What Medicare Participants Should Know About Hospital Patient Observation Status

Understanding what Hospital Patient Observation Status Really Means

Some people expressed their disappointment over the “Hospital Patient Observation Status” experience to admission in the hospital.  Staying in a hospital for few days yet considered as an outpatient by the Medicare is very frustrating. Hospitals put you in “Observation status” if you are too sick to go home but not sick enough to be admitted. Statistically, patients who are admitted in the hospital for observation care increases every year. In 2011 statistics, the number increase up to 69% in five years. This report is not very comforting for senior patients.

Hospital Patient Observation Status Means No Medicare Coverage for Skilled Nursing and Rehab / Nursing Home

A senior if admitted to the hospital for “observation status” cannot receive Medicare coverage for follow-up care in a skilled nursing and rehab facility/nursing home, even with doctors recommendation. As Medicare ruled, a senior can be eligible for skilled nursing and rehab facility (SNF)/nursing home if he/she has spent at least 3 consecutive days as in-patient. Toby Edelman, a senior attorney with the Center for Medicare Advocacy,  says “to deny people coverage in the nursing home because the hospital called them outpatients makes absolutely no sense.”

The Center for Medicare Advocacy, after receiving complaints from hundreds of people sued the Department of Health and Human Resources. According to Edelman,  the lawsuit challenges the use of observation status. They argues that long observation stays are not authorized by the Medicare.

Medicare recommends that observation status should be made within 24 to 48 hours only. For the past six years the use of observation status in the hospitals increases. The government study shows that last year there are more than 600,000 Medicare patients were admitted to the hospital for at least 3 days yet they are under the observation status. Then, they are not qualified for coverage in the nursing home care.

Hospitals did not take responsibility of the observation status increase and complains. Instead, they blame the government, specifically, the government program called RAC (Recovery Audit Contractors). The auditor goes out and examines the old hospital records. Joanna Hiatt Kim, vice president for payment policy at the American Hospital Association says, “The recovery audit contractors can go back three years, and in fact do go back three years,”. According to Kim, if auditors decide that the inpatient cases should be an outpatient cases, hospitals must refund the amount that they had received years earlier, often get little or no reimbursement.

The Department of Health and Human Resources have not commented on this issue because of the impending lawsuit. However, they have issued some new rules to improve things between hospitals and patients. Recently, they have a revision in payments rule to ease financial pressure on hospitals. Hospital that were denied the reimbursement, can now resubmit a bill within one year to Medicare for a payment based on observation status. Yet, the improvement they made is not enough. The American Hospital Association has also said that it is not enough time and is suing Medicare to end the policy. Though they have addressed some issues, there are no changes that is directly benefit the patients. According to Rep. Joe Courtney, D-Conn it need an act of Congress. “It was not really an issue that could be resolved easily by Medicare through an administrative change,” he says.

A proposed legislation that would require Medicare to pay for follow-up treatment in a nursing home for any patient who had been in the hospital for at least three days, no matter if they’re an inpatient, outpatient or on observation status is what Courtney is pursuing now. So far his bill has more than 90 co-sponsors, including 20 Republicans. “This is an issue that has a life of its own,” he says. “It is not an issue that … falls into traditional partisan playbooks.”

Though this bill has been introduced in Congress, it has not yet received any action.

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