Medicare recipients may face large bills for care

Inpatient admissions increased 34% in 2 years

Pittsburgh Post-Gazette - Medicare recipients who need more time to recuperate after leaving the hospital could be hit with unexpected expenses if they don't qualify for the standard 20-day stay in a nursing home because a four-day hospitalization was billed as an outpatient "observation" instead of an inpatient admission.

While a room can still be theirs, they will likely face an upfront payment of hundreds of dollars to claim it.

The problem has become more common in the past year as patients end up squeezed between a federal health care agency trying to control spending and hospitals and nursing homes trying to avoid unpleasant surprises. As a result, a patient could be treated at a hospital for congestive heart failure for four days then, because the stay didn't count as an admission, owe $250 a day for follow-up nursing home care.

It doesn't happen all the time, "but until 2012 we rarely saw it. It was just not a typical problem," said JoAnne Reifsnyder, chief nursing officer for Genesis HealthCare, a national network of skilled nursing facilities.

What has changed is Medicare's interpretation of what constitutes an inpatient hospitalization -- several days in a hospital bed receiving treatment under a doctor's care does not necessarily meet the criteria.

In June, Brown University researchers published a study that found nationally the ratio of Medicare patients classified as outpatient "observations" rather than inpatient admissions had increased 34 percent from 2007 to 2009.

Last summer, the Centers for Medicare & Medicaid Services proposed increasing payments for outpatient services and noted it is "concerned about recent increases in the length of time that Medicare beneficiaries spend as outpatients receiving observation services."

The agency asked for public comment on potential policy changes.

Historically, an outpatient observation would be a period of time when a person is being evaluated for something like chest pain or is receiving short-term treatment while doctors decide if further, inpatient care is needed.

But, in an attempt to hold down costs, the scope of "observations" now can include spine fractures or overnight stays that last several days while the patient undergoes tests and receives treatment.

While the move toward classifying more hospital stays as observations is also an issue with private insurers, Medicare poses particular problems because of the large number of Medicare beneficiaries, and because of Medicare's auditing process, which allows the agency to retroactively check and change a hospital stay from inpatient to outpatient for up to five years.

When that happens, a hospital can lose its entire reimbursement payment -- and, in some cases, the hospital will then bill the patient.

Hospitals have long decried the trend among all insurers, including government insurers such as Medicare and Medicaid, to classify even overnight hospital stays as "observations" rather than admissions, thus reducing by more than half the reimbursement to the hospital.

With Medicaid, which provides coverage for low-income families, observations are not reimbursed at all.

Now Medicare beneficiaries and other patients are paying the price, too. Under Medicare rules, a beneficiary is entitled to a nursing home stay following a minimum three-day hospitalization. But it must be a three-day admission -- and neither time spent in the emergency room nor the day of discharge count.

In other words, someone can be receiving hospital treatment for congestive heart failure over four days but Medicare may consider it an observation. Then, when the patient transfers to a nursing home afterward, there's no coverage -- and the facility may start charging $250 a day or more.

In November 2011, the Center for Medicare Advocacy -- a national nonprofit based in Connecticut and Washington, D.C., that advocates for Medicare beneficiaries -- filed a class-action lawsuit against U.S. Secretary of Health and Human Services Kathleen Sebelius alleging that the agency is wrongfully denying Medicare beneficiaries coverage by classifying inpatient stays as outpatient observations, and thus exposing Medicare patients to large bills for their hospital and skilled nursing stays.

(Contact Steve Twedt at

(Distributed by Scripps Howard News Service,

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