Know Your Hospital Status: Inpatient or Observation?

Sunrise Senior Living  |  June 20, 2019
Know Your Hospital Status: Inpatient or Observation?
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If your senior loved one has recently been hospitalized, you may have had an unpleasant surprise when the bill arrived. The financial impact of a patient’s admission status can be shocking. Medicare patients often don’t realize there is a difference between being classified as “observation” and being admitted as a patient.

What Is a Hospital Observation Stay?

Medicare defines an observation stay as follows:

“Observation services are hospital outpatient services you get while your doctor decides whether to admit you as an inpatient or discharge you. You can get observation services in the emergency department or another area of the hospital.”

Medicare guidelines say hospitals should use two criteria in making this determination:

  • Does the severity of your illness require hospital admission?
  • Is the treatment intense or difficult enough that only a hospital can safely deliver it?

Unfortunately, these are vague criteria, and being held under observation can have serious financial consequences for seniors.

When a Hospital Stay Isn’t a Stay

When a Medicare recipient is held under observation, their Part A doesn’t cover the hospital stay. The expenses will be partially—not fully—covered by Part B. The result is higher out-of-pocket expenses for a variety of hospital services, such as medications, lab tests, and X-rays.

Changes in Medicare reimbursement and increased penalties on readmissions made observation stays attractive to hospitals. A New York Times report found the number of older adults held under observation status soared by 69 percent between 2006 and 2011.

The Impact of Observation Status on Skilled Nursing Center Care

This issue also impacts a senior’s ability to pursue follow-up care after a hospital stay. Seniors who aren’t officially admitted to the hospital don’t meet Medicare’s three-night hospital stay rule. That means they can’t use their Medicare skilled nursing and rehabilitation benefit to continue their recovery.

With the average cost of a skilled nursing stay starting at $245 per day, being held under observation can seriously impede an older adult’s ability to get the help they need. Many older adults find themselves in this scenario.

A study by the AARP showed that 2.1 million people were held under observation in 2015. Of those, 150,000 left the hospital with a physician’s order to continue their recovery in a skilled nursing facility. Because Medicare wouldn’t pay for their care, however, only one-third of the seniors followed their doctor’s orders.

There is reason for hope on the horizon, however. There is bipartisan legislation pending that would require Medicare to consider the three-day rule met if the older adult was held under observation.

If you would like to stay up to date on this legislation and other issues impacting older adults, we encourage you to bookmark The Sunrise Blog and stop back often.