II 

115TH CONGRESS 

1ST SESSION S. 568 

To amend title XVIII of the Social Security Act to count a period of receipt 

of outpatient observation services in a hospital toward satisfying the 

3-day inpatient hospital requirement for coverage of skilled nursing facility services under Medicare. 

IN THE SENATE OF THE UNITED STATES 

MARCH 8, 2017 

Mr. BROWN (for himself, Ms. COLLINS, Mr. NELSON, and Mrs. CAPITO) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend title XVIII of the Social Security Act to count 

a period of receipt of outpatient observation services 

in a hospital toward satisfying the 3-day inpatient hospital requirement for coverage of skilled nursing facility 

services under Medicare. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Improving Access to 

5 Medicare Coverage Act of 2017’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 


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1 (1) Medicare requires beneficiaries to be hos2 pitalized for medically necessary inpatient hospital 

3 care for at least three consecutive days before cov4 ering post-hospital care in a skilled nursing facility. 

5 (2) Often patients remain under ‘‘observation 

6 status’’ in the hospital for several days. These days 

7 are not counted toward the 3-day inpatient stay re8 quirement because they are considered outpatient 

9 days. 

10 (3) Hospitals’ use of observation stays has in11 creased sharply since 2006. According to the Medi12 care Payment Advisory Commission’s March 2014 

13 report, outpatient visits, many of which are observa14 tion stays, increased 28.5 percent between 2006 and 

15 2012, with a simultaneous 12.6-percent decrease in 

16 inpatient stays over this same 6-year time period. A 

17 study published in Health Affairs found a 34-per18 cent increase in the ratio of observation stays to in19 patient admissions between 2007 and 2009, leading 

20 the researchers to conclude that outpatient observa21 tion status was becoming a substitute for inpatient 

22 admission. The same study also documented in23 creases in long-stay outpatient status, including an 

24 88-percent increase in observation stays exceeding 

25 72 hours. 


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1 (4) To health care providers, care provided dur2 ing observation is indistinguishable from the care 

3 provided to inpatients, with all medically necessary 

4 care being provided, regardless of patient status. 

5 Beneficiaries are generally not informed of their in6 patient or outpatient status and assume that they 

7 are inpatients when they are placed in a hospital 

8 bed, only to find out that such care was not counted 

9 for purposes of satisfying eligibility requirements for 

10 medically prescribed Medicare coverage of post-hos11 pital care in a skilled nursing facility. 

12 (5) Older Americans and people with disabilities 

13 who are hospitalized but do not meet the 3-day inpa14 tient hospital threshold simply because they were 

15 placed in ‘‘outpatient observation status’’ for some 

16 or all of their hospital stay (even when their total 

17 actual stay exceeds 3 days in the hospital), can face 

18 a significant and unexpected financial burden, which 

19 can amount to thousands of dollars, for skilled nurs20 ing facility care. Among beneficiaries who received 

21 care in a skilled nursing facility that Medicare did 

22 not cover, average out-of-pocket charges were more 

23 than $10,000 according to the Office of Inspector 

24 General. 


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1 (6) The Centers for Medicare & Medicaid Serv2 ices (CMS) attempted to provide hospitals with clar3 ity on which patients should be categorized as inpa4 tients in its Fiscal Year 2014 inpatient payment 

5 rule. However, this rule fails Medicare beneficiaries 

6 because it does not address the problem and explic7 itly states that days spent in observation do not 

8 count for purposes of satisfying the 3-day inpatient 

9 stay requirement. 

10 (7) Because of CMS’ policy, which indicates 

11 days under observation do not count towards the 3- 

12 day inpatient stay requirement, some patients under 

13 observation and their families will continue to face 

14 a significant, often insurmountable financial burden 

15 if they need skilled nursing care after their hospital 

16 stay. 

17 (8) The amendment made by this Act would 

18 update Medicare policy by deeming patients under 

19 observation as inpatients for the purposes of satis20 fying the 3-day inpatient stay requirement. Such 

21 amendment does not repeal the 3-day inpatient stay 

22 requirement, rather it simply expands the Secretary 

23 of Health and Human Service’s administrative defi24 nition of ‘‘inpatient’’ for purposes of the 3-day inpa25 tient stay requirement to include time spent under 


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1 observation. As such, it is not a reprise of the Medi2 care Catastrophic Coverage Act of 1988, which re3 pealed the 3-day requirement and resulted in 

4 ‘‘churning’’ of patients back and forth from non5 Medicare payment sources to Medicare. Such 

6 amendment simply restores the original objective of 

7 the 3-day rule, which was to ensure that Medicare 

8 covered skilled nursing facility stays that followed 

9 hospital care for patients who stayed in the hospital 

10 for 3 days. 

11 (9) It is the intent of this Congress, through 

12 such amendment, to allow access to skilled nursing 

13 care for the population of beneficiaries who meet 

14 medical necessity requirements for such care, but 

15 who do not satisfy the 3-day inpatient stay require16 ment simply because some or all of their time in the 

17 acute care hospital is characterized as ‘‘outpatient 

18 observation status’’ for billing purposes. 

19 (10) It is the understanding of this Congress 

20 that the Secretary of Health and Human Services 

21 will monitor patterns of behavior to ensure that pro22 viders deliver appropriate and needed levels of care. 

23 (11) The Office of the Inspector General of the 

24 Department of Health and Human Services is sup25 portive of counting hospital observation days toVerDate Sep 11 2014 01:34 Mar 14, 2017 Jkt 069200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S568.IS S568

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1 wards the 3-day inpatient stay requirement. In addi2 tion, in September 2013, the congressionally estab3 lished Commission on Long-Term Care rec4 ommended that the Centers for Medicare & Medicaid 

5 Services count time spent in observation status to6 ward meeting Medicare’s 3-day inpatient stay re7 quirement. In addition, in a December 2016 report, 

8 the Office of the Inspector General of the Depart9 ment of Health and Human Services found that an 

10 increased number of Medicare beneficiaries classified 

11 as outpatients are paying more for care that is sub12 stantively similar and have limited access to skilled 

13 nursing facility care due to their patient status. 

14 SEC. 3. COUNTING A PERIOD OF RECEIPT OF OUTPATIENT 

15 OBSERVATION SERVICES IN A HOSPITAL TO16 WARD THE 3-DAY INPATIENT HOSPITAL RE17 QUIREMENT FOR COVERAGE OF SKILLED 

18 NURSING FACILITY SERVICES UNDER MEDI19 CARE. 

20 (a) IN GENERAL.—Section 1861(i) of the Social Se21 curity Act (42 U.S.C. 1395x(i)) is amended by adding at 

22 the end the following: ‘‘For purposes of this subsection, 

23 an individual receiving outpatient observation services 

24 shall be deemed to be an inpatient during such period, 

25 and the date such individual ceases receiving such services 


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1 shall be deemed the hospital discharge date (unless such 

2 individual is admitted as a hospital inpatient at the end 

3 of such period).’’. 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 subsection (a) shall apply to receipt of outpatient observa6 tion services beginning on or after January 1, 2017, but 

7 applies to a period of post-hospital extended care services 

8 that was completed before the date of the enactment of 

9 this Act only if an administrative appeal is or has been 

10 made with respect to such services not later than 90 days 

11 after the date of the enactment of this Act. Notwith12 standing any other provision of law, the Secretary of 

13 Health and Human Services may implement such amend14 ment through an interim final regulation, program in15 struction, or otherwise. 

Æ 


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