If you or a loved one are a Medicare beneficiary, then it’s important that you
are aware of Medicare’s “Observation Status”, which has the potential to greatly impact your life if you enter a hospital.
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The following information is for educational purposes only and is intended to provide an overview of the key components related to Medicare’s “Observation Status”.
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Observation Services are those services furnished by a hospital on its premises, including the use of a bed, periodic monitoring by nursing and other staff, and any other services that are reasonable and necessary to evaluate a patient’s condition or to determine the need for a possible (inpatient) admission to the hospital.
• Hospitals can utilize any specialty inpatient areas (e.g. ICU or CCU) to provide observation services (e.g., telemetry).
• While the Medicare suggested time for observation status is 24 to 48 hours, many hospital stays have been extended up to 14 days.
Tim Knox is a 87 year old male hospitalized with a fractured hip. Mr. Knox was placed on the medical unit, and received regular nursing care and meals during his 14 day hospital stay.
When Mr. Knox was ready to go to a skilled nursing facility for rehabilitation, Mr. Knox was told that he would have to pay for the rehab services himself, because he did not qualify for Medicare Part A rehab services. When asked why not, Mr. Knox was told that he was never formally admitted as an inpatient to the hospital. Instead, Mr. Knox had been in the hospital under “observation, which would end up costing Mr. Knox thousands of dollars out of pocket.
Inpatient vs. Observation Status
Medicare beneficiaries are increasingly being admitted for treatment at hospitals on "observation status" (covered by Medicare Part B), instead of as inpatients (covered by Medicare Part A).
Medicare Part A (Hospital coverage) covers inpatient hospital services. This usually means you pay a one time deductible for all of your hospital services for the first 60 days that you are in the hospital.
As an inpatient, Medicare Part B (Medical Insurance) covers most of your doctor services.
Under “observation status”, you are responsible to pay 20% of the Medicare approved amount for doctor services after paying your Part B deductible.
How Much Will This Cost Me
The potential impact is great. For a hospital stay classified as observation status" under Medicare Part B, you are required to pay a copayment for each individual outpatient hospital service (e.g. medication). You will also be responsible to pay 20% of the total Medicare approved amount after you have meet your Part B deductible.
To qualify for skilled nursing care (SNF), a beneficiary must have had a three day inpatient hospitalization. A patient’s time spent on "observation status" does not meet this three day requirement. The cost of a SNF may be as high as $450 per day.
Your Rights
- Ask the doctor if you are an inpatient or on “observation status”.
- Do not sign anything until you have had a family member review the documents.
- Retain the services of a Certified Case Manager to serve as a patient advocate.
- Request a discharge planning meeting before you leave the hospital, to review services and coverage.
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
