CMS Works to Update Definitions for Inpatient, Outpatient Status

CMS has released a proposed rule on determining whether a Medicare beneficiary is classified as a hospital inpatient or outpatient.

In the rule, CMS says "hospitals appear to be responding to the financial risk of admitting Medicare beneficiaries for inpatient stays that may later be denied upon contractor review by electing to treat beneficiaries as outpatients receiving observation services - rather than admit them."

Classification is key because Medicare beneficiaries might need care at a nursing home after an inpatient hospital stay, but Medicare does not cover the nursing home stay if the beneficiary is admitted under observation status. This can lead many beneficiaries unable to afford their follow-up care.

The American Hospital Association issued a comment letter that noted hospitals risk loss of reimbursement when patients are admitted for short stays. The AHA also said that CMS frequently criticizes hospitals that use an excessive number of observation stays.

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