HomeIn the HospitalObservation Status: Putting Patients Between a Rock and a Hard Place

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Observation Status: Putting Patients Between a Rock and a Hard Place — 13 Comments

  1. This article highlights one of my greatest job dissatisfiers. The observation versus inpatient debate pits patients against physicians, as patients, wrongly feel that the doctor can change their “status” at a whim. (We cannot-the cases are all reviewed by case Managers-and if we “get it wrong” and put you as inpatient instead of obs, payment will be denied and then you are stuck with the whole bill.). I am emergency medicine and countless patients leave at great peril to themselves due to the financial implications of this rule, and it leaves them angry at the physician and the system. Some insurances have waived the 3 day stay for nursing home coverage requirements, but we have no control over this. Medications not being paid for can have huge implications for patients as many can not go without their blood pressure medication, rate control medications, or blood thinners for the duration of the observation stay., yet they add thousands of dollars to the cost of care- that the patient is responsible for.I think the most important thing for patients to know is that this system is NOT the doing of your physician. I am required to gave this conversation with each of my obs patients before they leave my department and it is often a heart wrenching one- and again status is NOT my decision, it is all decided through a complicated system of “criteria”. This system , although designed with good intentions (cost savings), has actually just further eroded the trust in physicians and the system and left vulnerable patients at risk.

    • Lane, thank you so much for this very thoughtful and accurate comment. It absolutely pits patients against physicians and is completely out of our control. I stumbled across an article that told patients “tell your doctor to change you to inpatient status” and I thought, “No, no, no. That’s not how it works!” I think I will update the article to clarify this point.

    • It’s my understanding that patients do NOT have to pay the whole bill if Medicare doesn’t pay for a patient who was classified as admitted (or inpatient) and should have been in observation care (outpatient). When that happens, the hospital doesn’t get paid but under Medicare rules, the patient cannot be charged for the full cost of the hospital visit. If I’m wrong, I’d like to know of any examples where Medicare patients received bills for the full cost after Medicare denied payment to the hospital. Thanks, Susan Jaffe, Kaiser Health News, Jaffe.KHN@gmail.com “FAQ: Hospital Observation Care” at https://khn.org/MjYzMTE

      • Susan, you are correct. If a Medicare patient is discharged and the hospital bill is denied for inappropriate admission status, the patient is not responsible for the entire hospital bill. HOWEVER, more and more hospitals receive real-time feedback from case managers and physician advisors regarding admission decisions and the lack of medical necessity. Conditiom Code 44 allows the hospital to self-deny these claims prior to the patient being discharged and convert the hospitalization to an observation (outpatient) admission. The patient must be notified, but there is no appeal process and they are then stuck with the charges I discussed in the article.

        Thanks for contributing to the discussion!

  2. Thanks so much for sharing this informative piece. This explains the exuberant bill I received following my daughter’s hospital admission for “observation” after an acute respiratory event!

  3. Very informational. Something that irks me too every day as a hospitalist, but always good to read a refresher on why and how I should consider triaging my patients between the two statuses.

  4. A little late to the party….I work for a BCBS plan and we see this scenerio often. On an inpatient claim, both observation hours as well as inpatient room and board charges will be billed. Can both be allowed? Can they overlap? Should there be an order to admit for observation and then admit inpatient? We are starting to perform pre-pay audits outside the Medicare arena and looking for ways to be consistent.

    • Hi Pamela,
      Thanks for reading the article. I am certainly not an expert on the insurance side so I recommend you discuss the logistics re: pre-pay audits to one of your colleagues. From a physician’s perspective, I can say that patients often start out in observation status then, due to either the need for ongoing care or a change in clinical status, they are changed to inpatient. The reverse is also true. Some doctors will enter an inpatient order, then realize 1-2 days later the patient doesn’t meet inpatient criteria based on insurance guidelines. At this point they will change the patient to observation status. This is a pitfall for patients who end up with more of the responsibility for the bill.

  5. This was helpful for a layperson like myself. I had to rush my 16 yr old son to the hospital last weekend with severe abdominal pain. As might be expected he was diagnosed with appendicitis and admitted for surgery scheduled the next day. All went well, no complications and we got him out of there in the evening after the surgery. Now I am getting a denial from the health insurance company for the stay, saying he should have been observational. Didn’t even have an idea about this. Wondering now if they will deny the surgery as well as we didn’t wait to see if the appendicitis would subside on it’s own.

  6. I recently experienced the ER monitoring after having chest pain and an abnormal EKG. I have private insurance with one copay amount for inpatient and a different amount for ER visit ($2000 vs. $950). I was charged the $2000 copay amount. Shouldn’t it have been the ER copay amount of $950?

    • Hi Nancy,
      Did they keep you overnight for observation? (Note that you can be in observation status without moving to a new room.) If you were placed in observation status, depending on your insurance plan you may be subject to a different copay, but technically, observation status is an OUTPATIENT status. Were you actually admitted to the hospital? If so, they typically waive the ER copay and charge the
      inpatient one instead. Either way, I encourage you to contact your insurance company directly to inquire about the charges. If you have additional questions after speaking with them, contact the hospital’s billing department. Good luck!

  7. There is always a system behind the system. I worked in Williamsburg and I watched hospitals work with nursing homes that needed more private pay funds to stay afloat admit people under the pretense that medicare would pay only for me as a social worker to find out from the discharge planner that the three day stay was non qualifying and they had to pay out of pocket. The only person that was happy was our facility because we knew that they had the money many of them would stroke a check for $20,000 and walk out like it didn’t put a dent in their wallet. We were encouraged not to tell people about long term care Medicaid because we knew the families were rich and they had the money even if they had to borrow it.

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