Patient Status in Hospital could lead to Costly expenses for Medicare Beneficiaries

Imagine becoming ill or having an injury and being rushed to the hospital’s emergency room. This is a terrifying experience at any age; for most, it very time consuming and can be costly. You might be surprised to know that after several days in the hospital, that you were never classified as an inpatient. You were considered an outpatient, in “observation” status. Why is this important?

Traditional Medicare requires a three day inpatient stay before it will cover the first 20 days of rehabilitation care in an approved nursing facility. If the hospital classifies you as “observation” status instead of inpatient status, you do not qualify for Medicare services after you are discharged from the hospital and will be responsible for the full bill for rehabilitation services. Traditional Medicare will not cover you. The cost for nursing home care can exceed $400 a day.

You might be wondering, How can this happen? Observation status looks and feels like full hospital admission, but technically you are an outpatient. You might have been assigned to a room on a floor, stayed several days, having doctor and nurse care with several test. You will receive the same care in the hospital if you were classified as “inpatient”, however you will not quality to receive any additional care under traditional Medicare because you were “observation” status or otherwise, never admitted.
Medicare Advantage Plans do not necessarily have the same rule. Excellus, Blue-Cross, BlueShield  reported that hospital status will not affect eligibility for rehabilitation as long as the services are deemed necessary. MVP Healthcare on the other hand, requires a three day qualifying stay in order to be eligible. United Healthcare does not require a 3-day prior hospital stay to qualify for skilled nursing care. However it is important to note that, unless the provider writes an order to admit you as an inpatient to the hospital, you are an outpatient and pay the cost sharing amounts for outpatient surgery. Even if you stay in the hospital overnight, you might still be considered an outpatient. People with private commercial insurance plans are also subject to the terms and conditions of their contract.
A study in the June 2012 issue of the journal Health Affairs reported the ratio of observation stays to inpatient admissions from 2007-2009 among fee-for-service Medicare patients increased 34 percent. Local data reflect national trends.
Increased “observation” stays might be a result of payment policies. Medicare routinely performs audits on hospital billing practices and flags patients where it is determined that an outpatient procedure would have sufficed over a hospital stay. In some cases, the hospital loses the revenue billed, even after an appeal process is completed. It is good to note that recently, The Center for Medicare Services will permit hospitals to re-bill in cases where hospital admissions are not deemed to be justified.
Hospitals therefore are being creative to insure that they receive payment for services provided.
Senator Charles Schumer, D-N.Y., announced early in March his plan to introduce a bill that would have observation stays count toward the three day requirement.
In the meantime, know that patients admitted through the emergency department are considered in observation status in many hospitals. Once there, be certain to have the conversation with the doctor so that you are not blindsided once discharged. 

For more information, read: Patient Status in Hospital can lead to a jolt,

Carmen Coleman, is a trusted Medicare Advisor and Consultant. She owns Lifetime Financial Group in Rochester, NY offering an array of insurance products including Medicare Advantage Plans. Visit her webpage:

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