Revisiting “observation status” and Medicare

Posted: July 17th, 2015 | Author: Elizabeth H. Klampert Blog
Categories: Medicare

Has anything changed since I originally wrote about this topic in September 2013?  The short answer is:  “Not really.”

Remember the scenario:  You, a Medicare recipient, are taken to the local hospital’s emergency room after suffering chest pains and, in fact, are later taken to a hospital room.  You are discharged after three days and sent home.  At no time did anyone advise you that you were on “observation status”.  You receive a bill and find out that you are being asked to pay for services that you thought were covered under Medicare Part A, but are not because you were never admitted to the hospital.

More significantly, you then need skilled nursing facility (SNF) services.  Because you were never admitted to the hospital, Medicare may decide that you are not qualified to receive payment for those services under Part B which means that you will have to pay for them yourself.  The hospital’s failure to admit you can be very costly to you personally.

Hospitals are still not “admitting” Medicare patients, but keeping them under “observation status.”  This status is intended for short term stays which, under the Center for Medicare and Medicaid Services (CMS) guidelines, means 24 hours or less.  It also means that you are being treated as an outpatient and so not covered under Medicare Part A.  Patients often have no idea that they have never been admitted and, once they have left the hospital, find that the consequences can be significant, as our scenario illustrates.

CMS became concerned about this issue and proposed certain policy changes, which it discussed in a 2013 memorandum.  Prior to that, a lawsuit, Bagnall v. Sebelius, was filed in 2011 in the U.S. District Court of Connecticut, which challenged the use of “observation status.”  However, the court dismissed this lawsuit and, despite repeated efforts in Congress to mitigate the impact of observation status, the latest bill, Improving Access to Medicare Coverage Act of 2015 (H.R. 1571), is unlikely to pass.  If it did, it would allow a 3-day stay in the hospital, regardless of status, to meet the 3-day inpatient hospital requirement for Medicare coverage for SNF services.

As I advised in my earlier post, New York State passed legislation in June 2013 that requires hospitals not only to give notice to patients placed in observation status but also to explain the consequences of doing so.  This law took effect in January 2014.

Since Congress has failed to act, you should consider the following to protect yourself when you are taken to the hospital:

  • If there for any length of time, ask the hospital staff what your status is.  Ask every day.  Be persistent.
  • If you are told that you are under observation status, ask the hospital doctor to admit you as an inpatient.
  • If there is any resistance to this, ask your primary care physician to call the hospital and explain why you need to be admitted.  Do this while you are still in the hospital.
  • If you are transferred to a nursing home while being kept under observation status, Medicare may deny coverage.  After you receive your Medicare Summary Notice (MSN), you can appeal this denial but may need the assistance of an attorney to do so.

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