Medicare Beneficiaries: Beware of “Observation Stays”
Friday, June 8th, 2012
If you spend up to a week in a hospital and receive tests and procedures, you must be an inpatient, right? And if you are on Medicare, Medicare will pay for most of your expenses and post-hospital care, right?
Not necessarily. More and more hospitals are keeping Medicare patients for up to a week without officially admitting them. These non-admission hospital stays are called “observation stays.” If you are in the hospital on an observation stay, and then need nursing care when you are released, you may find that Medicare won’t cover your post-hospital care.
“Observation” means that the doctor is evaluating your condition to see if you need to be admitted. Until you are admitted you are an outpatient, even if you are given a bed and stay overnight. Or over several nights.
Observation stays are most common if a patient seeks help through the emergency room, but they are not limited to the emergency room. If the doctor sends you to the hospital to treat a known disease such as mesothelioma cancer, probably observation stays won’t be an issue, but it doesn’t hurt to clarify this with the hospital staff.
A study published in the journal Health Affairs found that between 2007 and 2009, the ratio of observation stays to regular admission increased by 34 percent. “Medicare beneficiaries were increasingly subjected to hospital observation care and treated as outpatients instead of inpatients, which can expose them to greater out-of-pocket expenses if they are eventually admitted to skilled nursing facilities,” the study says.
Bernice Young of the Sacramento Bee recently reported on a 73-year-old woman who spent five days in a Santa Rosa hospital in severe pain. While in the hospital, she received an MRI, pain medication and physical therapy. When she was released, her doctor recommended that she recover in a skilled nursing facility.
But the woman found that the recommended nursing facility wanted $7,000 up front, just to admit her. Because she had never been admitted to a hospital, Medicare would not pay for post-hospital care.
It used to be that patients were kept “on observation” only for a few hours. Now observations stays of three days or more are becoming common, especially for Medicare patients. Why?
The practice of keeping patients without formally admitting them is an unintended consequence of crackdowns on Medicare fraud. Medicare investigators are looking especially hard at short hospitals stays that may not have been necessary. Such stays cost taxpayers a lot of money, and sometimes the bills are padded with tests and procedures that were not actually performed. This week a congressional subcommittee heard testimony that fraud could be taking as much as $100 billion a year out of the Medicare system.
Hospitals have learned they can avoid drawing the attention of Medicare fraud investigators by classifying short stays as “observation.” This doesn’t mean these hospitals are cheating Medicare. Patients may have been genuinely distressed and given medical care. Even so, Medicare investigation is about as welcome as an IRS audit.
The California Hospital Association says that short stays put hospitals in a bad spot. “Hospitals face criticism from patients and CMS (Medicare & Medicaid Services) over the perceived use of observation status as a substitute for inpatient admissions, but risk penalties from CMS auditors and prosecutors when auditing admissions of short inpatient stays,” their website says.
Until Medicare and the hospitals iron out some compromise, be careful to not be stuck in observation stay limbo. The CMS has publication called “Are You a Hospital Inpatient or Outpatient?If You Have Medicare – Ask!” that explains the difference between inpatient and observation-outpatient coverage.
Most important, if you are in the hospital for more than a few hours, be sure to ask the hospital staff if you are an inpatient or an outpatient. And keep in mind that hospitals may admit you but change your status to observation before you are released, so watch out for that, too.
