By Jennifer Wilson, Social Work Resource Assistant

Most people assume that when they are admitted into a hospital they are automatically considered an inpatient. However, this is untrue. The physician or practitioner decides whether to list the patient as an inpatient or put them on “observation status.” CMS defines observation status as, “a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital.” The problem with observation status is that Medicare Part A will only pay for hospital inpatient care. If you are listed as on observation status Medicare Part B will pay for care provided by the hospital physicians, and normally supplemental insurance policies will pay for the additional costs such as hospital deductibles, copayments, and Part B cost sharing. This is an issue for beneficiaries who opted out of Medicare Part B and also for those who require care in a skilled nursing facility upon discharge from the hospital. Medicare Part A will only cover skilled nursing care in a facility if the patient had been admitted to a hospital as an inpatient for three days prior – this is called a “qualified stay.” This means that if you were on observation status, even if you stayed at the hospital for three days, Medicare will not pay for the skilled nursing facility rehabilitation you need as that was not a qualified stay..

Putting patients on observation status has become an increasingly common occurrence. This is because CMS audits hospitals if they believe that there have been improper Medicare payments. If a hospital’s decision to admit a patient as an inpatient is overturned, the hospital loses money. Certain steps have been taken to address this problem such as a national class action lawsuit filed by the Center for Medicare Advocacy, Bagnall v. Sebelius. This was in 2011 and an outcome is still being awaited.

In the meantime there are certain steps you can take as a patient or as a caregiver to avoid this. The first very important step is to find out the admission status of you or your loved one immediately. If you are on observation status, the Center for Medicare Advocacy advises that you try to get your status changed by having your primary doctor contact your treating physician at the hospital. If you are still unable to get your status changed, the Center for Medicare Advocacy created a Self Help Packet for Medicare “Observation Status” which outlines the next steps to take in detail. You can view the packet by clicking here