Medicare patient being observed?

He or she may face unexpected bills

Hospitals are left in an “untenable position” due to changes in policy by the Centers for Medicare and Medicaid Services (CMS) that are causing hospitals to place patients in observation status for more than 48 hours instead of admitting them, according to an April 27, 2012, amicus brief filed by the American Hospital Association (AHA).

According to the brief, hospitals face loss of reimbursement and penalties from auditors and prosecutors for admitting patients for short medically necessary inpatient stays, while at the same time hospitals also face criticism from CMS and patients for substituting observation for admission.

“Professionals who manage hospital patient access or registration are often put in a difficult position,” says Don May, the AHA’s vice president of policy. “They must educate and work with physicians, ensuring they have all of the information needed to make the correct admissions decisions within the rules.”

Patient access leaders need to educate physicians on complete and timely documentation and help them be up to date on current Medicare admission policies, advises May. In addition, he adds, patient access staff should clearly communicate to patients about their care status. “When patients are being admitted to the hospital, they must understand the difference between a regular hospital admission and being admitted in an observational status, which is really outpatient care,” says May.

For patients who are being observed, May advises making sure registrars use language such as, “We continue to observe your clinical condition to determine whether you should be admitted for full inpatient care.”

“If the patient is in observation, don’t use the term ‘admit’, because then the patient thinks they are inpatient,” he says.

122% increase in five years

Over the last five years, observation cases for Medicare patients have increased 122% at Sarasota (FL) Memorial Health Care System, reports Diane C. Settle, CPA, CHFP, executive director of the revenue cycle.

Medicare outpatients must pay the outpatient deductible, coinsurance, and self-administered drugs, says Settle. “Self-administered drugs can be several hundreds of dollars if the patient is in observation for several days,” she says. “These drugs are covered by Medicare if you are an inpatient, but not covered under observation status.”

The Medicare beneficiary will experience increased out-of-pocket costs due to observation status being classified as outpatient, says Bernadette Lodge-Lemon, director of revenue cycle at University of California — Los Angeles Health System. Outpatient services are subject to a 20% coinsurance of the Medicare Allowable, she notes, so if the patient does not have supplemental or secondary health insurance coverage, they are required to pay the coinsurance themselves.

“This may present a financial hardship to some Medicare beneficiaries,” Lodge-Lemon says. “We have seen an increase in patients applying for financial assistance in an effort to cover these costs.” (See related story, below, on maintaining patient satisfaction despite this scenario.)