In an annual report, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) identifies 25 top recommendations that it made in prior years about HHS programs that HHS has not implemented. This year’s report on Top Unimplemented Recommendations includes observation status.
OIG calls on the Centers for Medicare & Medicaid Services (CMS) to “analyze the potential impacts of counting time spent as an outpatient toward the 3-night requirement for SNF [skilled nursing facility] services so that beneficiaries receiving similar hospital care have similar access to these services.”
Citing two earlier reports, OIG expresses concern that “Beneficiaries with similar post-hospital care needs have different access to and cost sharing for SNF services depending on whether they were hospital outpatients or inpatients.” Specifically, OIG found that increasing numbers of patients are in outpatient/observation status and that these patients have more limited access to post-hospital care in skilled nursing facilities and must pay more for those services than patients who are classified by their hospitals as inpatients.
The Center for Medicare Advocacy fully supports the need for CMS to address the problems that observation status causes Medicare beneficiaries. In particular, the Center supports federal legislation to count all time in the hospital for purposes of the three-day inpatient requirement for Medicare skilled nursing facility coverage. In addition, the Center reiterates that CMS has authority under existing law and regulations to correct the unequal treatment of Medicare beneficiaries by defining “inpatient” to include time spent in the hospital.
November 11, 2021 – T. Edelman
 OIG, OIG’s Top Unimplemented Recommendations: Solutions to Reduce Fraud, Waste, and Abuse in HHS Programs, https://oig.hhs.gov/reports-and-publications/compendium/files/compendium2021.pdf
 Id. p. 11.
 OIG, CMS Improperly Paid Millions of Dollars for Skilled Nursing Facility Services When the Medicare 3-Day Inpatient Hospital Stay Requirement Was Not Met, A-05-16-00043 (Feb. 2019), https://oig.hhs.gov/oas/reports/region5/51600043.pdf OIG, Vulnerabilities Remain Under Medicare’s 2-Midnight Hospital Policy, OEI-02-15-00020 (Dec. 2016), https://oig.hhs.gov/oei/reports/oei-02-15-00020.pdf
 OIG, OIG’s Top Unimplemented Recommendations: Solutions to Reduce Fraud, Waste, and Abuse in HHS Programs, p.11, https://oig.hhs.gov/reports-and-publications/compendium/files/compendium2021.pdf
 H.R. 3650, The Improving Access to Medicare Coverage Act of 2021, discussed in “Observation Status Bill Reintroduced” (CMA Alert, Jun. 10, 2021), https://medicareadvocacy.org/observation-status-bill-reintroduced/, and S. 2048, The Improving Access to Medicare Coverage Act, discussed in “Senators Introduce Bipartisan Observation Status Bill to Help Vulnerable Medicare Beneficiaries” (CMA Alert, Jun. 17, 2021), https://medicareadvocacy.org/observation-status-bill/
 See memorandum by the Center for Medicare Advocacy, https://medicareadvocacy.org/cms-has-authority-under-existing-law-to-define-inpatient-care/