and received care just like an
inpatient in a hospital. The hospital never told me that he was
medical observation. They said nothing about it. Harold
remained in the nursing home six weeks for rehab.
The administrator told me that we had to pay the nursing
home $7,859 immediately upon leaving or the bill would be put
into collection for the full amount of $15,000, or my house
would have been attached for the full amount. We paid the
$7,859, but I had to cash a money market account to pay the
bill.
I looked for someone who could help us fight this and found
a wonderful lawyer, Diane Paulson of the Medicare Advocacy
Project at Greater Boston Legal Services. Diane has been
working with me for over a year to try to get Medicare to cover
the nursing home bill. She keeps appealing, but Medicare keeps
telling us that we cannot appeal the hospital's decision to
call my husband ``medical observation,'' that since he was not
an inpatient, Medicare will not cover his nursing home bill. I
later found out that the hospital had to pay back millions of
dollars to Medicare because they called some patients
inpatients instead of outpatients. I think this is why my
husband was called observation.
Harold was able to remain at home for several months after
he was discharged from the rehab, but then he had to go to a
nursing home for patients with dementia, where he remains to
this day. I am still fighting this battle with the help of my
lawyer.
Thank you for listening to my unfortunate situation. I hope
you will make changes so this will not happen to anyone else.
Thank you.
The Chairman. Well, there you have it stated quite clearly.
We thank you. We want to thank Senator Whitehouse and Senator
Brown. I have already uttered your name, Senator Brown, as the
sponsor of the legislation which we, Senator Collins and I,
have cosponsored.
Let me just take care of a delightful little administrative
item here. Would our summer interns please stand up, Hannah
Berner, Allison Gottman, Danielle Spiegelman, Selena Qian,
Michael Watson, and Al Haidar. We want to thank you. This is
the last time, since we are going into the August ``go back
home'' time period, and so we want to thank you for your good
work on our Committee. We appreciate it very much.
Ms. Borgstrom.
STATEMENT OF MARNA PARKE BORGSTROM, CHIEF
EXECUTIVE OFFICER, YALE-NEW HAVEN
HOSPITAL, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, YALE-NEW HAVEN
HEALTH SYSTEM, NEW HAVEN, CONNECTICUT
Ms. Borgstrom. Thank you, Chairman Nelson, Ranking Member
Collins, and distinguished members of the Committee, and thank
you for inviting me to testify. I am Marna Borgstrom, the
President and CEO of the Yale-New Haven Health System. I also
served as the Chair of the Association of American Medical
Colleges, Council of Teaching Hospitals and Health Systems.
As Senator Blumenthal said, our system is large. We have
over 20,000 employees, 6,000 medical staff members. The
flagship hospital is Yale-New Haven, which is a 1,541-bed
academic medical center, which, in affiliation with the Yale
University School of Medicine, includes a mission of educating
tomorrow's health care professionals and advancing medical
care.
My remarks today are going to focus on CMS's ``two-
midnight'' policy rule related to inpatient care. As you know,
under this policy, hospital admissions spanning two midnights
are considered inpatient care for purposes of Medicare payment.
In contrast, hospital stays of less than two midnights are
considered outpatient care, regardless of clinical severity or
a doctor's judgment on whether inpatient care is needed.
A primary concern regarding the two-midnight policy is the
financial impact and confusion it creates for patients. I would
like to--when a patient is deemed outpatient, as my colleague
noted, she is responsible for 20 percent of a copay. Also, her
outpatient time does not count toward the three-day stay
requirement for nursing home care.
I would like to share one example of the two-midnight rule
very recently in our hospital. On July 5th, an 88-year-old
frail female with known breast cancer metastatic to her bones
and lungs came in with chest pain and difficulty breathing. She
needed to be hospitalized and was appropriately predicted to
require less than two midnights in the hospital. She was placed
in observation and was discharged late the next day. She lives
with her son, who works full time, and the patient is
frequently home alone. The family wanted her to go to a skilled
nursing facility and was upset because she could not, due to
her observation status.
She saw her doctors over the next two weeks, but continued
to get weak. Her family brought her back to the hospital on
July 21st. She was dizzy, not eating well, and could not care
for herself during the day. Again, a review was done and the
patient did not meet the inpatient criteria, so she was again
placed in observation. The family wanted her to go to a skilled
nursing facility, but could not afford $250 a day, nor $20 at
home for a home health aide. They had no choice but to take her
home with the limited services they can afford.
We have little doubt that we will be seeing this patient
again, and all of her care providers secretly hope that when
she comes back, she will be sick enough to meet the inpatient
criteria so that she can get into a facility and be cared for
in a loving and dignified way.
Beyond the direct impact on patients, the two-midnight
policy penalizes hospitals like ours that, with improved
technology, can evaluate, treat, and transition certain
patients to an appropriate care setting in less than the two-
midnight time frame. This is the very medical efficiency that
CMS should be encouraging, but instead, hospitals are seeing
dramatic reimbursement cuts. In addition, the two-midnight
policy ignores physicians' clinical judgment on medical
necessity and instead relies on a rigid and arbitrary time-
based approach.
The two-midnight policy disproportionately impacts academic
medical centers and safety net hospitals, as it shifts payment
for necessary hospital care to the outpatient setting. As a
result, teaching and safety net hospitals experience decreases
in their direct Graduate Medical Education payments and lose
altogether their payments for indirect medical education and
disproportionate share. These mission-related payments are
intended to support the delivery of care to vulnerable patients
and those who require services that are unique to teaching
hospitals, including trauma centers and burn units. We cannot
afford for these social missions to be jeopardized at a time
when medical education for new practitioners is critical to
meet the demands of the United States aging population.
My colleagues across the country and I believe that CMS's
policy must change for stays lasting fewer than two midnights.
We should return to the policy in place prior for short stays
before October 13th that defers to a clinician's judgment,
understanding that the decision to admit a patient to the
hospital is not made lightly.
Additionally, we support your recommendation that Congress
eliminate the three-day inpatient stay requirement for Medicare
coverage of nursing home care and provide some sort of cap to
patient copays.
Yale-New Haven and hospitals across the country stand ready
to work with policy makers on these important efforts, and I
thank you for the opportunity to testify today.
The Chairman. Thank you, Ms. Borgstrom.
Senator Brown, I know you have to leave. Did you want to
say something about your bill?
Senator Brown. Thank you. Only to say thank you to you, as
the Chair of this Committee, and Ranking Member Collins, for
holding this hearing and for this discussion and for your
cosponsorship of the legislation that a number of us have been
working on, the Improving Access to Medicare Coverage Act.
I think, when I heard the last two-thirds of Mrs. Engler's
testimony, and we have all in our own States heard a number of
these stories, that our case workers tell us about, that people
on the street tell us about--a woman in Cleveland came to me.
She had a 90-year-old mother taken to the emergency room. The
same thing happened. She was stuck with this huge bill, and, we
know the kind of anxiety and fear inflicted on the individual
patient and inflicted on the family that comes from this quirk
in the Medicare law, and I just wanted to say how appreciative
I am that the Committee is taking it up and hopeful that we can
move on this legislation.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Brown.
Mr. Armstrong.
STATEMENT OF BOB ARMSTRONG, VICE
PRESIDENT, ELDER CARE SERVICES,
ST. MARY'S HEALTH SYSTEM, LEWISTON, MAINE
Mr. Armstrong. Good afternoon, Chairman Nelson, Ranking
Member Collins, and distinguished members of the Committee. I
would like to thank you for holding this important hearing to
examine the impact of Medicare observation status on seniors. I
especially appreciate the opportunity to appear before you here
today.
My name is Bob Armstrong and I am the Vice President of
Elder Care Services for St. Mary's Health System in Lewiston,
Maine. Our nursing home, St. Mary's d'Youville Pavilion, is one
of the largest nursing homes north of Boston and a flagship
component of the elder care services offered through St. Mary's
Health System, which, by the way, also includes St. Mary's
Medical Center, so, we actually deal with this issue on both
the hospital and the nursing home side.
With our state-of-the-art rehab center, we have a
specialized dementia care unit, skilled and long-term care, and
we provide our residents with the most advanced technology and
skilled nursing care in the region. More importantly, we offer,
hopefully, respect, care, and compassion to every one of our
residents.
The St. Mary's Health System is proud to be a member of the
Maine Health Care Association and the American Health Care
Association. The Maine Health Care Association represents over
200 nursing homes and assisted living facilities in Maine,
including for-profit and not-for-profit facilities. The most
recent Statewide occupancy report indicates that Maine nursing
homes care for over 6,300 residents every day. Sixty-five
percent are in long-term care being paid for by Medicaid, 23
percent are paid for by private pay, and 12 percent are covered
by Medicare, usually a Medicare Part A skilled benefit.
The American Health Care Association is the nation's
largest association of long-term care and post-acute care
providers. Our Association advocates for quality of care and
services for the frail elderly and those with disabilities. Our
members provide essential care to millions of individuals in
more than 12,000 not-for-profit and for-profit member
facilities.
Our Association and its affiliates, including the Maine
Health Care Association and member providers, advocate
continuing vitality of long-term care provider community. The
Association is committed to developing and advocating for
public policies, such as the one being addressed today, that
support quality of care and quality of life for our nation's
most vulnerable population that I, as an administrator, deal
with every day. We also would like to state that the support of
the American Health Care Association and the Maine Health Care
Association is in strong support of the policies that address
the observation stays issue. I thank you, Senators Nelson and
Collins, for bringing this critical issue to the forefront.
As a long-term care administrator, which I have been for 29
years, I have seen the last several years firsthand the impact
the observation stays issue has had on residents and their
families. For example, one resident, a sixty-six year-old
gentleman, was admitted to my facility for short-term rehab
care after a hospital stay and care for the treatment of a left
humerus fracture and two broken ribs and some other injuries
accompanying his fall.
According to the discharge documentation sent to us from
the hospital, the resident was admitted to the hospital on
November 9th, 2013, and was discharged on November 14th, 2013.
The paperwork clearly gave an admitting hospital diagnosis with
the fall injuries, including the left humerus fracture, which
indicated the resident qualified under Medicare for post-
hospital skilled rehab care. The paperwork also clearly
indicated that we received that he was an inpatient in the
hospital.
We provided appropriate skilled rehab care to this
resident, who then successfully returned home. We believed, as
the family did, that the resident's stay would be covered by
Medicare Part A because the hospital discharge paperwork
clearly showed that the resident was admitted to the hospital,
and then they stayed in the hospital for at least the required
three days.
My facility then appropriately billed Medicare for the
resident and was told that the resident was, by the way, not
really admitted to the hospital as an inpatient, similar to the
case of our panelist today. The resident was in the hospital
for five days under observation, even though, again, I say that
the paperwork I have clearly stated that he was an inpatient as
well as being admitted. My facility lost thousands of dollars
for providing care for this resident in need with no payment
from Medicare, even though this resident clearly should have
received their Medicare Part A skilled nursing care benefit.
Now, in our case, because of our mission, we did not charge
the family or attempt to recover the funds from the family
because it was not their fault. They were under the assumption
that the Medicare benefit would cover them. We were all under
the assumption the Medicare benefit would cover them, and we
did not feel it appropriate to burden the family with the bill,
so we absorbed the thousands of dollars as a bad debt and took
it that way.
This is just one, as we have heard today, of the countless
heart wrenching stories from across the country.
We all--this is why we are having the hearing here today--
must do more to ensure our nation's most vulnerable have access
to their Medicare benefit they have earned and so rightly
deserve. I am asking, along with the American Health Care
Association, that Congress pass and sign into law bipartisan
legislation that Representatives Joe Courtney and Tom Latham,
along with Senator Brown, introduced, the Improving Access to
Medicare Coverage Act of 2013, S. 569, H.R. 1179, which many on
the Committee, including Senator Nelson and Senator Collins--
thank you--are cosponsors of. It seems to count all hospital
days spent in observation towards the three-day inpatient
required for Medicare coverage of Part A skilled nursing care
benefits.
Our Association also supports legislation eliminating the
three-day requirement, which effectively solves the related
issue of observation stays. Representative Jim Renacci's
bipartisan Creating Access to Rehabilitation for Every Senior,
called the CARES Act of 2013, or H.R. 3531, eliminates the
three-day inpatient stay requirement by allowing all seniors
that meet particular criteria to automatically qualify to waive
the prior hospitalization requirement. The criteria are based
on the CMS Nursing Home Compare Program.
In addition, we also back a similar bill introduced by
Representative Jim McDermott, the Fairness for Beneficiaries
Act of 2013, called H.R. 3144, which also seeks to eliminate
the three-day stay requirement.
It is important to note that several national patient and
provider organizations have written to CMS and advocated on the
Hill in support of addressing this observation stays issue. In
fact, the American Health Care Association is part of an
Observation Stays Coalition, which consists of 30 provider and
beneficiary organizations working to address this issue. It is
simply not right, and I think the members of the Committee
understand it is certainly not fair, to limit the access to the
quality of care for those who are most in need.
Hopefully, now is time for Congress to pass this
legislation to solve this problem, and again, I thank you for
the opportunity to weigh in on this important matter, and I and
the members of the Maine Health Care Association and the
American Health Care Association look forward to working with
the members of Congress in both chambers on this issue as it
goes forward, and I would be more than happy to answer any of
your questions. Thank you.
The Chairman. Thank you, Mr. Armstrong.
Those of you standing in the back, we have some seats
available up here on the side walls, so avail yourself of that,
please.
Dr. Sheehy.
STATEMENT OF ANN M. SHEEHY, M.D., CHIEF, DIVISION
OF HOSPITAL MEDICINE, UNIVERSITY OF
WISCONSIN SCHOOL OF MEDICINE AND PUBLIC
HEALTH, AND MEMBER, PUBLIC POLICY COMMITTEE,
SOCIETY OF HOSPITAL MEDICINE, MADISON, WISCONSIN
Dr. Sheehy. Thank you, Chairman Nelson, Ranking Member
Collins, and members of the Committee. Thank you for the
opportunity to discuss observation policy today, and thank you,
Senator Baldwin, for the kind introduction.
I am a physician at the University of Wisconsin Hospital in
Madison, Wisconsin. I am a hospitalist, which is a physician
who cares for patients primarily in the acute care hospital
setting. I also conduct research on how observation impacts
hospitals and patients, and I am a member of the Society of
Hospital Medicine, an association that represents the nation's
more than 44,000 hospitalists.
I would like to make three points today. First, observation
status is problematic for Medicare beneficiaries and it needs
reform.
I became interested in researching observation about four
years ago because I was concerned about what was happening to
patients under observation. As the Committee is aware, patients
hospitalized under observation are considered outpatients, so
are covered under Medicare Part B, subject to copays and
pharmacy charges with no cumulative limit, and do not qualify
for skilled nursing facility care as inpatients do, even if
they stay three midnights. What I see as a physician are
patients who stay overnight in a hospital and receive care that
is often indistinguishable from inpatient care, yet Medicare
views them as outpatients, as if they were in a clinic.
I will never forget the patient who first opened my eyes to
the problem of observation. Of limited financial means, this
woman had a new diagnosis of cancer. Her only worry should have
been her health, yet her main concern was what her hospital
bill and skilled nursing facility bill were going to be because
her hospital stay was on observation. Here was a patient who
had paid into the Medicare program her whole life, only to
realize when she needed it most, she was not eligible.
What should observation really be? Most physicians
recognize a role for observation in providing a few additional
hours of care for low-complexity patients immediately following
an emergency department visit to decide whether a patient needs
admission as an inpatient or can discharge home. In fact, that
is exactly what the CMS Benefit Manual says, that observation
should be used for a well-defined subset of patients and should
last less than 24 hours. In only rare and exceptional cases do
outpatient observation services span more than 48 hours.
Unfortunately, this is no longer what observation looks
like in clinical practice. We published our University of
Wisconsin data in JAMA Internal Medicine last year. Of more
than 43,000 hospital encounters, we found that over half of our
observation patients stayed longer than 24 hours, and one in
six stayed longer than 48 hours, indicating that stays longer
than 48 hours were no longer rare and exceptional. Any attempt
to reform observation status must recognize how far observation
status in clinical practice has drifted from CMS's original
intent, and, more patients are being hospitalized under
observation, as documented by MedPAC and others.
The second point I would like to make is that the new two-
midnight rule is not a fix for the observation problem.
As the Committee is aware, CMS recently established a new
rule to determine observation. Effective October 21, 2013, most
patients hospitalized less than two midnights were to be
considered observation, and those staying two midnights or more
would be considered inpatient, although full enforcement of
this rule has been delayed through March 31, 2015.
There are several problems with this rule. First, time of
day a patient becomes ill, not different clinical needs,
determine insurance benefits. Say a patient requires 40 hours
of hospital care before they are safe to go home. If this
patient is hospitalized at 9:00 p.m. on Wednesday, they will
discharge at 1:00 p.m. on Friday, a two-night stay, so they are
inpatient, but, if this exact same patient needing the exact
same clinical care is hospitalized at 1:00 a.m. on Thursday
morning, they will discharge at 5:00 p.m. on Friday, a one-
midnight stay, and will be considered observation.
This is not just theoretical. At the University of
Wisconsin Hospital, in a second publication last year, we
retrospectively determined that nearly half of our less than
two-midnight encounters would have been considered observation
instead of inpatient solely based on time of day they became
sick, not different clinical needs.
The two-midnight rule also hurts a new population of
patients, those requiring less than two midnights of care. A
patient with diabetic ketoacidosis may present to the hospital
acutely ill and need intensive care unit admission, a level of
care that could never safely be delivered in an outpatient
clinic setting. Yet, these patients can also improve quickly,
sometimes in less than 48 hours. Now, short stays, even in an
intensive care unit, can be considered outpatient.
Finally, as the Committee is aware, the Recovery Audit
Contractor Program charged with enforcing observation
determinations needs major reform. Given the recent roundtable
this Committee hosted earlier this month, I will not spend more
time here other than to state that no plan to reform
observation will be successful without concomitant reform of
the RAC system.
Thank you for conducting this hearing today. The Society of
Hospital Medicine looks forward to working with the Committee
to improve observation care for Medicare patients, and I
appreciate Senator Brown and all of the members of this
Committee who have supposed S. 569, the bill that counts time
spent in observation towards the two-midnight requirement for
skilled nursing facility care, which SHM also strongly
supports.
Senator Collins. [Presiding.] Thank you very much for your
testimony.
Let me start by thanking Mrs. Engler for being with us
today and putting a human face on the consequences of this very
complex and troubling problem.
I want to start my questioning with Dr. Sheehy and Ms.
Borgstrom. There has been, as both of you have referenced, an
increase in the number of observation stays that hospitals are
doing, and I am wondering why that is. We see it in the
Inspector General's report, that there has been measurable and
substantial increase in the number of observation stays. Why
are we hearing these stories where hospitals are keeping people
for fairly substantial amounts of time and not admitting them
as inpatients? What incentives are there that are driving the
decision to keep someone in observation status rather than just
admitting them as an inpatient patient?
Dr. Sheehy. Thank you for that question. I think the simple
answer is there is increased auditing pressure from the
Recovery Audit Contractors that have increased scrutiny and
increased surveillance of our admission and observation
determinations. At the University of Wisconsin Hospital, we
have seen a marked escalation in our audits, on the several-
hundredfold increase over the last four years. Hospitals are
very fearful of mislabeling a patient. We do not want to commit
Medicare fraud. We want to follow the rule of the land and that
is what we have been doing.
I will also say there is a marked fear of the length and
the cumbersome nature of these audits. Our audits at the
University of Wisconsin that are still in appeals since 2010
have been in the appeals process for over 500 days, and so a
hospital is also looking at that as a decision about whether
they are willing to put a case through a very lengthy appeals
process.
Senator Collins. Ms. Borgstrom.
Ms. Borgstrom. I cannot add a lot, because I agree
completely. You know, we have read the rules, we understand
them, and we want to follow them, and, I think, frankly, as a
non-clinician, but talking with a lot of our clinicians, they
feel that the criteria for making a patient inpatient are quite
clear, and when they do not honestly believe that a patient
meets that criteria, they do not feel that they have the
ability to use their judgment to override the regulation and
instead admit those patients to observation status.
Senator Collins. Well, I learned a lot attending the
roundtable that we had at which the Recovery Audits were
discussed at length. It is clear that they are producing
unintended consequences because of the way the incentive
structure is set up, where they get a percentage of whatever
they recover, and yet, if you look at the success that
hospitals, home health care agencies, nursing homes, other
providers, doctors, dentists, et cetera, have when they appeal
the decision of the Recovery Audit, it really shows you that
there is something wrong with the system, so, it is interesting
that that is playing into this problem, as well.
Ms. Borgstrom, do hospitals use observation status with
individuals with other forms of insurance, or just with
Medicare? As a related question, do non-Medicare plans have
similar policies or limitations with regard to follow-up
nursing home care? Mr. Armstrong, that might be a question for
you, as well.
Ms. Borgstrom. You know, I cannot speak uniformly to them,
but we do admit patients other than Medicare patients to
observation status. Each contract that we have with a third-
party payer is different in terms of what they pay and how they
determine the appropriate location for a patient. To the best
of my knowledge, Medicare Advantage and the commercial policies
do not have the three-day requirement before skilled nursing is
paid for.
Senator Collins. Mr. Armstrong, is that your experience, as
well?
Mr. Armstrong. Yes, Senator. In our hospital, we admit, and
we actually in our hospital are trying to limit, because of the
cause and effect of this issue, the number of observation days
that our hospital actually utilizes, but, it usually just
generally affects negatively the Medicare recipients. Where the
insurance payers do not have the same limitations in their
contracts with us, they do not require the three-day midnight.
They do not require some of these things. They just require
that a person need the skilled care, so it really does not
affect them as it would a Medicare recipient. This falls mostly
on Medicare recipients for skilled care.
Ms. Edelman. Excuse me, Senator, if I could say something
about----
Senator Collins. Yes, Ms. Edelman.
Ms. Edelman. [continuing.] About the Recovery Auditors.
There are a lot of programs that the Federal Government has to
prevent fraud, to make sure that Medicare payments are
appropriate. What is unique about Recovery Auditors is if they
come in and look at the hospital's decisions and decide that a
patient should have been called an outpatient instead of an
inpatient, the hospital is basically required to repay to
Medicare everything that it got. It gets zero payments for
medically necessary care. Nobody is disputing that the care is
medically necessary and appropriate, but because the wrong term
was used--a person was called inpatient instead of outpatient--
hospitals do not get paid.
It is understandable that they want to err on the side of
calling people outpatients. At least, then, they get Part B
payments from Medicare, the Part B copayments from the patient,
and they can also bill the patient for the prescription drugs
in the hospital, but, if they make a mistake and call them
inpatient, they get nothing.
Senator Collins. That is an excellent point. What we really
need to do with the Medicare program to reduce improper
payments, whether it is fraud or mistakes, is to have better
controls up front and more collaboration with stakeholders up
front rather than doing the pay-and-chase model, which is what
we have now.
I am going to turn to my colleagues and then I will have
some additional questions. Senator Warren.
Senator Warren. Thank you very much, Chairman.
Some seniors need additional care at a skilled nursing
facility after leaving the hospital before they can return home
safely, as Mrs. Engler so eloquently pointed out, and, that is
the reason that I am also a cosponsor of Senator Brown's bill,
along with Senator Collins and Chairman Nelson and Senator
Baldwin, but, I see that as a good start, but we also recognize
that some seniors still need skilled nursing facilities without
spending any time in the hospital.
In 2010, as part of a CMS Care Management Pilot Program,
Massachusetts General Hospital allowed patients to be sent
directly to a skilled nursing facility after evaluation by a
doctor. These were patients who needed rehab after a fall or
needed some extra care to recover from an illness. Compared to
similarly situated patients who were sent home instead of being
directly admitted from the hospital to the nursing facility,
patients in the pilot experienced fewer subsequent admissions
to the hospital and cost Medicare less money over the
subsequent 60 days.
I understand that the three-day rule was put in place to
try to protect against over-utilization of highly specialized
care, but I also understand that we are trying to move toward a
payment system that rewards for value and not for providing
unnecessary services. Today, almost all of the Pioneer ACOs,
including Massachusetts General Hospital, waive the three-day
rule.
Given the results from pilot programs like the one at MGH
and the ongoing experience of our ACOs across the country, do
you think that a three-day rule is still the most appropriate
measure of the need for a skilled nursing facility? I thought I
might start with you, Ms. Borgstrom.
Ms. Borgstrom. I have a little bit of familiarity with the
Massachusetts General experience, and again, I will say, as a
non-clinician, no, I do not think that the three-day stay as a
preparatory requirement for skilled nursing facility makes
sense, and, in addition to what the Pioneer ACOs permit, which
is direct admission to skilled nursing, also, in CMS's
experience with bundled payments--we are participating in 11 of
the bundled payments--you can admit patients directly to
skilled nursing if you want.
I think it gets down to the economic issue versus clinical
judgment, because clinical judgment in the case of the
Massachusetts General experience said these patients will do
better and we will bypass the inpatient environment, and for
older Americans, not go through the confusion of being moved on
two occasion. I think that that is--there is real opportunity
for reform.
Senator Warren. Right. I just want to be clear when you say
the clinical versus the economic. In fact, relying on clinical
judgment, according to our best evidence, saved money. It did
not cost money.
Ms. Borgstrom. Right.
Senator Warren. These two things were not in tension with
each other. When used appropriately, they seem to reinforce
each other.
Ms. Borgstrom. I absolutely agree with you, but the
prevailing CMS payment methodology is currently DRGs.
Senator Warren. Well, so that is why we are talking about--
--
Ms. Borgstrom. Right.
Senator Warren. [continuing.] Alternative ways to do this,
and, I thought, perhaps, you would like to weigh in on this,
Mr. Armstrong.
Mr. Armstrong. Yes. I think, as stated in the opening
remarks, the three-day requirement was implemented years and
years and years ago and it just continues to be on the books.
As my colleague on the panel just spoke to, in Bangor, we
have Eastern Maine Medical Center, which is a Pioneer ACO and
they are not required to do this. Other programs, like the PACE
program, or Program for All-Inclusive Care for the Elderly that
operates very successfully in 29 States, including successfully
in Massachusetts and Rhode Island in the New England area, they
do not require the three-day hospitalization because they have
a capitated payment for Medicare and Medicaid for the residents
that cover a whole host of services, that keep people at home,
or if they have to go to a nursing home, like I say, directly
without going to the hospital, the PACE program pays for that,
so, there are currently other CMS programs that do not require
the three-day hospitalization at all.
Senator Warren. As you rightly point out, and within that,
there are other ways to manage the access question.
Mr. Armstrong. Yes.
Senator Warren. We understand we do not want to have over-
utilization. We want to get appropriate utilization.
Mr. Armstrong. For example, the three-day hospitalization
stay is just one of the triggers now that qualifies for
someone. They still have to meet the need for skilled nursing
care or skilled therapy care or a combination of those to
qualify for skilled care in our facility, so, if you waive the
three-day requirement altogether, they would still have to meet
that criteria to need the service, and that is currently
already in the CMS requirements for Medicare reimbursement, so,
if you just did away with the three-day requirement, they would
still be required to meet the need for the service before we
could provide it.
Senator Warren. Good. Well, thank you very much. I have
more questions on this, but I will wait for the next round.
Thank you, Madam Chairman.
Senator Collins. Thank you.
Senator Baldwin.
Senator Baldwin. Thank you. I wanted to add the voice of
another patient experience to what we have heard today, and
thank you, Mrs. Engler, for being here to put a face and a
story behind the issues that we are dealing with today.
I heard this from a constituent in Port Washington,
Wisconsin. This gentleman had heart surgery to treat atrial
fibrillation at a Wisconsin hospital. He stayed overnight, but
was discharged the following day with a catheter and further
instructions from his doctor. He was shocked to find out that
his treatment was billed under observation status, requiring
him to shoulder 20 percent of the cost, and, he was also so
frustrated that he called another area hospital and was told
that the same procedure there would have been billed under Part
A as an inpatient at their facility, which, of course, only
added to his substantial confusion about what was going on, so,
I thank all of you for being here today to shed additional
light and help us as we move forward.
Although full enforcement of the two-midnight rule has been
delayed, hospitals and physicians across the country have
already made, it seems, significant administrative changes in
anticipation of compliance with the policy, and these changes
are exposing the consequences of using observation status when
it is not based on clinical needs.
Dr. Sheehy, I wonder if you could describe the experience
and challenge faced by the University of Wisconsin Hospital in
preparing for enforcement of the two-midnight rule and
additional information on how it has impacted you and your
fellow hospitalists in their practice.
Dr. Sheehy. Thank you for that question. We had very little
time to prepare for the two-midnight rule. The final rule was
posted in the Federal Register on August 19th and the rule went
into effect on October 1st. This was a major, major change in
all hospitals. We had changed from looking at clinical decision
tools, such as InterQual and Milliman, to make our observation
determinations to one based on time. Further, we had to
interpret the rule and understand what kind of documentation
CMS was going to be looking for, what their auditors would be
looking for to enforce this rule. At the time, we did not know
there were going to be delays, so we--every possible prepared
for the rule as if it was going to be, and it is still the law
of the land. Although enforcement is delayed, we are trying to
comply.
I think this has impacted physicians negatively. I think we
feel that our clinical judgment has really been overridden by
kind of a time-based rule which will be enforced by auditors.
When I see a patient, say, in the emergency department--and I
was working this weekend--I am looking at a patient and I am
trying to determine when I first see them whether they are
going to need two midnights or not, and sometimes a Medicare
beneficiary will come in with something simple like a fever,
which can be a very self-limited virus or it could be a life-
threatening bloodstream infection, and I cannot know that up
front and I have to make that decision right away and my
determination is going to be subject to scrutiny down the road.
Senator Baldwin. I thank you, and particularly that your
answer helps shed some light for us on sort of who is in the
decision making position, the fact that you need to predict the
future without having perfect clarity about the future.
I guess I am interested, also, in the role that you and
your colleagues play in the necessity to improve the
conversation and communication with the patients about what it
means to be under observation rather than as an inpatient.
Obviously, you are providing the care, but this function is
also very important so that they are as informed consumers of
health care as they possibly can be, and talking about these
issues before they perhaps decide to forego further care. Tell
me a little bit about what role you and your fellow
hospitalists play in that regard.
Dr. Sheehy. Well, I completely agree that patients need to
be informed about what their status is. One of the tricky parts
of this is, sometimes, I will not know right away, so a patient
who may decide whether or not they want to agree to the care I
am proposing does not have that information in front of them.
They may be admitted to the hospital, and then the next day it
may look like they are actually going to get better quicker and
they are going to be observation based on length of stay, so,
patients really are not equipped with that information at the
right time.
We have--at the University of Wisconsin, our case managers
inform all of our patients who are under observation. We feel
it is very important, and we field a lot of questions on that.
One of the downsides, which is part of this process, is that,
like I mentioned in my oral testimony, once patients find out
they are under observation, a lot of them are very concerned,
and, when they only should be focusing on getting themselves
better and worrying about their health, now they are worrying
about observation. That said, patients still need to know and
we need to deal with those questions that come.
Senator Baldwin. Thank you.
Senator Collins. Senator Whitehouse.
Senator Whitehouse. Thank you, Chairman, and thank you to
the witnesses.
The Rhode Island Governor's Advisory Commission on Aging
has written to formally express to me its concern over the
severe impact of the designation of an observational status
upon Medicare patients when seeking health services at a
hospital upon the onset of an injury or illness, and they go on
to say that the significant lack of information, although
available in, quote, ``the fine print,'' and the enormous
unexpected financial responsibility consequences which this
designation unloads upon an unsuspecting Medicare-eligible
participant cannot be overstated.
Health Affairs published back in 2012 a study by Brown
University researchers, including a guy named Dr. Vincent
Moore, who we work with a lot on these issues, that reviewed
the outpatient Medicare claims data from 2007 to 2009 on these
observation stays and they found that the number of observation
stays increased by 34 percent and inpatient admissions
decreased, suggesting a shift by the hospitals, and, whether
they are doing it for their own accounts or whether they are
doing it because they are afraid of audits and it is a response
to pressure, would be my first question. Do you think that they
have changed their behavior in response to this, and is it
self-interested in the sense that this is somehow beneficial
for the hospitals, or is it simply trying to duck the risk of
CMS audits?
Ms. Borgstrom, you seem--or Dr. Sheehy, whichever.
Dr. Sheehy. I think that is a wonderful question, and
MedPAC also has data looking from 2006 to 2012 that show about
a 28.5 percent increase in observation--actually, outpatient
stays, and a decrease in inpatient stays of about 12 percent
over that time.
I think it is important to point out that, financially, at
the University of Wisconsin, we have looked at our data pretty
carefully and our hospital loses money on observation stays,
so, there is no incentive for a hospital, other than to avoid
an audit, to put a patient in observation. I truly feel this is
hospitals trying to comply with Medicare rules and accepting
the consequences of that.
Senator Whitehouse. Got you. I am not sure I understand the
two-midnight rule exactly.
Senator Collins. That is because no one understands the
two-midnight rule exactly.
Senator Whitehouse. Is it actually two midnights? Because,
if it actually is two midnights----
Senator Collins. It is not 48 hours.
Senator Whitehouse. [continuing.] Then it seems to me that
if you are taken ill at 11:00 p.m.----
Senator Collins. Exactly.
Senator Whitehouse. [continuing.] You can be in the
hospital for 25 hours and pass the two-midnight rule and be on
your way, whereas if you are slow in the ambulance and got in
after midnight, you could be 47 hours in the hospital and fail
the two-midnight rule, and, I am getting nods that that is,
indeed, correct, so, 25 could be enough to make it and 47 too
little to make it, even though 25 is less than 47. It does not
seem to make mathematical sense.
Of course, Senators dabbling in mathematics is a dangerous
thing, so I will leave it at that, but, I appreciate very much
the testimony that you all have brought, and particularly, Mrs.
Engler, the personal story that you, unfortunately, had to
bring here, and, to our Chairman and to Ranking Member Collins,
thank you to you both.
Senator Collins. Thank you.
Ms. Edelman. There are actually two two-midnight rules,
Senator.
Senator Whitehouse. Oh, it gets better.
Ms. Edelman. I mean, one is what the doctor is supposed
to--well, the doctor is supposed to predict, and as Dr. Sheehy
said, that is not how doctors think. It is not what they are
doing, so, they are supposed to decide, this person should be
an inpatient because I believe this patient will be here for
two midnights.
The second two midnight is what the auditors do, so, if the
doctor is not sure or thinks the person may not be in the
hospital for two midnights, what CMS says is the physician
should say this patient is an outpatient, and then the next
day, if the person is still there and still needs to be there,
maybe that person should become an inpatient, so, the second
two-midnight rule is what the auditors do. If they see somebody
was an outpatient for a day and then an inpatient for a day,
they are not going to review those cases. It is extremely
confusing.
Senator Whitehouse. Have you ever----
Ms. Edelman. If you think it is confusing, I mean, the
patients have no idea, because they think--they have come from
the emergency room, and the doctor says, you need to stay. We
are not done. We need to figure out what is wrong, and, you are
upstairs in a bed and getting care, and as Dr. Sheehy says,
indistinguishable if you are an inpatient or an outpatient.
Senator Whitehouse. Have you ever come across a patient who
came into the emergency room, was directed by their doctor that
they had to be, I guess ``admitted'' is probably not the
precise word in this, but, in any event, taken to a room
upstairs and treated as if admitted, that they were somehow in
outpatient status? Does anybody think that?
Ms. Edelman. Do patients think that they are outpatients?
Senator Whitehouse. Yes.
Ms. Edelman. No. People think they are----
Senator Whitehouse. Because they are not. They are
in.
Ms. Edelman. [continuing.] They think--they are in a bed.
They are----
Senator Whitehouse. In is in. Out is out.
Ms. Edelman. Right.
Senator Whitehouse. Yes.
Thank you.
Senator Collins. Ms. Edelman, we have heard all these
stories that Mrs. Engler and Mr. Armstrong have told about the
confusion that Senator Whitehouse has just referred to, and I
just cannot imagine anyone who is ill and has been put into a
hospital bed making a distinction or even realizing there is a
distinction between being in inpatient status or in observation
status.
My question--and we have also heard Mr. Armstrong talk
about how his nursing home, to its great credit and to St.
Mary's Health System's great credit, absorbed the cost of
treating a patient because of this lack of clarity so that it
did not fall on the patient's family, but, not every nursing
home is going to do that. They did not in the case of Mrs.
Engler's husband, for example.
My question to you is this. How does CMS respond to
complaints from beneficiaries or their families about the lack
of clarity in what their status was which leads to tremendous
financial penalties for them? Is there an established appeals
process for beneficiaries dealing with this issue?
Ms. Edelman. There is no established appeals process.
Medicare does not consider outpatient status a denial of
Medicare. It is just payment under Part B instead of Part A,
and, in fact, CMS does not require hospitals to inform people
that they are outpatients. If somebody goes from the hospital--
from the emergency room to a bed and is an outpatient, there is
no requirement that the patient be told.
The only time CMS says that there needs to be information
is if the physician says, my patient is an inpatient and that
decision gets reversed. Then, CMS says, okay, hospital, under
those circumstances, you must tell the patient your status has
changed from inpatient to outpatient.
There is no right of appeal at that point. There is no due
process. Usually, in due process, you get notice and an
opportunity for a hearing. There is no opportunity for a
hearing.
CMS tells people all kinds of things. Sometimes, they tell
patients, call the Quality Improvement Organization, but they
say--QIOs say, we only handle Part A, not Part B, so we do not
handle those cases. Increasingly, we hear from people that they
are being told by CMS that there is no appeal. There is just
nothing they can do about it.
We came up with a system on our own to say, appeal from the
Medicare Summary Notice, but that is after the fact. That is
only if people have actually gone to the skilled nursing
facility, paid out-of-pocket, gotten a Medicare covered level
of care, and then try to fight with CMS and try to get the
payment back, which is what Mrs. Engler described. They are
appealing. This happened over a year ago. They have lost at the
first two levels of appeal. Now, the next level is the
Administrative Law Judge. Maybe that is a year in the future,
but, sometimes people win those cases and frequently they lose
those administrative appeals, and CMS is not making it clear.
Senator Collins. You know, when I think of all the
confusion that already exists over whether or not Medicare pays
for nursing home care and under what circumstances, to expect a
beneficiary to understand whether or not they have been in a
hospital bed as an inpatient versus in observation status is
just absurd. I just cannot imagine that the vast majority of
patients would know there was any difference at all. Is that
your experience in trying to help people?
Ms. Edelman. People have no idea of what has happened and
they do not hear frequently until they are about to be
discharged, when they are told, you know, bring your checkbook
to the nursing home because you are going to have to pay for
it, so, people have no idea of what to do.
That is why the legislation you are all supporting is so
important. It just says--it is so simple. It is one sentence.
If you are in the hospital for three midnights, you have met
that requirement, and, as Mr. Armstrong said, there are many
other requirements, still, which would still continue to exist,
but, if you have been in the hospital for three nights, they
count.
I would just say in response to what Senator Warren said
before, when Medicare was enacted in 1965, that is where the
three-midnight rule came in. The average length of stay for
people 65 and older in an acute care hospital was 13-plus days.
As of a couple of years ago, it was five-plus days, so, it is a
huge reduction in the time people spend in a hospital, and
people assume if they are in a bed, they are really in the
hospital.
Senator Collins. A very logical assumption to make.
Mr. Armstrong, have you seen elderly beneficiaries with
Medicare forego care because they are--they become aware that
it is not going to be covered under the Medicare program? Have
you seen cases where seniors actually do not get the follow-up
nursing home care or rehabilitation services that they need
because of the cost?
Mr. Armstrong. Yes, Senator, and unfortunately, I have seen
cases where--in many cases, they do not know they are in an
observation status. There are cases where they sort of discover
it in some fashion and they do not then want to go in and get
the rehab care they need because they are then realizing they
have to pay thousands of dollars to get this care.
There are cases where we have seen people not get the care
they need go home and return to us through the hospital, and
eventually to us again because they did not get the care they
needed properly the first time, and those cases are the saddest
cases because, because they did not get rehab properly the
first time, then Medicare also, from a cost perspective, pays
for another hospital visit which ends up being covered by
Medicare, and then they go to a nursing home again anyway and
then end up being taken care of, but, this poor person in the
meantime did not get the care they should have gotten up front,
and those are the saddest cases, really, because they go home
and they are not properly rehabbed and then they fall and they
break a hip and they start the whole cycle over again. It is
worse than if they just got the proper care in the beginning.
Senator Collins. Those are terrible cases, because not only
is there unnecessary suffering, but there is greater expense to
the system in the long run, so, it reminds me of the therapy
caps that are put on, which, in my view, prevent people from
regaining full function in some cases where someone has had,
for example, a severe stroke, and it just makes no sense and it
ends up costing the system more plus causing suffering that
could be avoided.
Senator Warren.
Senator Warren. Thank you.
You know, as we have been talking about, the two-midnight
rule was put in place to try to deal with the issue of long
observation stays by saying, anyone who is in the hospital for
two midnights should be an inpatient, but, I just want to make
sure we get a couple of questions on the record here that we
are able to build, and the first one is a fact question, and
that is, in your experience, has the two-midnight rule
decreased or increased the number of long observation stays?
Dr. Sheehy.
Dr. Sheehy. Yes. Thank you for that question. I think the
one benefit of the two-midnight rule is likely a decrease in
those long observation stays.
However, if I could speak to the--we are currently under
the probe and educate period under the MACs, the Medicare
Administrative Contractors, while the RACs are on hiatus, and
at University of Wisconsin Hospital, we had nine cases that
were pulled and looked at in the probe and educate period.
Three of those were determined to be overpayments. All three of
those cases were cases we tried to claim two-midnight inpatient
stays for. The MACs--which we thought would be honored because
the physician's determination was that that patient needed two
midnights. We went through the appeals process. We watched
their webinars, did not get further information, requested a
consult, and just days before our consult occurred, we got
notification from the MACs that all cases would be paid.
I think the point of that is, is we are vulnerable. Even
those two-midnight cases that we think are going to hold as two
midnights and we would see a reduction in long-stay
observation, if hospitals start getting audited on cases they
claim two midnights for, we are going to see that long
observation stay rate increase.
Senator Warren. That is a very interesting point.
Would you like to weigh in on that, Mr. Armstrong.
Mr. Armstrong. Yes. I mean, I think it is interesting. I
picked a case in my oral testimony on purpose because of the
timing of the so-called implementation of the rule. My case was
actually following the implementation of the two-midnight rule
time-wise. I actually picked it specifically for that reason,
that it did not seem to affect that particular case at all, so,
if it was supposed to be in place, it was supposed to be
policy, the hospital who referred the person to us did not
follow the policy, you know, that is supposedly in case,
because it actually followed in the time frame when it was
supposed to be implemented, so, I actually picked that case on
purpose for this question, because in our case, the person
still was in the hospital for five days----
Senator Warren. Right. I get it.
Mr. Armstrong. [continuing.] You know, I mean, it is----
Senator Warren. Let me ask, then, another part of this, and
that is that the hospitals in Massachusetts, and, I think,
around the country, have asked for a way to define and pay for
hospital stays that are less than two days where inpatient care
is appropriate, and, in this year's inpatient Prospective
Payment System proposed rule, CMS asked for feedback on the
policy options to address these short stays, and I am very glad
that the agency is working on it, but I want to ask about this,
and that is, again, this question about the impact on seniors.
Ms. Borgstrom, I would like to start with you. Will a well-
designed short stay policy greatly reduce or even eliminate
long hospital stays under observation status? If not, what else
do you think needs to happen?
Ms. Borgstrom. It is hard to answer that question because
the caveat is in well designed.
Senator Warren. Fair enough.
Ms. Borgstrom. I think it is--you know, I believe that it--
--
Senator Warren. I do not want this to be, ``and then a
miracle occurred.''
Ms. Borgstrom. No, but I believe that it is possible to
create a rational short stay payment plan that would decrease
long-stay observation patient stays.
Senator Warren. Let me just ask you the same question. Dr.
Sheehy, do you agree with that?
Dr. Sheehy. I think you could. I think you could come up
with some sort of a short stay modifier or some short stay DRGs
that would accomplish that goal. It would need to be
accompanied by some check on the auditing of the process, and
hopefully, these would be paid under Medicare Part A so the
vulnerability that the Medicare beneficiary feels currently
would not be felt.
Senator Warren. I recognize, there is going to be some
complexity to this. I mean, we cannot get away from that, but,
the question is, on balance, whether that is a better approach
than using the two-midnight rule as a way to try, as you
rightly point out, Mr. Armstrong, to sometimes corral the
problem of long observation stays.
Mr. Armstrong.
Mr. Armstrong. Well, I think, to give CMS some credit, they
have come up with the ACO concept and the concept of bundled
payment, which sort of takes that three midnight and this whole
observation and all this--and the two midnight--all off the
table by, you know, having to take care of these people in a
bundled payment, and we are entering in our system into a
bundled payment agreement as we speak with CMS for several
bundles which we will not have to deal with some of these
requirements, because under the bundled payment, we will have a
settled bundled payment from CMS for the whole continuum of
care, including the physician practice, including the
operation, say, for a hip, the inpatient stay for the hip
fracture or replacement, as well as for the skilled stay in our
skilled facility will all be covered under the bundle and we
will not have to deal with, really, any of these issues.
Senator Warren. Basically, just to underline your point,
that means we do not need the complexity in the system. We do
not need the complexity and the resources spent in the
monitoring, and most importantly, to go back to Ms. Borgstrom's
point, we are really relying on clinical judgment at that point
which aligns with the financial incentives, and financial
responsibility, I should say.
Mr. Armstrong. Yes.
Senator Warren. Is that a fair description, Mr. Armstrong?
Mr. Armstrong. Yes, Senator. Yes.
Senator Warren. Good. Ms. Borgstrom.
Ms. Borgstrom. Just adding to that, because I think your
question and your point is really important, and to Mr.
Armstrong's point, CMS is trying to support some
experimentation with the ACOs, with bundled payments, to
determine a way that allows clinical judgment to determine how
patients are cared for and create more rational economic
incentives.
I think the problem here is we are not giving those time to
work and we are overlaying it with another policy that, you
know, as this hearing is demonstrating, very few people
understand and find rational. It is almost that we are trying
to do too much without letting some things play out and
determine what is really going to optimize the delivery of
patient care and the payment requirements or expectations.
Senator Warren. Good. Thank you. I think that is at least a
hopeful sign, so thank you very much, and, again, thank you so
much for being here, Mrs. Engler, and getting us started in the
right direction. I am sorry for the need for it, but welcome
your coming here to talk about it to try to do some good for
others, so, thank you.
Senator Collins. Senator Baldwin.
Senator Baldwin. Thank you.
There is existing policy and emerging policy discussions
and pressure to reduce unnecessary hospital readmissions, and I
am wondering about any observations you might have about the
interaction between use of observation status versus inpatient
status and that other whole set of policies. It looks like, Mr.
Armstrong, you are eager to kick it off.
Mr. Armstrong. Well, yes. It is a wonderful question,
Senator, because if a person is never admitted to the hospital,
then they go home and have other problems, the hospital then
cannot be punished for a hospital readmission because they were
never admitted in the first place, so, these policies, you
know, when implemented, have the interesting consequences in
the real world when they get implemented, where it is an
incentive, again, for the hospitals now to use observations
even more because then the person was never ever admitted, so,
if they get readmitted, it never happened.
Senator Baldwin. Dr. Sheehy.
Dr. Sheehy. I would say, as kind of a--in my clinical
practice, that the readmission penalty and reclassification of
patients as inpatient or observation really does not cross our
mind. It is one of so many things that are out there. We are
really trying to determine what the patient's clinical needs
are, what their diagnosis is, how to start their care. A lot of
times--most of the time, I can see that a patient has been in
the hospital within 30 days, but I do not know if that
hospitalization was observation or inpatient or not. It just
really does not--and my colleagues, I think, at the University
of Wisconsin, would agree. It just is not a part of our
decision making to make a patient inpatient or observation.
We do know that observation is a detriment to patients. It
is a detriment to our hospital, so, for us to try to make a
patient observation instead of inpatient for the readmission
penalty reason just really would not make a lot of sense,
either.
Senator Baldwin. Thank you. Any other comments? Thank you.
Senator Collins. Thank you. Senator Whitehouse, it is my
understanding that you are all set?
Senator Whitehouse. All set.
Senator Collins. Thank you.
I want to thank our witnesses for being with us today. One
of the advantages of our Committee is that we are able to take
the time to delve into very complex issues that have very
significant impacts on our seniors, and I think we have seen an
example of that here today. Your testimony has been extremely
helpful in allowing us to better understand these complex
issues and the very real life consequences that they have for
seniors, for nursing homes, for hospitals, for practitioners,
for advocates, and we very much appreciate your being here.
I am sure that Senator Nelson is going to have some
additional questions for the record, and other members who were
unable to be here today may, as well, so the hearing record
will remain open for ten days for the submission of any
additional testimony, questions, and we would appreciate your
cooperation in answering them.
Again, thank you so much for being with us today, and this
hearing is now adjourned.
[Whereupon, at 3:23 p.m., the Committee was adjourned.]
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APPENDIX
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Prepared Witness Statements
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Statements for the Record
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