Handling Observational Status at the Hospital

This might just sound familiar to you, it may have happened to you or an elderly loved one….

In April, an elderly woman entered her local hospital with cardiac problems. She stayed four nights, at one point receiving a coronary stent.

Then she went home, but felt faint and fell several times. Five days later, her primary care doctor sent her back to the hospital. This time, her stay lasted 39 days while physicians tried various medications to regulate her blood pressure.

Though they eventually succeeded, this frail elder, 84, a retired insurance agent, had grown so weak that she could no longer walk.

“They said, ‘She really needs to go to a skilled nursing facility for physical therapy,’” recalled her son Tom, who’d come from his home in 10 hours away in another state, to be with her.

He agreed, but soon learned one of the brutal truths of Medicare policy: Patients can be hospitalized for days, undergo exams and tests, and receive drugs — without ever officially being admitted to the hospital.

Instead, they are at the hospital “under observation,” which only means they are outpatients, not inpatients at the hospital.   That can bring financial hardships — including lack of coverage for subsequent nursing home care.

That’s why our subject, on observation status through both hospital stays except for one night, had to pay for rehab herself. “By declaring her an outpatient, they really took away her Medicare benefits,” her son said.

Patients can appeal virtually any other claim that Medicare denies. But there’s no way to appeal observation status. Even our subject’s congressman, contacted by her family, couldn’t help.

But a recent ruling in a case that’s bounced through the courts since 2011 may be a harbinger of changes to come.

On July 31, a federal judge in Connecticut certified a class in a class-action lawsuit: all Medicare recipients who’ve been hospitalized and received observation services as outpatients since January 1, 2009.

That means hundreds of thousands of people, our subject among them, will be eligible to join the suit against the Centers for Medicare and Medicaid Services, with a trial expected next year. If the plaintiffs prevail, they’ll be able to appeal their observation-outpatient stays.

“People call in dire situations, and we have to tell them there’s no way to challenge this,” said Alice Bers, litigation director of the Center for Medicare Advocacy, which brought the lawsuit with Justice in Aging and a law firm, Wilson Sonsini Goodrich & Rosati. “Now we can tell them, ‘You’re a member of the class, so stay tuned.’”

A quick primer on a confusing situation: Medicare Part A covers hospital care for inpatients. Outpatients, including those on observation status, are covered under Part B. That distinction has generated complaints and controversy for years, as the number of inpatient hospitalizations has declined among Medicare recipients and outpatient stays have really become common.

Why does the classification matter? Outpatients can face higher payments for drugs and coinsurance, but the really expensive item is skilled nursing home care.

After a hospital discharge, Medicare pays the full cost of skilled nursing for the first 20 days, and most costs up to 100 days — but only for patients who’ve spent three consecutive days as inpatients. Without three inpatient days, patients are on their own.

Though most observation patients return home and needn’t to worry about nursing home costs, nearly two-thirds of those who do need skilled nursing have to shoulder the substantial costs themselves, according to a report from the AARP Public Policy Institute.

They hadn’t met the three-day inpatient requirement. Many, fearing the costs, skipped rehab in a nursing facility altogether, the researchers found.

Our subject did go to a nursing home and now owes close to $5,000 — only because she remained in the nursing home for only 2 weeks.   Nationally, nursing home care cost $315 a day last year, according to the Genworth Cost of Care Study, and more than $400 a day in cities like New York and San Francisco.

Recognizing the problem, Congress passed legislation that took effect earlier this year, requiring that hospitals inform patients when they’re not inpatients but are under observation.

So while it came as news to our subject’s son that his mother’s status would mean no coverage for a nursing home, at least he knew what her status was — not that he could do anything about it.

While there is an improvement in the works for this regulation done via legislation, we can offer a short term remedy.  Many elders that are admitted via observation status and ineligible for nursing home care coverage through Medicare are finding a short term stay for Transitional Care at an assisted living, independent living, or Alzheimer’s assisted living much more affordable and better for their overall well being.

Having been thrust into a hospital and deconditioned, many find themselves going home with little to no help or guidance on what to do next.  With sporadic home health services offered to them, a new medication regime, and the inability to cook nutritious meals or cover basic daily tasks due to illness – the situation is less than desirable.

Instead a stay in a senior living community, which is so much more affordable than a skilled nursing facility and an environment that will contribute to overall health and wellbeing, is a great option for people.  Often times this can be a first step into a permanent move to a community while you regain strength and enjoy the food, friendship, rehab services, and oversight by a medical team.

“Going to a nursing facility is not on everybody’s wish list,” said Carol Levine, director of the United Hospital Fund’s Families and Health Care Project, who said she was not speaking for the group.

If you or a loved one is faced with a challenge such as our subject and their family, call one of our communities today – don’t wait.  One of our Executive Directors or Community Relations Directors will be there to guide you through the process of a Transitional Stay in one of our high quality senior living communities.

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