A Hospital Classification That Could Cost Seniors Thousands

affordable home care companies assisted home care in Minnesota at home caregivers elder care in Minnesota elderly home assistance in home care Minneapolis in home help for seniors senior citizen careAfter a hospitalization, it’s common to spend some time in a rehabilitation facility to get intensive physical and/or occupational therapy.  Most often, if people with Medicare have a three-day hospital stay, they can transfer to a skilled nursing facility for rehabilitation and be covered under their Medicare benefits as long as they make progress in therapy.

The problem comes when people are discharged to a rehab facility and don’t realize that they were not really “admitted” to the hospital in the first place.  With the new Affordable Care Act, understanding why could save seniors thousands of dollars.

Observation Status vs. Inpatient Status

Increasingly, we are seeing people going to the hospital, and instead of being formally admitted, doctors are placing them on “Observation Status,” frequently for 48 hours but sometimes for up to 5 days!  While there can be valid reasons for this, those in this situation need to be aware of how being classified as “Observation Status” affects Medicare benefits.  “Observation Status” does not count as a three-day hospital stay, which means the person will have to pay privately if sent to a rehab facility.  “Observation Status” includes services, short-term treatment, and tests to help doctors decide if the patient should be admitted for inpatient treatment.  But from the patient’s perspective, because they are taken upstairs to a hospital bed, given a wristband and have completed a meal chart, they think they are formally admitted.

While many hospitals will provide written notice to patients admitted under “Observation Status,” most patients do not realize until discharged or when receiving the bill that they never were formally admitted to inpatient status.

How This Affects Out-of-Pocket Expenses

According to Cindy Dubansky, MSW, LICSW, C-ASWCM, and owner of Case Management Solutions, “Observation Status” can also affect how a hospital bill is covered by your health plan.  Each plan may cover it differently.  If Medicare is a senior’s primary coverage, “Observation Status” is covered under Medicare Part B.  Thus, people may be responsible for out-of-pocket expenses including their deductible, if it has not already been met, a 20% coinsurance for each hospital service, and drug charges.  Be aware that Medicare part B covers very limited medications, so seniors may be billed the hospital rate for medications and for the hospital staff to administer them.  Medicare supplemental plans may cover the deductible and co-insurance charges according to the particular contract but will likely not cover drug and drug administrative charges, which can run from hundreds up to thousands of dollars depending on the drugs and how long care is classified as “Observation Status.”

If your loved one is admitted to the hospital:

  • Be sure to ask the doctor whether the status is “Inpatient” or “Observation” and the reason for the classification.
  • While in the hospital on “Observation Status,” ask the doctor every day whether the status can be changed to “Inpatient Status.”  If not, ask why not.
  • If you need assistance, ask the hospital’s patient advocate, social worker, or patient representative to help you clarify the status or to get the status changed.
  • Consider being an advocate or asking a family member or trusted friend to be an advocate.

Why Is This Happening?

As part of the new Health Care Reform bill, hospitals are now financially penalized if elderly patients are admitted again within a certain timeframe for the same condition.  This is to give incentive for hospitals to deliver better and more cost-effective care for older people and to ensure there is a solid and safe follow-up plan in place after leaving the hospital. If there is a good discharge and follow-up plan which ensures continuity and coordination of care, the chances are better that the person will not end up back in the hospital, which saves all of us money.  Of course, if the person was never admitted as “Inpatient” in the first place (read: categorized as “Observation Status”), then the financial penalty does not apply.

The bottom line is to know whether your elderly parent is categorized as “Inpatient” or “Observation” status when taken to a hospital.  Knowing the status and advocating to change it, if appropriate, can potentially save a senior thousands of dollars!

If you are taking care of elderly parents and feel that “Observation Status” has been used inappropriately in a particular situation, you can appeal that decision by contacting Kelli Jo Greiner at the Minnesota Board on Aging.  Her phone number is 651-431-2581, and her email is Kellijo.greiner@state.mn.us.


Julie Ellingson, LSW

November 27, 2012





Tags: , , , , ,

Leave a Reply