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Observation Stay Relief via Congress?

An issue that continues to confound the hospital and SNF industry is the growing use and thus, referral and coverage (Medicare) ramifications of observation stays.  Fundamentally, and observation stay by current definition is a non-inpatient stay – an extended residence in an outpatient status.  Truly, this a bifurcated problem or issue; hospitals wishing to avoid admission and readmission penalties and SNFs trying to determine the nature of the hospital stay for Medicare coverage purposes.

The observation stay issue at hand is truly the proof of the law of unintended consequences and outgrowth of competing health policy agenda.  For elderly patients and SNFs, it can be exceptionally difficult to sort out a multiple day hospital stay (greater than three days) when many of the days, or all, occurred in what appears as a private room.  In fact, in many hospitals, expanded outpatient areas are easily confused as inpatient environments, with no visible delineation in accommodation, care, etc.  The sole differentiating factor is whether the room and location are defined by the hospital’s license as an “inpatient room”.  As Medicare coverage in an SNF requires a precluding three-day inpatient hospital stay, a stay that does not incorporate an actual admission to the hospital proper (not an outpatient admission) of at least three days in length fails to satisfy the three-day inpatient requirement.

For the hospital, observation stays (and the increase thereof) are a direct outgrowth of aggressive Medicare Recovery Audits. By deeming, via post review, inpatient stays “inappropriate or not medically necessary”, Medicare has recovered hundreds of millions of dollars from hospitals.  Additionally, a growing list of admitting diagnoses (DRGs) are plaguing hospitals in terms of looming reductions in reimbursement if a patient originally admitted and subsequently discharged, is readmitted for any reason within 30 days of the discharge.  To avoid this readmission penalty, hospitals will use an observation stay as an alternative. The most significant observation trend ramification is the growth in the length of stay in this status.  In 2006, only 3% of observation stays lasted longer than 48 hours.  In 2011, the percentage increased to 11%.  In certain regions today, the percentage is as high as 14% of observation stays exceed the 48 hour period.

In May, CMS proposed to alter or modify the observation stay vs. inpatient stay criteria; creating additional clarity for recovery auditors.  The proposal would allow recovery auditors to presume that any inpatient stay equal to or greater than two midnight periods (one Medicare day)  is appropriate.  Stays shorter than this duration (inpatient) are thus classified as outpatient.  CMS has not yet codified this change.

Earlier by a month or so, two bills were introduced (companions) in the House and the Senate.  Both bills proposed modification to Title 18 (Medicare) of the Social Security Act, effectively classifying an observation stay day as equivalent to an inpatient stay day for purposes of satisfying the three-day prior stay requirement for Medicare coverage in an SNF.  The bills are titled “Improving Access to Medicare Coverage Act of 2013”.  Each has achieved a fair number of co-sponsors and today, reside in committee (House sub-committee on health and the Senate).

The likelihood of passage is by my estimate, 50/50 at best. The rub in terms of passage is cost as a change in definition (proposed) will increase the coverage exposure for SNF stays.  No one knows what the exact magnitude is and no CBO score exists for either bill (yet).  Additionally, CMS is likely to balk as simplification as proposed will have a spill-over impact on the “appropriateness” definition presently used to recover hospital payments for “unwarranted” inpatient stays.  There is no question that weighting a day under federal law equivalent to another day for coverage purposes will push hospital lawyers to pose arguments that reclassification of inpatient to outpatient days via recovery auditors is “capricious”.  Such arguments are already in federal courts and administrative courts. Further, a case filed in 2011, Bagnall v. Sebellius argues that the use of observation stays violates federal law.  This case is not yet at trial but will in all likelihood, receive a boost if Congress amends the Social Security Act as proposed.

Regardless of the legislative outcomes, it is clear that movement is in-place for additional clarity around the use and misuse of observation stays.  Even sans legislative success, CMS is now tasked to modify and clarify the use of observation status and thus, re-focus recovery auditors on a more direct course of Medicare payment excess.  This issue needs resolution and frankly, Medicare auditors need to focus more attention where the real abuse and overpayments are occurring.  This is small potatoes by comparison.

September 25, 2013 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , | Leave a comment

Fables, Tales and Job Reports

Before too much rancor sets in among readers, I’ll admit that my content has strayed just a bit lately from health policy, etc. to politics and economics.  This too shall pass and rather quickly.  This post is for a friend and reader who e-mailed me earlier about the ADP job report and what it means for the current political debate regarding the economy.  The following is my brief answer.

For those who don’t typically follow economic data, the ADP report is a monthly barometer tied to private, non-farm, non-governmental payroll data.  ADP is the largest processor of payroll in the U.S.  Their report is the result of accumulating payroll data and arithmetically, modeling the data into employment changes (jobs added, jobs lost).  Today’s report indicates that 158,000 private, non-farm, non-governmental jobs were added in October.  On first blush, this is a plus as most economists were forecasting less than 100,000 new job adds in the month.

Politically spun, this a plus for Obama and while not a total downer for Romney, a shot across the bow.  The report rallied the stock market as expected.  Coming less than a week before election Tuesday, the report will either gain momentum based on tomorrow’s BLS report (federal job and employment data from the Bureau of Labor Statistics) or turn idle if the math doesn’t jive.  I suspect a high degree of alignment.

To the title of the post and the reply to my friend and reader: The accuracy of the ADP number and the BLS numbers is highly suspect.  While their respective releases make prominent news their corrections don’t.  Consistently and over time, the corrections are where the real story is.  Before anyone, including my friend, “jumps the shark” (a reference to Happy Days and Fonzie) and takes today’s report and tomorrow’s report as indicative of anything, let alone a sign to vote one direction of the other, consider the following.

  • Even at 158,000 new jobs for October, the ADP report if accurate only indicates very slow growth.  Job losses for the month were still above 350,000.  Push and pull at the two with fifth grade math skills and a bit of common sense, this is not a sign of robust growth or even a foot-hold on longer term recovery.
  • The ADP report does not cover the “core” of relative job data.  For example, we don’t know “what type of jobs” (part-time, full-time, permanent, etc) or at what rate of pay.  As is typical at this time of the year, seasonal retail is bulking-up and part-time, low to moderate wage jobs are added.  These are not permanent jobs with benefits or for that matter, “game changers” for recovery.  Similar to the last BLS report that dropped the unemployment rate, free-lance, part-time, ad hoc and so forth can be counted a variety of ways and reported as employment or jobs.
  • ADP has recently changed its calculation methodology to “more accurately reflect” real time changes in employment.  Important to note is that ADP’s data is proprietary and only results are shared.  A quick glimpse difference in this report is a rather large shift to job growth among large businesses.  While I won’t state openly that this is troubling from a validity standard, it is outright curious as to this point and through recent periods, large business job growth has been “zip”.  Also somewhat curious to me is the strong results in construction job growth against a decrease in manufacturing.  I buy the manufacturing but I question a 23,000 jump in construction if for no other reason than I’d like to see the type of job, especially at this time of year.  True, new housing construction is up but commercial is flat and government spending for infrastructure is at low tide.
  • Finally, ADP like the BLS data is consistently “wrong” and not just by a little.  Post period revisions are common and rarely, especially of late, are the revisions “up”.  For example, the BLS data and the ADP data are effectively the same in their raw state yet the difference between the two over recent periods (last three years) annualized to 400,000 jobs; ADP overstatement.  The ADP methodology revision I referred to is supposed to correct this gap but as it is new (first month), only time will tell.  I am skeptical at best.  Under the old estimating method, September’s report was 162,000 new jobs later revised to only 88,000.

Economic data like jobs reports, etc. point-in-time or snapshot reminds me of a phrase used by former British Prime Minister Benjamin Disraeli: “There are three types of lies – lies, damn lies and statistics”.  For any of this data to truly become meaningful from a complete economic perspective, it must be consistent over time.  Jobs are only a fraction of the issue with the greater weight of type of job, wage, benefits, sector, etc. all required additions.  Similarly, new jobs as a sole measure must balance out organic labor growth (new workers), existing unemployment levels at the U6 level (the total number of people unemployed and underemployed including those who have given up looking for a job which today remains precariously close to 15%), and rolling job losses.  At 158,000, if accurate, this is approximately a net “gain” of 58,000 jobs as by consensus measures, 100,000 new workers enter the economy monthly.  The truest measures are wages/income and percent of total population capable and willing to work, working/employed on a consistent basis.  Don’t look for this economic measurement to be truly positive and reflective of a go forward change in momentum prior to next Tuesday or for that matter, any time in the near future.

November 1, 2012 Posted by | Policy and Politics - Federal | , , , , , , , | 4 Comments

One Week

One week from today is the national election for president, every seat in the House of Representatives, and one-third of the Senate.  Additionally, there are numerous gubernatorial elections and local or state-wide races at issue.  No other nation on the face of the earth affords, nay protects, the rights of all of its citizens to partake directly in government.

The U.S. is unique in that its government is a representative form of democracy.  We directly elect those we wish to represent us at every level of government; local, state and national.  The power, used correctly, is that each voter contributes directly to current and future outcomes of the governing process.  The power used incorrectly, or in my view abused, occurs when we get government by abdication.  Power can be used correctly to instill direction and movement.  It can be misused, creating havoc, uncertainty and upheaval (Syria, Egypt, and Libya come to mind as recent examples).  Power can also be fallowed; left unused and thus on-the-shelf, inappropriately placed perhaps waiting for some future opportunity.  In our form of electoral process, power is given and protected often at great human cost, with the intent of use, not misuse and not left unused.

In 2008, the national election was prized as a great example of engagement and voter turnout – just a shade over 60%.  In terms of turnout of the voting age population, the number was just under 57%.  By any statistical measure, more than one-third of eligible voters abdicated their individual power and decided that the other less than two-thirds would decide their course for the next four years.  While I have no statistics in terms of how many voters merely failed to vote for a national race yet participated locally, I suspect the real results are inverted – they voted nationally and failed to cast a local or state-wide vote.

Projections for this cycle suggest a lower turnout than in 2008.  How sad.  Even sadder is the certain lament I will hear from folks about the outcome, the course of the country and the assorted woes and struggles that are apparent for most who choose to abdicate their power.  The disconnect between how “things” work and who influences direction is a crevice that demands attention.

Like the candidates or not, next Tuesday is a monumental day in the U.S.  To anyone paying attention, the choices on our ballot are clear.  As I have said before, I am not partisan moreover, opinionated for reasons I articulate in my writing.  Frankly, I could care less how people vote, just so they do.  Government by abdication scares me in what is left of this free (or mostly) society.  I fear slippage will continue if we can’t marshal our collective rights, utilize them, and express our personal and where applicable, collective opinions.

As I wrote previously, elections have consequences.  Those who vote typically understand the consequences far better than those who don’t vote.  Today, the potholes and sink holes are fairly evident yet what we fail to grasp is the depth.  Like all elections, this one is consequential but for reasons perhaps to economically wonky and policy wonky for many to grasp.  I just hope that the sense of either right-course or wrong-course is palpable enough today to muster a stronger turnout than predicted.

For me, the direction is clear.  I am at heart, an economist and a policy guy.  I love the detail and spend much of my days working with folks on the guts and outcomes of health and economic policy.  I think I see the big picture and gravitate to the broad solutions rather than the micro.  I am after all, someone who has built businesses and had success by finding solutions and compromises across broad issues and strategies.  I think of things as issues where convenience breeds unintended consequences and follow most acutely, the wise words of my father: ‘Tell people the truth, even if you know it’s not what they want to hear, tell it to them just the same”.

I know election hype is less about truth in the media or the debates as people seek style rather than substance and the forums provide little opportunity for substance.  Yet substance is available for those who seek it.  Records are public, depicting action and inaction.  Most outcomes are known or knowable for those who want to ponder and probe just a tad deeper than the conventional news cycle.  Character is fairly displayed.  We can frankly, make clear decisions with sound logic on the policies and ideas that matter and if brave enough, tune out the conventional opinions, polls, political caricatures and robo calls.  We have the power and while it is cliché, a comic book hallmark stated it best: “With great power comes great responsibility”.

October 30, 2012 Posted by | Policy and Politics - Federal | , , , , , | 1 Comment

Catching Up Part I: Politics, Observation Stays, and Medicaid

Off the golf course (reluctantly) and back to work.  Last week was full of catching up and revisiting issues and reports.  As promised before I went temporarily AWOL, here’s Part I of at least two parts (maybe three) of issues that I am following.

  • Politics and the First Tuesday in November: The conventions are done and now the grind begins through the November election.  This may be the most polarized election in decades and the price tag is certain a record breaker – approximating $1 billion. What is most interesting to me is the banter about the economy and healthcare.  Being that I am an economist by training and a healthcare guy on the ground, what I see is quite different than the rhetoric on the news, reported via polls, analysts, etc.  Here’s my twist on the substantive issues under debate.
    • The economy is stalled and the primary reason is uncertainty.  Fixing uncertainty is all about changing, for the U.S. economy, the consumer’s point of view.  Consumption drives economic activity (demand) and thus, businesses and suppliers will return with investment, jobs, etc. to meet the rising consumer demand.  This also is true for healthcare demand which has stayed level to flat in a number of sectors as the ranks of the under and unemployed have swelled (no job, no health insurance, no healthcare).  I suspect that a fair amount of healthcare demand is pent-up now, awaiting a change in economic fortunes.  Granted, this is primarily elective type demand but nonetheless, business and revenue presently absent.  Sadly, I also believe that a near-term rise in chronic disease is forthcoming as folks have foregone early intervention for lack of resources.
    • Creating “certainty” doesn’t happen via a presidential election directly unless the elected president is capable of galvanizing a vision and creating compromise.  For example, tax policy.  The economy is far more fluid than either party would want voters to believe.  It can handle higher or lower tax rates but not “tax policy” by absenteeism.  For the economy, the fiscal cliff is less about falling into the abyss and more about what is at the bottom of the cliff, if a bottom even exists.  Certainty is about rational for consumers, not ideology.  Only one major impediment exists to creating rational on a broader level and that is bureaucracy.  Endless regulatory policy and reams of court and administrative law interpretations are anathema to certainty.  Clear, straight-forward approaches that share gain and balance pain are necessary.  No business person that I talk with, healthcare or other, is simple-minded enough to believe that gain in any form comes without a certain amount of pain.  It is the fear of unknown pain (how much and how bad) that is keeping both consumers and producers away from the economic fray (discretion is the better part of valor).
    • Healthcare economics is trickier than either party chooses to admit and neither has an answer at this point.  Entitlement spending is out of control and the present policy fixes described, come woefully short of changing the trajectory.  Both parties are presenting band-aid solutions to a hemorrhaging wound.  The only true answer is a complete overhaul of Medicare and Medicaid from benefit levels to funding mechanisms to entitlement conditions. The Ryan Roadmap came closest albeit “close” in this case is akin to getting the ball near the red zone, taking three holding penalties and then fumbling at mid-field.  True, political suicide is sure to occur for anyone bold enough to take this on but failure to touch the core issues creates a certain “death by a thousand cuts” scenario.  Solutions are available but unfortunately for a politician or his/her party, each is too radical to tie to re-election prospects.
    • Regardless of the outcome of November’s election, recovery will remain slow and stagnant without fundamental changes to how we “govern”.  The prospects for recovery today are less economic and more policy weighted.  Without fundamental shifts in policy, recovery stays stuck in neutral.  For fans of civics lessons past, this has more to do with Congress than it does with the President.  Congress controls the purse-strings and makes the laws, not the President.
  • Hospital Observation Stays: In healthcare today, its hard to find a more on-point issue to underpin my comments on uncertainty than hospital observation stays.  Briefly, a hospital observation stay is a period of “limbo” time where a patient is typically triaged through an urgent care or emergent care setting proximal to the hospital.  The triage period has determined the patient unstable to return to a non-medical or community setting, requiring observation but services beyond this point. less clear as to justify an admission and inpatient stay.  Where the rub or issue is today is for Medicare patients and as most cases with Medicare policy issues, it is squarely bifurcated.  From the hospital side comes the concern regarding readmission penalties applicable to certain Medicare inpatient DRGs that re-visit the hospital with another admission anytime 30 days post-discharge.  The penalty for too many readmission instances in 2013 is a payment reduction of up to 1% of Medicare reimbursement. The number of applicable DRGs and the percent reduction for too many readmissions increases again for FY 2013, applied in 2014.  On the post-acute side, primarily the nursing homes, is the argument that a patient not admitted to the hospital but hospitalized in an observation status nonetheless, may not/won’t qualify for a three-day prior inpatient stay and thus, won’t receive Medicare coverage for their nursing home stay.  Arguably, the consumer or Medicare beneficiary and his/her family are placed in a stage of uncertainty as well and insurance and other coverages post hospitalization are jeopardized.  CMS has heard the concern and their answer is to expand an outpatient Part B billing (hospital) demonstration project that would provide a safe-harbor for hospitals on the payment end, somewhat.  Via a demonstration project presently under way, CMS proposed and is soliciting comments, on providing a 90% level of payment for a denied Part A claim via re-billing under the outpatient (Part B) program guidelines.  At the same time, they are stating that payment would not be made for observation status claims.  Payment of course is subject to medically necessary definitions, etc. Oddly, a wholly bizarre proposal.  Legislatively, two bills are working their way through the House and Senate with bi-partisan support. The origin bill is H.R. 1543 known as “Improving Access to Medicare Coverage  Act of 2011”.  This bill would require counting all hospital time against the three-day qualifying stay criteria for Medicare coverage of nursing home care.  This would re-solve the observation stay issue.  Watching this issue over the past years, I’ve seen a fairly consistent increase in observation stays and the length thereof.  While CMS implies that an observation stay should not last more than 24 hours, this guideline is clearly not followed and no enforcement mechanism is in-place.  In fact, this issue is so pervasive in the industry that Medicare beneficiaries have resorted to court action, charging that the use of observation stays violated their rights to use their Medicare benefits for skilled nursing care, creating real financial damages.  According to a recent study by Brown University,  average lengths of observation stays are up by 7% and in 10% of cases reviewed, the stay is longer than 48 hours.  Their findings also suggest an 88% increase (between 2007 and 2009)  in stays longer than 72 hours.
  • Medicaid: Alas, the election will push health policy debates regarding Medicare front-and-center while the bigger immediate looming gorilla is Medicaid.  Two distinct policy choices are going to get little play.  The first is the current-law provisions for Medicaid expansion which will cost an estimated $650 billion over the next ten years (I think this figure from the CBO is light).  The second is the Romney proposal to cut $800 billion for Medicaid funding and transition the program to a “block-grant” system.  In a block grant approach, the Federal government allocates a fixed amount of dollars to a state in return for the state providing certain levels of qualified services.  Typically, block grant style funding pushes more regulatory oversight back to the states and allows room for programmatic flexibility.  Medicaid today is actually a hybrid block grant program as states are required to provide certain levels and programmatic criteria before the government allocates funding.  My take, based on my discussions with various statehouses nationally is that the states are divided on which would work better.  Not surprising, present Red states prefer the Romney approach provided sufficient regulatory relief comes as a result.  Blue states tend to favor increased government funding and expansion as a means of helping the state fiscally.  With more and more states taking a Managed Medicaid approach, it would seem like a ground-swell of “reform” Medicaid  is brewing.  I’ve said for years that Medicaid, not Medicare, is this generation’s next biggest unfunded liability and all of the studies and numbers coming from credible sources bear this out.  The federal government has no means of sustaining the funding promises concurrent with the ACA expansion provisions.  States have no economic means to continue to fund the current liabilities let alone, any expanded programs (with or without additional federal dollars).  Providers are already loathe to see a growth in poor-paying Medicaid patients.  Forget the funding equations for a moment and focus just on the access issues.  How in the world can expanded Medicaid coverage be absorbed by the current level of providers even willing to take on additional Medicaid patients at below cost reimbursement levels?  Many rural and urban areas lack adequate supplies of providers as it is.  Adding to the ranks more Medicaid beneficiaries with existing demand will only create widening access gaps.  And honestly, where will the dollars come from necessary to improve payments enough to entice providers to open their arms, clinics, offices, hospitals, etc?  My take is that the Medicaid issue needs real-watching as this system is approaching melt-down and can very easily, contribute a significant drag (already is) on state economies and their recovery.

Part II soon to come….

September 11, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | Leave a comment

Medicaid Expansion and the PPACA

Article I wrote for the National Healthcare Reform Magazine on the implications for Medicaid as a result of the expansion provisions under the health care reform law. Click on the link below (or copy and paste) to view the article.

http://healthcarereformmagazine.com/article/health-reform-and-medicaid-expansion.html

July 13, 2010 Posted by | Uncategorized | , , , , , , , | 2 Comments