Several years ago, faced with increased complaints about out-of-pocket expenses from patients who received observation services rather than being admitted, the case management department at Northwestern Lake Forest Hospital began giving patients in observation a letter explaining the difference in inpatient and observation status.
“We felt like we were not serving our Medicare beneficiaries fairly by not notifying them of their status and the potential they would have out-of-pocket expenses,” says Jennifer Prescia, MSN, RN, ACM, CCDS, director of case management at the Lake Forest, IL, hospital.
Observation letter
When the hospital’s observation rate doubled after CMS issued the two-midnight rule, the hospital revised the letter and the way case managers explain observation services as part of an initiative to change the admissions process to comply with the new regulations.
“Patients are at their most vulnerable when they are in the hospital and they don’t remember everything. We are not required by Medicare to give them a letter notifying them they are receiving observation services, but we do it as a service to them,” Prescia says.
Since the hospital started giving patients letters telling them they are receiving observation services, patient complaints have decreased and patient satisfaction with the discharge process has improved each year, Prescia says. “But it’s hard to tell if it’s because of the observation letter or a variety of factors,” she adds.
The observation letter explains the difference between inpatient and observation services and what observation means financially for patients. It does not include specific out-of-pocket costs the patient may be responsible for because observation services are billed individually and the total cost isn’t available until discharge, Prescia says.
“Many people seem to think that Medicare will pay for everything. The letter explains that patients may have a copay, that observation services do not count toward the three-day stay required for Medicare to cover a nursing home stay, and that Medicare won’t pay for certain outpatient services, such as mammograms, when patients are in the hospital,” she says.
Not only do the case mangers give patients the letter, they get them to sign it. “When patients get a bill for their share of observation services, they often call me saying they didn’t know they were observation patients; I pull up the letter and mail them a copy and they always call me back and say ‘yes, that is my signature,’” Prescia says.
When patients are receiving observation services the case manager explains it to them, then explains it again to their children, their spouse, sometimes their pastor or their neighbor, says Karen Lutz, RN, BSN, ACM, manager of case management. “The family and other caregivers want the patient to have a three-night qualifying stay for a skilled nursing admission. Often the patient is ready to go home, but their family isn’t ready,” she adds.
The case management team has created a patient pamphlet that explains observation vs. inpatient in more details. When patients ask questions about why they are receiving observation services instead of being an inpatient, the case managers use the pamphlet to help answer the questions.
“We also changed the way we talk to patients when Medicare doesn’t cover something. Instead of saying that Medicare won’t cover it, we say that their insurance doesn’t cover it. It helps people realize that Medicare is insurance. It’s a minor change but it’s effective in helping people understand,” Prescia says.
To educate people in the community who are Medicare beneficiaries on the difference in inpatient and observation and what it means to them, Prescia spoke at local senior centers, assisted living centers, and other community organizations to explain observation services, what it means to patients, and what rights they have.
“I talked about the fact that Medicare has no appeals process for observation, that their out-of-pocket costs are likely to be greater than if they are inpatients, and why hospitals provide observation services instead of admitting people as inpatients,” she says.
The input from these meetings was used to make the observation letter more detailed, Prescia says.
Issue an ABN
The hospital also gives observation patients an Advance Beneficiary Notice of Non-Coverage (ABN) when the patient will be financially liable for services or a stay that is not covered, Lutz says. For instance, a physician may order a mammogram or another test or procedure that isn’t related to the hospital visit for an elderly patient who is receiving observation services after a fall.
In other instances, the staff and attending physician may feel a patient is ready for discharge, but the patient isn’t ready to leave. “They don’t want their husband to have to drive after dark or their daughter can’t get off work to drive them home, and they want to stay overnight,” Lutz says. In those cases, the hospital staff arranges for a second physician to review the medical record and issue the ABN.
“Since observation patients do not have appeal rights, we think it’s fair to inform them of their financial risk if they choose to have the service or choose to stay,” she says.
When patients find out that their cost for an additional overnight stay is around $1,800 they opt to go home, Prescia says.
The hospital can never bill a patient for a Medicare service unless patients receive an ABN, Prescia points out. “If we feel it’s an avoidable delay and the patient had to stay overnight because of a problem on our end, we don’t issue the ABN and we carve out those extra hours on the bill,” Prescia says.
