Medicare Hot Topics: Observation Status v. Inpatient & The “Improvement Standard” Myth Issues and Advocacy Brenda L. Marrero, Esq. Community Legal Services, Inc. Also see acknowledgement to Center for Medicare Advocacy

2 Community Legal Services  We are a non profit public interest agency serving low income Philadelphians in a variety of legal areas  Aging and Disabilities: this unit serves low income seniors and those with disabilities  We handle Medicare cases—quality of care, access/coverage, denials, appeals

3 Center for Medicare Advocacy  See their website  Source for much of the materials and information presented today is from their website. Being used with their permission is a portion of their presentation titled “Overcoming Barriers to Medicare Coverage of SNF Care”

4 Medicare basics  Medicare is a federal health insurance program for those who are at least 65  You may also get it if you are disabled and receiving Social Security Disability Insurance (SSDI) or have end stage kidney disease  It is run by the federal government  Red/white/blue card

5 Medicare Basics, con’t  Part A—hospital insurance  Part B—doctor’s visits, outpatient services, medical equipment  Part D—prescription drug coverage  You can also choose to have your Medicare through an HMO—Medicare Advantage Plan (Part C)

6 When can a beneficiary lose SNF coverage?  Observation services, which prevent coverage and admission to skilled nursing facility (“SNF”)  The myth of medical improvement, which prevents continued Medicare coverage when the resident is not “improving”

7 New phenomenon  In the context of a hospital setting, a patient may be told that their stay is not “inpatient” but instead they have been in “observation status”, receiving “observation services”  Why is this happening? One possibility: the evolution of the RAC program

8 Recovery Audit Contractor (RAC)  Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) authorized RAC’s to detect and correct improper payments in the traditional Medicare program, both overpayments and underpayments  Started as demonstration project— moving to permanent nationwide program

9 RAC con’t  The 3 year demonstration project found that RAC contractors (who were paid on a contingency basis) identified $1.03 billion in improper payments  96% in overpayments, 4% in underpayments  Most of the overpayments (85%) were collected from inpatient hospitals  Few providers appealed (14%) and few RAC overpayment determinations were overturned on appeal (4.6%)

10 UR Committee Authority  Even if admitted as an inpatient by a patient’s attending physician, the hospital’s utilization review committee may retroactively reverse the admission determination to outpatient observation services  Condition Code 44, Transmittal 299 (Sep. 2004), now at Medicare Claims Processing Manual, CMS Pub. No , Ch. 1, §50.3, c01.pdf (scroll down to §50.3 at p. 138) c01.pdf c01.pdf

11 UR Committee Authority con’t  Since 2004 CMS has authorized hospital UR Committees to change patients’ status from inpatient to outpatient, but such a retroactive change may be made only if:

12 When can change be made retroactively?  (1) the change is made while the patient is in the hospital  (2) the hospital has not submitted a claim to Medicare for the inpatient admission  (3) a physician concurs with the UR committee’s decision, and  (4) the physician’s concurrence is documented in the medical record

13 Effect of “observation status”  Why does this matter?  Because a beneficiary could then lose coverage for subsequent stay in a skilled nursing facility (“SNF”), since Medicare statute requires a “3 day qualifying hospital stay” as an Inpatient  Time spent in observation status does not count towards that 3 day qualifying hospital stay statutory requirement!

14 Effect, con’t  Beneficiary liability—cost is shifted  Consequences for beneficiaries whose entire time in hospital is considered to be observation  Denied Part A coverage for hospital stay  Denied Part A coverage for prescription drugs received while in hospital  Denied Part A coverage for SNF stay  Some beneficiaries who cannot afford to pay for SNF care go home or to assisted living, foregoing needed care

15 Definition of “3 day qualifying hospital stay”  “The beneficiary must have been hospitalized... for medically necessary inpatient hospital care... for at least 3 consecutive calendar days, not counting the day of discharge.” 42 C.F.R. §409.30(a)(1)

16 “Observation Services”  Neither the Medicare statute nor the Medicare regulations define “observation services”

17 CMS Manual definition  Defined in CMS’s manuals as “a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital.” Medicare Benefit Policy Manual, CMS Pub. No , Ch. 6, §20.6. Same language in Medicare Claims Processing Manual, CMS Pub. No , Ch. 4, §290.1.

18 Time spent in ER?  Time spent in observation status in the emergency room prior to (or instead of) an inpatient admission does not count toward the 3-day qualifying inpatient stay. Medicare Benefit Policy Manual, CMS Pub. No , Ch. 8, §20.1.

19 CMS Manual threshold  Manuals say observation should not exceed hours  Now, increasingly, Medicare beneficiaries’ entire stay in an acute care hospital is called observation services  Cases of multiple days and weeks in the hospital, all in observation

20 What is the criteria?  Hospitals generally use InterQual criteria (McKesson Corp.) to make coverage decisions  Proprietary process  Proprietary criteria, with screens for diagnoses  Severity of illness  Intensity of service

21 Beneficiary Notice  When is written Notice required in the hospital?  Notice issues unclear  CMS Manual says beneficiary must be notified by hospital if hospital retroactively changes status from inpatient to outpatient  Few beneficiaries are receiving notices; notices do not give appeal rights

22 Beneficiary Notice-SNF  SNF’s that believe that Medicare coverage will be denied for a technical reason, such as a lack of the 3 day qualifying hospital stay, may give the resident a Notice of Exclusion of Medicare Benefits (NEMB). But use of this Notice by SNF’s is optional

23 What does a NEMB do?  Beneficiary is given 3 options:  Option 1: Check Yes beneficiary wants to receive the services and wants Medicare to make a decision about coverage. SNF must submit the claim with supporting evidence to Medicare. If denied, beneficiary agrees to be personally and fully responsible for payment

24 NEMB options con’t  Option 2: Check Yes that beneficiary wants to receive services, but does not want the claim to be submitted to Medicare  Option 3: Check No, beneficiary does not want to receive the services and that no claim will be sent to Medicare

25 Liability to beneficiary  The Medicare Act states that when a determination is made that a service was not medically necessary and that Medicare will not pay for it, payment will nevertheless be made if the beneficiary did not know, and could not reasonably be expected to know, that payment would not be made. 42 U.S.C. §1395pp, 1879 of the Social Security Act

26 Liability, con’t  A beneficiary is presumed to not know “that services are not covered unless the evidence indicates that written notice was given to the beneficiary.” Medicare Claims Processing Manual, CMS Pub , Ch. 30, §30.1

27 Liability to provider?  A Medicare contractor has the authority and discretion to shift payment liability to the provider. Provider then has appeal rights.  Failure to inform the beneficiary when services are not medically necessary will relieve the beneficiary of responsibility of paying for the service.

28 How to advocate?  Always appeal  Call CLS for legal representation  Contact the Quality Improvement Organization (QIO) for your State. PA’s is Quality Insights of PA.

29 Clarification  Distinguish  Observation status  Inpatient hospital denial  Patient gets notice, with expedited appeal rights that should be exercised by noon of the first working day after written notice is received. 42 C.F.R. §  If expedited appeal is not exercised, patient can appeal non-covered charges using the standard appeal system. 42 C.F.R. § et seq

30 Advocacy con’t  CMA and many Medicare advocates take the position that CMS requires hospitals to give a beneficiary an Advance Beneficiary Notice (ABN) if their observation status exceeds the period of time (threshold) authorized for observation services  In CMA’s experience, hospitals are NOT giving such notice of non-coverage

31 Appeals and notice scenarios  If notice rec’d: appeal so Medicare can make initial determination of coverage  No notice rec’d: file request with Medicare Administrative Contractor (MAC), asking that the contractor review the information and determine whether they met inpatient criteria

32 Appeals con’t  If receive denial of coverage for subsequent SNF stay, should appeal that at the same time they appeal their observation status in the hospital  If beneficiary is billed for prescription drugs during their hospital stay, they should use their Part D plan’s process for submitting claims from an out of network pharmacy

33 Appeals: What To Do  Ask hospital for copy of  Emergency room records  Admission records  Physician orders  Consultation reports  Lab reports  Diagnostic imaging  Medication records  Nursing narratives  Discharge summary  Social service documentation

34 Appeals…  Review records with nurse or physician to determine whether care was rendered at an inpatient level of care  Services required can only be provided in a hospital  24-hour availability of a physician  Special equipment available only in a hospital

35 Hospital inpatient level of care  The severity of signs and symptoms exhibited by the patient  The medical predictability of something adverse happening to the patient  The need for diagnostic studies that appropriately are outpatient services (i.e., their performance does not ordinarily require the patient to remain at the hospital for 24 hours or more) to assist in assessing whether the patient should be admitted  The availability of diagnostic procedures at the time when and at the location where the patient presents. Medicare Benefit Policy Manual, Pub , Ch. 1, §10

36 Redetermination  Obtain from beneficiary Medicare Summary Notice (MSN) for the days beneficiary was at the hospital  MSN is quarterly notice from CMS  All pages (appeal information on last page)  Find hospital services billed to Medicare Part B, which will have a “control number.”  120 days to appeal (last date to appeal is identified on last page of MSN)

37 Redetermination con’t  Request redetermination  If late, assert good cause. For example,  The party was prevented by serious illness from contacting the contractor, or  The party had a death or serious illness in his or her immediate family. 42 C.F.R. §

38 Redetermination, con’t  In cover letter, write that the services billed by hospital under control number: xxx were inappropriately billed to Medicare Part B. The beneficiary was receiving an inpatient level of care during the days at issue and thus the care should have been billed to Medicare Part A.

39 Reconsideration  Redetermination is denied (hospital and SNF)  180 days to request Reconsideration  If hospital redetermination does not address observation issue, write the Medicare contractor and ask that the issue be addressed.  Request Reconsideration. On hospital reconsideration request, reiterate language regarding inappropriate billing to Medicare Part B.  Get physician statements in support of hospital inpatient level of care and SNF level of care.

40 ALJ level of appeal  Reconsideration is denied (Hospital and SNF)  60 days to appeal  If observation status is not addressed by redetermination, write to Medicare Contractor and request that it be addressed.  On Administrative Law Judge request, indicate that reason for appeal is that Part B was inappropriately billed for Part A hospital inpatient care.

41 The Hearing  Administrative Law Judge hearing  Request hearing by video teleconference  If possible, have a medical expert testify  Have family testify  Try to have both hospital and SNF case heard by same ALJ on the same day  Get a copy of the Office of Medicare and Appeals’ case file. 42 C.F.R. §  Submit additional records and statements, as needed (permissible under 42 C.F.R. § ).

42 Appeal and appeal…and appeal  Many of the observation status cases are won at the higher level of appeals  Don’t give up if the first levels of appeal are not in beneficiary’s favor  Keep appealing to ALJ level where many favorable decisions are being made

43 Favorable Decisions  ALJ Appeal No (Jan. 8, 2010), ationStatus/Decisions/VT_ALJ_01.10.pdf ationStatus/Decisions/VT_ALJ_01.10.pdf ationStatus/Decisions/VT_ALJ_01.10.pdf  Patient required monitoring, assessment, intravenous fluids (including intravenous morphine)  ALJ overruled Maximus Federal Services and held entire 5-day hospital stay was covered  ALJ relied on Medicare Benefit Policy Manual, CMS Pub. No , Ch. 1, §6; and QIO Manual, CMS Pub. No , Ch. 4, §4110, describing complex medical judgment that considers patient’s medical history, current medical needs, severity of signs and symptoms

44 Favorable Decisions con’t  ALJ Appeal No (April 9, 2009), ObservationStatus/Decisions/WI_ALJ_ pdf ObservationStatus/Decisions/WI_ALJ_ pdf ObservationStatus/Decisions/WI_ALJ_ pdf  ALJ addressed denial of 30-day SNF stay for lack of 3-day hospital stay, when resident had been in hospital for 13 days  ALJ found resident met hospital stay and needed and received Medicare-covered care in SNF

45 The myth of “improvement”  Medicare coverage of care and services in a SNF does not depend on the resident’s “improving.”

46 Myth, con’t  Restoration potential is not a valid reason for denial of coverage  “Even if full recovery or medical improvement is not possible, a resident may need skilled services to prevent further deterioration or preserve current capabilities.” 42 C.F.R. §409.32(c)  Example: “A terminal cancer patient may need some of the skilled services described in § ” 42 C.F.R. §409.32(c)

47 Maintenance Level Therapy  Maintenance rehabilitation therapy is a Medicare-covered service  “... when the specialized knowledge of a qualified therapist is required to design and establish a maintenance program based on an initial evaluation and periodic assessment of a resident’s needs….” 42 C.F.R §409.33(c)(5)

48 Criteria for Individual Assessment  Medicare should not use “rules of thumb,” such as  Lack of restoration potential, CMS Pub. No , Ch. 8, (“When rehabilitation services are the primary services, the key issue is whether the skills of a therapist are needed. The deciding factor is not the patient’s potential for recovery, but whether the services needed require the skills of a therapist or whether they can be provided by nonskilled personnel.”)

49 Good case law  Fox v. Bowen, 656 F. Supp (D. Conn. 1987)  Need for skilled nursing must be based solely upon beneficiary’s unique condition and individual needs  Court rejected “informal presumptions” or “rules of thumb” that denied coverage to beneficiaries who were not in weight- bearing stage of rehabilitation, amputees who did not have prostheses, beneficiaries who could ambulate 50 feet with supervision  Court held that the Secretary’s practice of denying Medicare coverage violated the Due Process Clause of the Fifth Amendment

50 Favorable ALJ Decisions  ALJ Appeal No (Jan. 25, 2010)  ALJ reverses QIO decision, which affirmed Medicare Advantage Plan’s termination of Medicare beneficiary’s SNF coverage, based on alleged stabilization of therapeutic regimen and no need for additional skilled nursing care, pdf pdf pdf  ALJ finds coverage for resident with “very complex medical history.” Additional therapy needed for resident to reach therapy goals, to prevent deterioration, and to preserve function. When resident’s medical condition destabilized, she needed skilled nursing observation and monitoring of her high- risk MRSA infection and “complicating underlying condition.”

51 SNF notice of non- coverage  Ensure the notice is valid  Is it signed/dated by beneficiary?  What is the rationale? Lack of improvement, patient reached a plateau, chronic condition requires only maintenance therapy  What is the appeal deadline? To whom do you appeal?

52 Request…  Statement of support from physician  Review SNF medical records  Daily skilled care  5 times per week, therapy, or  7 times per week, skilled nursing 42 C.F.R. §§ and (definition of skilled care)

53 Do you have clients affected?  If you have consumers who you know were denied Medicare coverage under this “improvement standard”, contact the Center for Medicare Advocacy  Can also contact CLS  Litigation is under way regarding this standard

54 Resources  Resources  CMA, Observation Status, ic/ObservationStatus/ObservationMain.htm ic/ObservationStatus/ObservationMain.htm ic/ObservationStatus/ObservationMain.htm  Includes links to Weekly Alerts, articles, other resources  Community Legal Services, Inc., (215) , 3638 N. Broad St., Philadelphia PA 19140

55 Acknowledgment  Various slides from this presentation were taken from the Center for Medicare Advocacy’s Presentation “Overcoming Barriers to Medicare Coverage of Skilled Nursing Facility Care”, authored by Toby S. Edelman, Esquire, presented to the NJ Elder Law Section Roundtable, February 14, 2011, Center for Medicare Advocacy, Inc.