Case Management

Should CMS eliminate observation services?

Case Management Monthly, November 1, 2010

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CMS has seen an increase in the number of extended observation stays and wants to know why. That was the reason it gave for holding an August 24 listening session regarding the matter. The reason providers misuse observation services may not have been as interesting as the solution proposed by some callers—namely, that CMS should abolish observation services. 

“I would love to see observation status eliminated. It has been the bane of my existence for the past four years since we got audited by the RAC [recovery audit contractor],” says Rhonda Karas, BSN, telemedicine coordinator at Trinity Hospital in Weaverville, CA. 

Proper use of observation services is a struggle for providers, mainly because CMS has changed the rules several times over the past decade, says Michael Ross, MD, FACEP,medical director of observation medicine at Emory University in Atlanta and chair of the CMS APC Panel’s observation subcommittee. The most recent change came in 2008 when CMS decided to pay a composite payment for observation services, which combined emergency or clinic visits into observation visit payment.

Observation services that extend beyond 48 hours hurt the Medicare beneficiary most. Beneficiaries pay high copays for observation services and typically do not understand the difference from inpatient care until they receive a bill. 

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