Hospital Observation Status and Medicare

You or a loved one is in a hospital room wearing a hospital gown and even have an ID bracelet so you are classified as an inpatient in the hospital, right? Not necessarily.

A problem that is occurring all too often is patients that are placed under observation status instead of being admitted to the hospital for an inpatient stay. Many patients would regard this as meaningless because they feel they are getting the same type of care, however the differences in classifications can have costly consequences. This is true not only for Medicare beneficiaries, but may affect individuals on private insurance as well.

When a Medicare beneficiary is admitted to the hospital for care, Medicare Part A covers the medical expenses, including prescriptions, and the patient is responsible for a $1,216 inpatient deductible. If the patient requires additional care in a skilled nursing facility (SNF) and has been in the hospital as an inpatient for three or more days, again Medicare Part A covers up to 100 days in the SNF with copays due for days 21 – 100.

If however the Medicare beneficiary is placed under observation status during the hospital stay, it classifies him/her as outpatient while in the hospital and the charges are now processed under Medicare Part B causing the patient to have higher out of pocket costs and also responsible for the cost of prescriptions. In this situation, if the patient requires additional care in a skilled nursing facility (SNF), the patient will be responsible for the entire cost of the nursing home because the requirement of a hospital inpatient admission of at least three days was not met. Because the patient was under observation status while at the hospital, Medicare will NOT cover the SNF cost.

It is very important to be actively involved with you or your loved one’s hospital stay. Each day while in the hospital, you should communicate with the hospital staff and your attending doctor about what your or your loved one’s current status is because it can change from day to day. If you find that you or your loved one is under observation in the hospital, it is easier to have your status reviewed while in the hospital than to go through the Medicare appeal process afterwards. It is even more important to have the status reviewed to determine if Medicare’s nursing home requirements are met if you believe that you or your loved one will need additional care in a SNF so you do not receive any surprising bills from the nursing home afterwards.

If you have any questions about this topic or encountered this situation and need help filing an appeal with Medicare, please call our office to speak with one of our knowledgeable staff.