The Medicare Payment Advisory Commission (MedPAC) voted unanimously on March 5, 2015, to approve draft recommendations to reform the Recovery Audit Contractor (RAC) program as part of a way to update Medicare policies related to short hospital stays.  MedPAC debated a set of five draft recommendations concerning short-term hospital stay issues.  MedPAC will vote on the final versions of the recommendations in April. 

One of the draft recommendations discussed at the March 5 meeting would update the RAC program to target reviews on hospitals with the highest rate of short inpatient stays, shorten the RAC lookback period for reviewing short inpatient claims, and modify RAC contingency fees to be based, in part, on claim denial overturn rates.  This draft recommendation is “aimed at relieving hospitals of administrative burden, improving RAC accountability, and better aligning RAC audits with the hospital rebilling program.”  Another draft recommendation would call on the Secretary of HHS to evaluate a formulaic payment penalty on excess short stays to substitute for RAC review of short inpatient stays. 

MedPAC also approved draft recommendations that would call on Congress to revise: the three-day hospital stay requirement for skilled nursing facility (SNF) Medicare coverage to include outpatient observation stays, so long as one of the days is classified as inpatient; require beneficiary notification of outpatient observation status; and package payment for self-administered drugs for patients under outpatient observation status on a budget-neutral basis within the hospital outpatient prospective payment system.  MedPAC commissioners were told that the draft recommendations are expected to increase Medicare spending in the aggregate. 

A transcript reflecting this vote is available here. 

Reporter, Linda Lin, Atlanta, + 1 404 572 3566, llin@kslaw.com.