According to Medicare a person’s hospital status (classification as an inpatient or an outpatient) determines how much a person is required to pay for hospital services such as lab tests, x-rays, and medication while in the hospital
In order to be an inpatient in the hospital, a person needs to be formally admitted to the hospital, which involves a doctor writing an order for admission. The day before a person is discharged from the hospital is classified as their last day in the hospital as an inpatient.
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A person is classified as an outpatient if they are receiving services in the emergency department, observation status, outpatient surgery, lab work, x-rays and any other hospital services that are being provided when the doctor has not written an order to admit the person as an inpatient. A person can be on observation status even if they are in a bed in the hospital overnight for several days.
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The stated purpose of observation services within a hospital setting, serves to give the doctor time to decide if a patient needs to be admitted, or if the patient is safe to be discharged.
Medicare does not require a hospital to inform a patient that they are in the hospital on observation status, which according to Medicare is supposed to last no more than 48 hours.
NY State recently passed a law that took effect on January 19, 2014, that requires hospitals to provide both oral and written notification to patients within 24 hours of being placed on observation status. In NY, hospitals will receive financial penalties of as much as $5,000 per incident, for violation of this law.
Why does this matter?
According to federal statistics, patients on observation status is a growing trend, with the number of Medicare patients receiving observation care having increased by 69% over the past five years.
According to the Department of Health and Human Services’ inspector general, patients admitted to the hospital and those patients placed on observation status, often have similar symptoms and receive similar care as those being admitted. The 10 most common reasons for a person being placed on observation status include chest pain, digestive disorders, fainting, signs and symptoms, nutritional disorders, dizziness, irregular heartbeat, circulatory disorders, respiratory signs and symptoms, and medical back problems.
Two areas that a patient may be negatively impacted by being classified as observation status vs. admission, include:
1) Patients may lose their coverage for any medications the hospital provides for their pre-existing health problems, which means any medication the person was taking prior to arriving at the hospital. Medicare drug plans are not required to reimburse patients for these medication costs.
2) Patients who are in the hospital on observation status do not qualify for short term rehab services in a skilled nursing facility under Medicare Part A after leaving the hospital, since observation status does not qualify for the three consecutive midnights in the hospital. The cost of private pay out of pocket rehab services in a skilled nursing facility, can cost as much as $450 per day.
Medicare Hospital Readmissions Reduction Program
According to a 2009 study entitled “Re-hospitalizations among patients in the Medicare fee-for-service program”, nearly 20% of Medicare beneficiaries are re-hospitalized within 30 days after discharge, at an annual cost of $17 billion.
Over the past several years hospital re-admission rates are being more closely scrutinized.. It is believed that many of these re-admissions can be avoided, among them being hospital acquired infections (e.g. MRSA) and other complications; premature discharge; failure to coordinate and reconcile medications; inadequate communication among hospital personnel, patients, caregivers, and community based clinicians; and poor planning for care transitions.
A program that was established by the Affordable Care Act (ACA) is the Medicare Hospital Readmissions Reduction Program.
For the first year of this program being in affect (fiscal 2013), the Centers for Medicare and Medicaid Services imposed fines on thousands of hospitals, costing these hospitals up to 2% of their Medicare reimbursement, as part of the Affordable Care Act’s program aimed at curbing hospital readmission rates.
Under the Affordable Care Act, the Medicare Hospital Readmissions Reduction Program’s maximum penalty will increase to 3% by 2015, and also expand to include readmissions for additional medical conditions.
One important factor to consider is that the Hospital Readmissions Reduction Program pertains to Medicare beneficiaries who have been admitted, discharged and readmitted within 30 days.
A Medicare patient in the hospital on observation status, no matter how many days they spend in the hospital, does not constitute an admission, and therefore if the person reenters the hospital within 30 days it would not count as a readmission.
This would lead one to question whether there may be a financial incentive for hospitals to place Medicare beneficiaries on observation status, rather than admit the person.
Where Can You Get Help
The following information is provided by the Centers for Medicare and Medicaid Services from their publication “Are You a Hospital Inpatient or Outpatient?”
• If you need help understanding your hospital status, speak to your doctor or someone from the hospital’s utilization or discharge planning department.
• For more information on Part A and Part B coverage, read your “Medicare & You” handbook, or call 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048.
• For more information about coverage of self-administered drugs, view the publication “How Medicare Covers Self-administered Drugs Given in Hospital Outpatient Settings” by visiting Medicare.gov/publications, or call1-800-MEDICARE for a free copy.
• To ask questions or report complaints about the quality of care of a Medicare-covered service, call your Quality Improvement Organization (QIO). Visit Medicare.gov/contacts, or call 1-800-MEDICARE to get the phone number.
• To ask questions or report complaints about the quality of care or the quality of life in a nursing home, call your State Survey Agency. Visit Medicare.gov/contacts, or call 1-800-MEDICARE to get the phone number.
Additional Information
For more information, or to request an initial consultation, please contact:
Linda Ziac, LPC, LADC, BCPC, CEAP, CCM, CDP
The Caregiver Resource Center
Greenwich, CT
203-861-9833
