By now you know the story—or at least think you do: A nursing home nurse sees an 87-year-old resident in cardiac arrest and calls 9-11. Despite desperate pleas of the call center operator, the nurse refuses to do CPR and the resident dies.

Except most of the story isn’t true. Lorraine Bayless lived at a Bakersfield (CA) continuing care community called Glenwood Gardens, but in independent living, not in its skilled nursing facility. She did not die of a heart attack but of a stroke, according to the death certificate signed by her personal physician. CPR may have saved her, but it is very unlikely.

And there is more. Mrs. Bayless did not want life-prolonging medical interventions, and her family is fully satisfied with the care she received. And the staffer who called 9-11 may not have been a licensed nurse at all. One piece of the story is true: Glenwood Garden staffers are prohibited from performing CPR or other medical interventions and are instructed to call 9-11 in the event of emergencies.

Still, even the real story raises some important questions. If you or a loved one live in residential care, here are five lessons to learn from this episode: 

What level of care can you expect? Independent living communities are not nursing homes or assisted living facilities. You should not expect them to provide medical care or even personal assistance. You have an apartment and perhaps access to a dining room and some social activities. Emergency response is probably limited to a pull cord in your unit. That’s about it. If you need additional assistance, you’re responsible for hiring your own aide. CCRC’s are more complicated since they may have a licensed nursing facility on site. Still, if you are living in an independent unit, don’t expect skilled nursing care.

Is staff trained and permitted to perform emergency care? Does the facility have at least one staffer trained in CPR and first aid on duty at all times? She doesn’t need to be a licensed nurse. And what is the staff allowed to do—bandage a cut, put ice on a bruise, CPR, or nothing? One CCRC director told me her staffers are trained in first aid but her facility’s lawyers urged her to instruct employees to always call 9-11.  

What emergency care do you want? This may be the most important question of all. Mrs. Bayless’ family says she did not want life-prolonging emergency care. It is not clear whether she had a living will or do not resuscitate order, or had designated a family member as her healthcare proxy. But if you are old enough to be reading this, you should discuss end-of-life issues with family members and prepare your own advanced directives. Right now.    

Is the facility aware of your wishes? It does you no good to prepare these legal documents if you don’t  share them with the care facility, your physicians, your local hospital, and your family. You should distribute advanced directives as widely as necessary. Remember, people cannot follow your wishes if they don’t know what they are. The best outcome for Mrs. Bayless may have been for the staffer to not call 9-11 at all but rather to hold her in her arms until she passed away. But she had to know that.

Finally, lesson No. 5: Don’t believe all the news you read on the Web.

Nearly two months ago, Congress created a commission to recommend reforms to the current long-term care system. So what has happened since? Not much.

Leaders of Congress have appointed members to serve on the panel but President Obama—who has three of 15 picks– has not yet made his choices. The commission can’t select a chairman, find a staff, or set an agenda until he does, so for now the effort remains on hold.

Sources say the delay is mostly bureaucratic—it often takes the White House time to review background checks and run candidates through the usual political traps. 

The commission members picked so far are an intriguing mix. They include health and long-term care policy experts, three representatives from the nursing home and the senior service industry, two physicians, a union official, a philanthropist focused on finding a cure for Alzheimer’s disease, and a Medicare consumer advocate. Somewhat surprisingly, it has no members explicitly representing the views of people with disabilities, family caregivers, or the insurance industry.

As I have written previously, this commission will operate under severe constraints. It is supposed to address three big issues–long-term care financing, delivery, and workforce challenges. It has no budget so its staff will be made up of people detailed from Congress or the Administration. It has only six months to submit a report (the clock starts ticking once Obama discloses his choices). After Obama makes his picks, the panel will have nine members appointed by Democrats but only six selected by Republicans–a ratio that already has the GOP planning to play defense. Most troubling, Congress is not required to act on the panel’s recommendations.

Some optimists believe the commission can achieve some modest goals—by framing the importance of long-term care reform and perhaps by agreeing to small reforms. But others have much lower expectations.  

Who are its members?

Democrats have picked:

Javaid Anwar, a Las Vegas internist who is vp for health services at a large casino/hotel company and served as chair of Nevada’s Committee on Access to Health Care.  

Laphonza Butler, president of the Service Employee’s International United Long Term Care Workers’ union.

Bruce Chernof, a physician who is president and CEO of the California-based SCAN Foundation, which focuses on senior issues.

Judy Feder, my colleague at the Urban Institute who served as a senior health aide in the Clinton Administration and staff director of the 1989-90 Pepper Commission.

Judith Stein, founder of the Center for Medicare Advocacy, which represents beneficiaries in their disputes with the Medicare program.

George Vradenburg, a former media executive and founder of USAgainstAlzheimer’s—a non-profit that advocates largely for research dollars aimed at finding a cure for dementia.

The GOP picks are:

Judith Brachman, who formerly served as a housing official in the Reagan Administration and director of the Ohio Department of Aging, now chairs the Jewish Federation of North America’s Aging and Family Caregiving Committee. JFNA represents long-term care providers.

Bruce Greenstein, Louisiana’s Secretary of Health and Hospitals, who was formerly a senior official at the federal Department of Health and Human Services and managing director for worldwide health at Microsoft.

Stephen Guillard was CEO of several large skilled nursing facility operators including HCR ManorCare and was chairman of the Alliance for Quality Nursing Home Care, a trade group that represents large for-profit nursing home companies.

Neil Pruitt is chairman and CEO of UHS-Pruitt Corp, an integrated health care company, and board chair of The American Health Care Assn., the largest trade group representing nursing homes and other senior service providers.

Grace-Marie Turner is president of the Galen Institute, a free-market oriented public policy organization that focuses on health care issues.

Mark Warshawsky is a pension expert who directs retirement research at the benefits firm Towers Watson and was a senior official at the Treasury Department from 2004-2006.  

There are some impressive people in this group and a few who seem to have little knowledge of long-term care. They represent a wide ideological spectrum which, depending on the panel’s dynamics, could be an opportunity to find bipartisan consensus or, more likely, a recipe for gridlock. But the commission won’t be anything at all until Obama picks the last three members.        

More people over 65 are dying in hospice care and fewer are dying in hospitals. But this good news is tempered by a very different story. People are also being hospitalized more frequently in the last three months of their lives, are more likely to spend time in intensive care units, and are often receiving hospice care for just a few days before they die.

In a new study in the Journal of the American Medical Association (JAMA), Joan Teno and colleagues painted a nuanced picture of end-of-life care in the U.S.  A key finding: Simply knowing where someone dies may not say much about the care she received at the end of life.  

As Teno and her colleagues note, one patient may spend her final week at home, but her last day in the hospital for pain control. Another may spend her last week being moved from home to hospital to nursing home and back to the hospital. Both die in the same place but their experiences are very different.

A recent report by the Centers for Disease Control and Prevention found more people are dying at home. And Medicare is considering site of death as a quality measure for end-of-life care, on the theory that dying at home may be less stressful than dying in an institution.

But Teno tells a much more complex tale. She and her co-authors found that about 33.5 percent of Medicare beneficiaries died at home in 2009, 10 percent more than in 2000. Only about 24.6 percent died in the hospital in 2009, down one-quarter from 2000, while the percentage of people dying in nursing homes was little changed. At the same time, about 42 percent died in hospice care in 2009, nearly twice the percentage in 2000.

For those of us who believe in the importance of palliative care at the end of life, this is all good. But it isn’t the whole story. And the rest is less positive.

Transitions from one care setting to another in the last 90 days of life increased by 50 percent, from an average of two moves in 2000 to three in 2009. Ten percent faced a care transition in their last three days in 2000, but 14 percent were moved in 2009. While 24 percent of those who died used the ICU in 2000, 29 percent received intensive care in 2009. More than 11 percent had three or more hospitalizations in the last 90 days of their life.

While these patients spent a bit less time in the hospital, they also spent more days in the ICU. Most disturbingly, dementia patients spent more time in the intensive care in 2009 than in 2000.

Finally, while hospice use increase, more than 28 percent of hospice users were enrolled for three days or less.  Medicare’s own attitude towards hospice is…complicated.

There are some big caveats to this study. The first is that it includes only patients in traditional fee-for-service Medicare, not Medicare Advantage. It will be interesting to learn whether experiences are any different for managed care patients.

Second, the study looks retrospectively at all patients who have died though in some cases nobody would expect them to receive end of life care. Imagine, for instance, an active 65-year-old who breaks a leg skiing. She has the leg repaired in the hospital, goes to a skilled nursing facility for rehab, and has a completely unexpected heart attack. She is returned to the hospital, where she dies in the ICU. She’d appear as someone with multiple care transitions at the end of life, though such care may have been completely appropriate.  

But many people don’t die that way. They suffer from chronic diseases, such as heart or lung disease or dementia, and death is often not unexpected (by them or their physicians). Teno’s study tells us there is still a lot more we need to learn about how to deliver care at the end of life.

Elder abuse is a serious and growing problem we know too little about and, worse, too often ignore. It comes in many forms—physical, financial, and emotional. Yet, even as society focuses on addressing child abuse, it has fallen far behind when it comes to responding to elder abuse. Here are a couple of examples of the right way, and the wrong way, to confront this problem:

First, the wrong way.  A true story with a few details changed: An 85-year-old man with life-threatening cancer lives at home with his wife (who is unable to care for him) and his adult son. The son, who serves as his father’s primary caregiver, is under tremendous stress, has serious behavioral issues, drinks heavily, and takes drugs. One day he brings home a handgun. When a paid caregiver learns about the weapon, she contacts her home care agency that, in turn, calls the community’s Adult Protective Services staff.

APS does nothing itself to investigate the matter. Instead, it calls the local police. An officer goes to the home, asks each of the residents if there is a gun in the house. They all deny it, and the officer leaves. There is nothing to be done, APS tells the home care agency, until “something happens.” That is to say, until the son shoots someone.

Here is a different way to address elder abuse: New York City responds aggressively to allegations of abuse, using teams of law enforcement officers, social workers, lawyers, and others. But a key challenge is helping abused elders find a safe place to live.  A Bronx nursing home has helped find a solution.

In 2004, the Hebrew Home at Riverdale and the Pace Women’s Justice Center created what became the Harry & Jeanette Weinberg Center for Elder Abuse Prevention. The project partners with more than a dozen government and non-profit organizations to provide a range of legal assistance, medical care, and social services to victims of abuse. It also trains law enforcement personnel and other service providers.

Much of the direct assistance is available to those who can still live in the community. But a key element is a shelter for abused seniors located at the Hebrew Home (and available to all regardless of religion). These elders, many of whom may have nowhere else to go, can stay for as long as a few months, though some may stay for just a few days.

The Hebrew Home solution is a classic win-win. Like many large, older nursing homes, the facility is plagued with empty beds. Rather than letting the space go to waste, the Hebrew Home created a shelter and opened up some otherwise-unused rooms to abused seniors.

The most interesting part of this story is that the Weinberg Center is now replicating the Riverdale experience at seven additional sites, including Fairfield, CT, Albany and Rochester NY, Minneapolis, Atlanta, and Providence, RI.  There are plenty of other facilities that should follow suit.

At a time when senior services budgets are being squeezed, local governments, communities, and senior service providers need to work even more closely to find solutions. Dan Sewell of the AP wrote a nice piece on Sunday describing a couple of programs, including the Hebrew Home project.

But I can imagine even more ambitious efforts to reach out to communities. Senior villages, those grassroots non-profits that have sprung up in hundreds of neighborhoods around the country, seem like an ideal partner for a Weinberg-like program. So do churches, temples, synagogues, and mosques.  

As the population ages, more and more seniors will be victimized by abuse. But there are solutions that can be built on existing resources. We just need to look for them.

Broad-based, integrated, community-wide initiatives can help keep seniors out of the hospital, says an important new study from the Journal of the American Medical Association.

The study, done by a team led by Dr. Joanne Lynn of the Altarum Institute’s Center on Elder Care and Advanced Illness is new evidence that by working together, hospitals, physicians, social workers, nursing homes, home health agencies, and community organizations can help seniors reduce both initial hospitalizations and readmissions. This suggests that such teamwork can improve the quality of care for elders with chronic disease.

The researchers looked at 14 initiatives across the country, all involving Medicare Quality Improvement Organizations (QIOs). These are private, Medicare-funded groups that work with medical providers and seniors in each state to improve the quality and efficiency of health care. The study looked at networks in a broad range of communities throughout the country from Miami, FL to Whatcom County, WA. The sites were rich and poor, urban and rural, and those with relatively high hospital usage and those with lower utilization.

Participants used a wage range of methods to reduce hospitalizations. Nearly all used care transition nurses who are specially trained to coach high-risk patients in ways to care for themselves. Most used Project RED (Re-Engineered  Discharge) that standardizes hospital discharges. Nursing homes used software called INTERACT which helps nurses identify and manage residents’ changing health status. What’s striking is these are all readily available off-the-shelf tools that any facility can use.

Some of the programs also used community relationships to help seniors stay out of the hospital. The program in Tuscaloosa, AL, for instance, built on ties with local churches. I have written in the past about a similar model in Memphis TN that aims to accomplish the same goal.  

In other communities, hospitals and nursing homes did a better job sharing data. In others, nursing facilities changed the way they cared for new admissions. My friend Joanne Kenen wrote a nice piece for Politico describing how some of these local projects operate.

The bottom line is that both initial hospitalizations and rehospitalizations were lower in the 14 communities than in 50 similar communities that did not use these interventions.

There are several important caveats to this study. The first is that fewer hospitalizations are not necessarily the same as better care.  It was also hard to find perfect matches between those communities that used the initiatives and those that did not. It also turned out that hospitalizations and readmissions declined in both sets of communities, though they fell more in those that implemented quality programs. Finally, while admissions and readmissions fell, rehospitalizations as a percentage of discharges (a commonly used measure) did not.

Still, this study builds on a growing body of evidence that when doctors, hospitals, nursing homes, community organizations, and patients themselves work together, seniors are more likely to do a better job caring for themselves. And that can keep them out of the hospital, which is usually  a very good thing.

A new insurance company survey of financial advisers reports that four-in-ten have clients who ask about giving away their assets so they can become eligible for Medicaid long-term care.  Oddly, though not surprisingly, the same advisers report their clients say that a key goal of their long-term care planning is “maintaining control.”

The online survey, by Nationwide Financial, questioned a small, self-selected sample of advisers, so the results may not be representative. And remember, this survey did not report that 40 percent of clients want to spend-down, only that 40 percent of advisers had clients who asked about it.

Most research suggests that few ever follow through with this strategy. Still, if control and independence are really your goals, the last thing you want to do is rely on Medicaid for your long-term supports and services. Here are some reasons why:

Medicaid benefits vary widely from state to state. And while a handful of programs provide beneficiaries some flexibility, Medicaid is loaded with rules about what is, and what is not, covered. While home care is becoming more common, assistance is still often available only in nursing homes. And even where Medicaid home care is offered, the level of assistance is often low and many enrollees face long waiting lists before such care is available to them.  

Medicaid pays only limited benefits for residents of assisted living facilities. It may pay for some assistance with daily activities, such as bathing or eating, but does not pay for room and board, which represents the bulk of costs. Medicaid normally won’t pay for independent senior living either.

While Medicaid does pay for nursing home care, getting into a high-quality facility is not easy. And once you get in, you may have very different accommodations than private pay residents.  

Nursing homes normally are not required to accept Medicaid residents. Indeed, because facilities say they lose money on Medicaid stays —a new industry-funded study reports that nursing homes lose an average of about $22-per-Medicaid patient per day—the best nursing homes limit the number of Medicaid residents they will accept at any one time.

The trick is to get into a high-quality facility while you are still paying out of pocket. Once you are there, the facility is not allowed to evict you if you run out of money and go on to Medicaid.  Nursing facilities, of course, know this. So they’ll often want to be sure you can pay for a year or more before accepting you. That may mean you have to enter a nursing facility long before you need to, just so you can get into your facility of choice.  

Also, keep in mind that while a facility may not reduce its care if you shift from private pay to Medicaid, it can make some changes. For instance, in nearly all facilities Medicaid residents must share a room.

Finally, Medicaid makes it tough to artificially give away assets in order to benefit from the program. One rule penalizes you if you give away your money within five years of being admitted to a nursing home.

At first glance, giving away money to relatives may seem attractive. But Medicaid is a program aimed at the poor and it faces severe budget issues.  Besides the ethical issues of gaming the system (which I think are significant), you might want to think twice about turning your care over to a government program that is chronically short of money.

Too often, we stash our elders away in institutional residential care facilities. And, sadly, even many active seniors choose to separate themselves from the broader world, opting for what they see as the safety and security of gated communities.  

This week, I spent a couple of days in Rochester, N.Y., where the St John’s Living Community has developed two alternatives to this world of hidden elders. One is a new independent living community that is explicitly opening itself up to the surrounding neighborhood. The second: Two 10-bed nursing homes that have been built in the midst of a middle-class subdivision, as fully integrated into the neighborhood as the private homes that surround it.

At first glance, the independent living community, called Brickstone, is not unlike hundreds of other upscale senior residences. Still under construction, it will include 102 townhouses, apartments, and bungalows, with a community center, walking trails, shops, and restaurants. It is a short walk from another St John’s facility called the Meadows, which provides both independent and assisted living.

What’s different is St. John’s aim to reach outward rather than turn inward. It invited local colleges to teach undergraduate courses at the Meadows. Shops and restaurants at Brickstone’s village square will be open to the broader community, not just limited to its residents. A lecture series is also open to the neighbors and includes programs that include children’s literature and story “slams.” Duane Girdner, St. John’s marketing vp, calls Brickstone an “ungated community.”   

St. John’s other initiative is even more interesting. It has built two “Green House” nursing facilities right in the middle of a new suburban development called Arbor Ridge in Penfield, N.Y.  Green Houses are themselves an important innovation, replacing big institutional nursing facilities with small homes for 8-10 residents.

Green Houses provide residents with broad autonomy, allowing them to choose, for instance, when to get up and when to eat. And they have profoundly changed the role of the nurses and nurse’s aides  who provide direct care. The concept has been around for several years, but until now most Green Houses have shared a campus with sister care facilities, often large, more traditional nursing homes.

St John’s Arbor Ridge project is very different. There, two single-story nursing homes sit in the midst of an otherwise ordinary subdivision.  From the outside, the facilities look much like the ranch houses that share the development. The goal: To integrate the nursing homes –and their residents– as much as possible into the community.

Soon after the facilities opened last spring, St. John’s threw a well-attended community party. Since then, staffers report no complaints or concerns from the neighbors, but neither has there yet been much bonding. 

I’ve visited some similar-sized assisted living facilities that have also located in residential neighborhoods. And the concept works. After a few years, local kids come by for Halloween trick-or-treating, neighbors get to know residents–and  something like a community is created. That’s what St John’s has in mind.   

Of course, the idea of seniors living in community settings is entirely unremarkable. Yet, even elders who live in their own homes are increasingly disconnected from their neighbors.  Old friends move away. Younger couples are busy with their kids. If an elder can no longer walk or has trouble hearing, she is less likely to meet new people. She can be living in a community but entirely isolated from it.

St. John’s is trying repair those broken links, both for active seniors and those with significant cognitive and physical limitations. If it succeeds, it can blur the line between institutional living and community living. And that would be a very good thing.

Last week, Medicare agreed to expand its skilled nursing care and rehabilitation therapy benefit for some people with chronic disease, including many elderly. This added care, which came in a settlement of a lawsuit brought by a Vermont woman named Glenda Jimmo, the Center for Medicare Advocacy, and others is potentially very important for some Medicare beneficiaries.

But the settlement does not affect long-term care benefits in any way. Medicare did not pay for long-stay nursing home care, home health aides, or other long-term care services before this lawsuit, and it will not do so now.    

Similarly, the case has no impact on Medicaid, the government program that does pay for these services for people who are both impoverished and need a high level of assistance. The benefits and eligibility rules for Medicaid remain unchanged.

Yes, this agreement will make it easier for some people who are receiving long-term care to also get skilled nursing care or physical therapy. But it will not require Medicare to pay for any long-term services or supports   

Still, many people are confused about Medicare benefits for those with chronic disease and uncertain about this case. Several people have called or emailed asking whether this settlement means their mom can now get Medicare long-term care benefits. The simple answer is: No.  

That is not to say the settlement is not important. For years, many home health agencies and skilled nursing facilities have interpreted Medicare rules to mean the program would not pay for rehab if a patient is not getting better.  

Imagine, for example, an 80-year old suffers a stroke. There has been no question that Medicare could pay for, say, her physical or occupational therapy. However, the rules have been unclear, and many providers have taken the position that Medicare would only pay as long as she improves as a result of this skilled care.

The rules were vague, and Medicare has sometimes argued that providers misunderstood them. Still, many service providers, who feared Medicare auditors would demand repayment for ineligible services, were reluctant to provide rehab or skilled nursing unless a patient met this “improvement standard.”  

Under the terms of the legal settlement, a doctor no longer has to assert that a patient will improve to be eligible for skilled nursing care and rehab.  She will now be eligible for the Medicare benefit even if that care helps her maintain her health status.  As long as skilled care is deemed necessary by a health professional  based on an individual assessment, maintenance therapy would now be a Medicare benefit.

It is also important to remember that the settlement does not increase the number of days skilled nursing care is provided after a hospitalization. It remains a maximum of 100 days per benefit period.

The agreement must still be approved by the judge before it is final. However, the federal government will begin implementing the agreement right away, though the process could take many months.

It is long past time for Medicare to clarify this issue, and it could even end up saving the program money since ongoing therapy might keep a patient out of the hospital. However, don’t be confused: This agreement does nothing to expand long-term care benefits.

Too many people make the dangerous roundtrip from hospital to nursing facility and back again. These transfers may increase risks of delirium, medication errors, falls, and infection. There is no doubt that some patients die as a result of these transfers. And, they cost payers—Medicare, Medicaid, and private insurance—hundreds of millions of dollars each year.

The real tragedy: By some estimates as many as 60 percent of these rehospitalizations are preventable. 

Now, nursing facilities and their partner hospitals are taking steps to cut these readmissions. In researching a new article for the journal Health Progress, published by the Catholic Health Assn., I had the chance to visit and talk to some of the nation’s most creative senior service providers. And I learned about both the challenge of reducing hospital readmissions and some cutting-edge solutions.

Some of these initiatives are being driven by new Medicare rules. Among them: On Oct 1, Medicare will begin cutting  payments to hospitals where too many patients are readmitted within 30 days of discharge. While the initial penalties are relatively modest and for only three conditions—heart failure, pneumonia, and heart attacks—they will gradually stiffen. And the new rules seem to have changed the mindset of many hospital administrators.

Increasingly, hospitals are improving discharges and keeping a close eye on patients after they leave. No longer do they abandon their patients once they roll out the front door. Many are putting transition programs in place—often using care managers, social workers, or nurses—to assist patients who are discharged to home. And slowly, they are beginning to work more closely with nursing facilities—both skilled nursing and long-stay nursing homes—to reduce readmissions.

At the same time, the best nursing facilities are making big changes of their own. They include:

• Increasing staff and improving training for nurses and aides to help them identify and treat situations that can lead to hospitalizations.  At Wheaton-Franciscan Healthcare in Wisconsin, nursing facility aides are trained to identify warning signs in heart failure patients and how to communicate what they see to staff nurses. These steps often prevent a crisis before it occurs.    
• Working with primary care doctors to encourage them to allow the nursing facility to treat many acute episodes rather than ordering patients back to the hospital.
• Asking patients, residents, and their families whether they want to be hospitalized. When Hebrew Senior Life asked patients at its post-acute care nursing facility in Boston what they wanted, it discovered many preferred to stay where they were. Now, the HSL system is expanding this program to residents of its long-stay nursing home.

Steps such as these are especially important since more patients are receiving post-acute and post-surgical care in skilled nursing facilities rather than in hospitals themselves.

It is important to keep in mind that reducing hospitalizations is not the goal: The real aim is improving the quality of care for these patients, many of whom need both medical care and personal assistance. Sometimes, they should be hospitalized. But often, they can receive the best care by staying where they are.

The medical and long-term care systems have a long way to go in their efforts to improve care for the frail elderly and others with severe chronic disease. But finally they are beginning to take some big steps down that road.

While many seniors and their families may not be aware of it, consumer groups, hospitals, and nursing homes are fighting a major battle with Medicare over how the federal program pays for patients who are cared for in a hospital, but not admitted to the hospital. Seniors caught in this regulatory purgatory may have to pay thousands of dollars for care they receive after they are discharged.

How can a patient receive care in a hospital but not be admitted? It happens when the patient is treated under what Medicare calls “observation status.” These stays are usually for 48 hours or less but can be longer. Most troubling, a patient’s status can be changed while she is in the hospital and without her knowledge.

While observation stays are still infrequent, they have become much more common in recent years. According to a new study by researchers at Brown University, as many as one million patients were kept under observation in 2009, one-third increase from 2007. Medicare itself estimates that the percentage of patients under observation for 48 hours or more increased from 3 percent in 2006 to 7.5 percent in 2010.

 Why does it matter so much? In part it’s because Medicare has another regulation called the “three-day rule” that says it will not pay for post-acute care or rehabilitation services in a skilled nursing facility unless a patient has first been admitted to a hospital for at least three days. The key word is “admitted.” Time under observation status does not count towards those three days, even though a patient may be in a hospital bed, receiving care from hospital staff, or getting tests and medications administered by hospital employees.  

As a result, if an observation status patient receives additional treatment at a nursing facility, the patient, and not Medicare, must pay for that post-discharge care. And costs can easily reach tens of thousands of dollars.     

At first glance, observation status makes sense. Imagine the common situation of an 85-year old suffering from chest pain who is brought to the emergency department of her local hospital. The ER docs find no evidence of a heart attack but would like to keep an eye on her.  She probably doesn’t need to be admitted to the hospital, which can be very expensive.   So, she remains under more cost-effective observation.

In addition, there have been abuses by nursing homes that send patients to the hospital so they can restart the three-day clock and get another round of Medicare payments. The problem is there are no clear clinical guidelines for when a patient should be kept under observation.  As a result, many observation decisions are driven, not by doctors, but by Medicare fraud auditors who can deny payments for patients they deem improperly admitted.

As a result, a wide range of advocacy groups, from the nursing home industry to consumer groups such as the Center for Medicare Advocacy (CMA) are urging Medicare to revisit the observation rules. In Nov., 2011, CMA sued Medicare to block the current system. At the same time, CMA and groups such as the American Health Care Assn. (which represents mostly for-profit nursing facilities) have asked Medicare to count all hospital days—including time under observation—towards the three day rule. Bipartisan bills in the House and Senate would accomplish the same goal.

As Medicare shifts its payment system to encourage providers to integrate care across settings or fully manage care, rules such as the three-day standard are likely to become obsolete. But until they do, expect this high-stakes battle to continue.

(Full disclosure: I am an unpaid board member of a community hospital)