Medicare’s Observation Status-Impacting the Pocket Book of Patients

We have had several blog posts about the issues with Medicare’s Observation Status.  A recent story on NPR (thanks to our friend Professor Naomi Cahn for sending it to us) gives us a first-person account of the impact observation status has on a patient’s checkbook. How Medicare’s Conflicting Hospitalization Rules Cost Me Thousands Of Dollars tells the story of a daughter who had to pay $12k for a nursing home stay for her mother’s care because her mother didn’t have a qualifying three-day hospital stay even though her mother was in the hospital for 4 nights. Why wouldn’t Medicare pay? Say it with me now-observation status.  As the daughter relates,  her “mother was caught in an administrative wonderland where she slept at a hospital for four nights, but the paperwork said she was an inpatient only one of those nights. Medicare’s rules, dating back to the 1960s, require people to spend three nights in a hospital before the federal program will pay for inpatient rehabilitative care.”  She notes her frustration with the explanations that focused on rules rather than her mother’s medical care:

• The doctor couldn’t admit her as an inpatient because she didn’t have a qualifying diagnosis.

• Her status was changed from observation to inpatient on the third day because Medicare requires that.

• They could not change her status to inpatient for the entire stay because they didn’t want to be audited.

• She couldn’t go to acute rehabilitation, which Medicare pays for, because there was no evidence she had had a stroke or heart attack.

She describes the competing Medicare Rules that produce this dilemma, and hospitals’ concerns about audits. She also describes software that hospitals use to decide whether to admit a patient or maintain the patient on observation status. To admit or not to admit, that is the question! (with apologies to William Shakespeare).  This long-standing problem rule is well-known, and Congressional bills to fix it haven’t gotten traction, she writes.  Why not shelve the three-night requirement?  The article mentions money as a likely explanation, but it appears that it is not 100% certain that is the reason, as the author cites to two studies from the ’70s.

Regardless, I do think we can agree that the requirement catches some folks off guard (despite the NOTICE Act) and costs many folks who need SNF care subsequently a lot of money.

For more on the issue of observation status, visit the Center for Medicare Advocacy.