Centers for Medicare & Medicaid Services (CMS) Proposes New Rules Addressing “Observation Status” and Medicare Coverage

As part of the annual update to inpatient hospital reimbursement under the Medicare program, CMS is again considering observation status. This time, CMS is proposing "a time-based presumption of medical necessity for hospital inpatient services based on the beneficiary's length of stay" (78 Fed. Reg. 27486, 47644 (May 10, 2013)). Under the proposed rules, Medicare would presume that an individual is an inpatient if the physician documents that the patient requires more than two midnights in the hospital following an inpatient admission. The "starting point for this time-based instruction would be when the beneficiary is moved from any outpatient area…

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