Unfortunately, the chances are pretty good that you already know someone who has suffered from the “observation problem.”. Here’s a typical scenario: a person walks into the emergency department suffering from dizziness and weakness. The doctor makes a determination that the person is not having a stroke, but that more observation is necessary.

The patient is then placed in an outpatient unit (or sometimes a regular hospital room). However, they are not actually admitted to the hospital. This might sound like hospital mumbo -jumbo … stuff for the accountants to work out. But it can make a big difference in who the bill is being sent to, and how much that bill is for.

How Medicare Observation Status Can Cost You Big Time

The most devastating consequence comes when skilled nursing care (SNF) is required after being released from the hospital. Guidelines stipulate that Medicare will only pay for SNF if the patient was admitted to the hospital for three days. Patients who were never admitted, but received treatment anyway (a minimum of 3 days) are plum out of luck. They’re not going to get a dime.

Considering the costs of nursing facilities these days, this problem has been waiting for a solution for a long time. In some cases, patients are looking at out-of-pocket totals of up to $30,000, stemming from a single hospitalization.

Hospitals Don’t Like It Either

Like so many of the frustrating inconsistencies with modern health care, it all starts with the feds  As a federally operated program, Medicare pays hospitals and doctors based on strict admissions guidelines. If a Medicare auditor thinks a patient was admitted incorrectly, then the hospital has to foot the bill.

To put it simply, hospitals are, more and more, refusing to admit patients out of fear of these penalties. In addition to wrongful admissions, Medicare has been penalizing hospitals for re-admitting patients within a single 30-day period. This gives doctors even more incentive to keep some people in Medicare observation status, even if they’re getting the same treatments.

Always Ask, “Am I Being Admitted?”

Managing your health care costs is all about keeping yourself educated and informed. If you enter a hospital for any type of treatment, insist that your doctor updates you on admission status. Most Medicare patients treated under observational status will be given an Outpatient Observation Notice. However, these don’t always come through, and they are not always enough.

If you discover that you are on observation status, it is sometimes possible to get your determination changed. This is particularly important if you expect to need skilled nursing care after your stay. Some Medicare patients have had success asking their primary physician to make the appeal on their behalf.

Or you can refer to Medicare’s own “two-midnight rule.” This rule states that if the doctor “reasonably expects” that the patient’s treatment will cross “two midnights”, it is appropriate to admit the patient. However, this route still involves making the case to the hospital doctor, and that is always a tossup.

Good News: You Can Appeal Your Medicare Observation Status

In some much-needed good news, Medicare patients now have the ability to appeal their Medicare observation status retroactively. This is all thanks to a class-action suit filed by the Center for Medicare Advocacy. Their case argued (rightfully so) that hospitals were neglecting to admit patients in fear of penalties.

The judge’s ruling grants patients who have had their “inpatient” status changed to “observation” the ability to appeal bills that might have resulted from the status switch. The ruling could also result in a significant payback of millions of dollars in nursing home bills. No action is required to join the suit if you are eligible; it will happen automatically.

In the meantime, you can read more about the Alexander v. Azar case here.

Remember, anytime you receive emergency medical care, insist that your doctor keeps you updated on your admission status. Hang on to any and all status notices you might receive through Medicare. If you have any questions about your Medicare coverage, give us a call.