CHA News Article

MedPAC Considers Short-Stay Policy Recommendations
Final vote expected in April

During its March meeting, the Medicare Payment Advisory Commission (MedPAC) discussed draft recommendations for short hospital stays, such those as those lasting only one night. The draft recommendations under consideration fall under three categories: recovery audit contractor reform, evaluation of a hospital penalty for excessive short stays and beneficiary protections. The details of each include:

  • The Secretary should direct Medicare recovery audit contractors (RACs) to focus reviews of short inpatient stays on hospitals with the highest rates of this type of stay.
  • The Secretary should modify each RAC’s contingency fees to be based, in part, on its claim denial overturn rate.
  • The Secretary should shorten the RAC look-back period for reviewing short inpatient claims.
  • The Secretary should evaluate a formulaic penalty on excess short stays to substitute for RAC review of short inpatient stays.
  • Congress should revise the skilled-nursing facility eligibility requirement so that, for beneficiaries formally admitted to the hospital as inpatients, time spent in outpatient observation status counts toward the three-day prior hospitalization threshold.
  • Congress should require, as a condition of Medicare payment, that all acute-care hospitals notify beneficiaries placed in outpatient observation status for longer than 24 hours of their observation status and that their status may affect their cost sharing for their current hospital stay, as well as coverage for skilled-nursing facility care.
  • Congress should package payment for self-administered drugs during outpatient observation on a budget-neutral basis within the hospital outpatient prospective payment system.

Notably absent from the draft recommendations is recommendation on a proposed payment methodology for short stays, which has been discussed extensively by the commission in recent meetings. The commission noted that development of a specific payment for a short stay is complex, and at this point it is unclear if such a policy would address the problem of short hospital says. The commission also discussed the need to make a statement about the two-midnight policy, but offered no formal recommendations.

The commissioners generally expressed support for the chairman’s draft recommendations but acknowledged some limitations worthy of additional discussion before a final vote, which would take place at the April meeting. Specifically, commissioners discussed the administrative complexities of requiring hospital notification of beneficiaries and at what point that would be most appropriate. In addition, the commission discussed the limitations of any formulaic approach to a penalty for excessive short stays but noted that the recommendation as written is a proposed evaluation of such a formula that would provide additional insights before proceeding.

CHA is pleased that MedPAC has acknowledged the need for significant RAC reforms in its recommendations, but believe many of them fall short of addressing hospitals’ concerns. However, it is disappointing that MedPAC is also considering additional hospital offsets for Congress to consider in order to cover the costs of implementing these policies. A complete transcript of the March meeting and the slide presentations provided to the public are available at, under “Public Meetings.”