This article appeared in Kaiser Health News on March 13, 2017.
By Susan Jaffe
Under a new federal law, hospitals across the country must now alert Medicare patients when they are getting observation care and why they were not admitted — even if they stay in the hospital a few nights. For years, seniors often found out only when they got surprise bills for the services Medicare doesn’t cover for observation patients, including some drugs and expensive nursing home care.
The notice may cushion the shock but probably not settle the issue.
When patients are too sick to go home but not sick enough to be admitted, observation care gives doctors time to figure out what’s wrong. It is considered an outpatient service, like a doctor’s visit. Unless their care falls under a new Medicare bundled-payment category, observation patients pay a share of the cost of each test, treatment or other services.
And if they need nursing home care to recover their strength, Medicare won’t pay for it because that coverage requires a prior hospital admission of at least three consecutive days. Observation time doesn’t count.
“Letting you know would help, that’s for sure,” said Suzanne Mitchell, of Walnut Creek, Calif. When her 94-year-old husband fell and was taken to a hospital last September, she was told he would be admitted. It was only after seven days of hospitalization that she learned he had been an observation patient. He was due to leave the next day and enter a nursing home, which Medicare would not cover. She still doesn’t know why.
“If I had known [he was in observation care], I would have been on it like a tiger because I knew the consequences by then, and I would have done everything I could to insist that they change that outpatient/inpatient,” said Mitchell, a retired respiratory therapist. “I have never, to this day, been able to have anybody give me the written policy the hospital goes by to decide.” Her husband was hospitalized two more times and died in December. His nursing home sent a bill for nearly $7,000 that she has not yet paid.
The notice is — as of last Wednesday — one of the conditions hospitals must meet in order to get paid for treating Medicare beneficiaries, who typically account for about 42 percent of hospital patients. But the most controversial aspect of observation care hasn’t changed.
“The observation care notice is a step in the right direction, but it doesn’t fix the conundrum some people find themselves in when they need nursing home care following an observation stay,” said Stacy Sanders, federal policy director at the Medicare Rights Center, a consumer advocacy group.
Medicare officials have wrestled for years with complaints about observation care from patients, members of Congress, doctors and hospitals. In 2013, officials issued the “two-midnight” rule. With some exceptions, when doctors expect patients to stay in the hospital for more than two-midnights, they should be admitted, although doctors can still opt for observation.
But the rule has not reduced observation visits, the Health and Human Services inspector general reported in December. “An increased number of beneficiaries in outpatient stays pay more and have limited access to [nursing home] services than they would as inpatients,” the IG found.