Medicare Recovery Audit Program Targeted for Reform After Spike in Observation Stays

Members of the U.S. Senate Special Committee on Aging called on the Centers for Medicare and Medicaid Services (CMS) during a hearing Wednesday to make changes to Medicare’s recovery audit contractor program, which some providers have identified as a driving force behind the rise in observation stays in recent years.

Committee members encouraged the agency to implement recommendations recently backed by the Medicare Payment Advisory Commission, in addition to making other changes to address the “hospital observation stay crisis.” Committee Chair Susan Collins (R-ME) noted that observation stays can have a “devastating” monetary effect on Medicare beneficiaries.

Observation stays have increased due to a number of factors, including audit contractor activities, according to Dr. Jyotirmaya Nanda, system medical director for informatics and physician compliance at the Center for Clinical Excellence and Corporate Responsibility at St. Louis-based SSM Health Care. Nanda testified at the hearing on behalf of the American Hospital Association.

“The auditors and prosecutors have made it clear that they believe observation status can serve as a substitute for inpatient admission in many cases,” Nanda said. “As a result of these inappropriate denials and actions, hospitals are left in an untenable position.” Mark Miller, Executive Director of the Medicare Payment Advisory Commission (MedPAC), testified that MedPAC has recently backed recommendations for reforming the Recovery Audit Contractor program, which would include withdrawing the controversial “two-midnight” payment rule for inpatient hospital stays, reducing the contingency fee for contractors with high overturn rates, and limiting the “look-back” review period.

Source/more: Modern Healthcare
Watch the hearing.
Background on the “observation status” issue from the Center for Medicare Advocacy

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