The Senate Special Committee on Aging today held a hearing to examine “solutions to the hospital observation stay crisis.” Testifying for the AHA, Jyotirmaya Nanda, M.D., system medical director for informatics and physician compliance at the Center for Clinical Excellence and Corporate Responsibility at St. Louis-based SSM Health Care, emphasized that the distinction between inpatient and observation services is a payment distinction set forth by the Centers for Medicare & Medicaid Services, not a clinical distinction. “Hospitals are doing their best, both to comply with Medicare payment policies and to address the confusing and difficult issue of patient status with patients and their families,” but “are left in an untenable position,” Nanda said. “On the one hand, they risk loss of reimbursement, monetary damages and penalties from auditors and prosecutors when they admit patients for short, medically necessary, inpatient stays. On the other hand, they face criticism from certain patients and CMS over the perceived use of observation services instead of inpatient admission.” Nanda said that Medicare auditors, especially Recovery Audit Contractors, second guess physician judgment, sometimes years after a patient was seen and often with additional retrospective information on the patient’s condition, undermining the physician’s medical judgment by denying inpatient claims. He said the Medicare Audit Improvement Act (H.R. 2156) would go a long way toward ensuring the RAC program “is more accurate and fair for the Medicare program, providers and beneficiaries.”