Medicare Reimbursement and Health Policy Director Anna Howard was quoted in a Modern Healthcare article titled, “Admissions Conundrum.” The article discusses how Centers for Medicare & Medicaid Services (CMS) is looking to reduce long observation stays, which hospitals see as another cut.

The CMS’s proposed rule for hospital inpatient services in 2014 includes significant changes on how to determine whether inpatient admission and reasonable and necessary. Officials say they’re concerned by the trend of increasing observation stays because it means higher copayments for beneficiaries.

To address the problem, the CMS proposed that Medicare’s external contractors would assume hospital admissions are reasonable and necessary for those beneficiaries who stay in a hospital through two midnights. The CMS estimates that would increase inpatient expenditures by $220 million.

According to Anna, this move comes when hospitals are also facing readmission penalties, disproportionate-share hospital payments to Medicare and Medicaid, and payment reductions through sequestration.

“It’s death by 1,000 cuts at the same time there is this move in healthcare out of the inpatient setting into the outpatient setting,” Anna said.