Outpatient vs. inpatient
Hospital ‘observation status’ can mean a whopping bill for some Medicare patients
Mandy Pino knows a thing or two about health care. The sprightly 93-year-old helped found what has become the health policy advocacy organization Health Action New Mexico.
Nevertheless, she became one of hundreds of thousands of patients who believed Medicare would cover most of the cost of a hospital stay, only to learn they might be stuck with a whopping bill.
Here’s how it happened. When an emergency room doctor recommended Pino stay in the hospital for a hernia problem, she wasn’t formally admitted as an inpatient. Her overnight stay was categorized as “observation status,” which meant for billing purposes she was an outpatient.
If a person is admitted as an inpatient, Medicare Part A will pay for hospital care and Medicare Part B will pay for care provided by physicians, usually 80 percent of the Medicare approved cost. Pino had coverage through a Medicare Advantage health plan offered by a private company that contracts with Medicare. Medicare Advantage Plans provide all of your Part A and Part B benefits.
However, according to the Center for Medicare Advocacy, Medicare beneficiaries hospitalized on observation status can face costs for drugs taken at the hospital and copayments for hospital services.
After her hospital stay Pino received several explanation of benefits letters from her insurance company showing she could be billed a total of about $20,000. “I was dumbstruck,” Pino said. From her familiarity with health care matters, Pino was aware of the observation status issue, but she assumed she had been admitted as an inpatient.
Pino turned to the Senior Citizens Law Office where attorney Mike Parks intervened on her behalf directly with the insurance company. He declined to name the insurer but said the company eventually agreed to reduce the amount Pino owned to just $300.
Pino was able to go home after her brief hospital experience. But an observation status designation can have even more devastating consequences for patients who require skilled nursing after a hospital stay, Parks said.
That’s because Medicare Part A will pay for skilled nursing care only if that care follows a Medicare Part A covered three-day inpatient stay in a hospital.
A 2012 study by researchers at Brown University identified more than 900,000 Medicare beneficiaries who experienced observation stays in 2009 alone.
Hospitals have been required since March 2017 to give patients “Medicare Outpatient Observation Notice” (MOON) informing them that they have been put on observation status. But patients do not have the right to appeal being placed on observation status.
Parks’ advice for patients covered by traditional Medicare or Medicare Advantage plans is to make sure to ask if your hospital stay is considered an inpatient admission or whether it is observation status. Ask about the MOON document, he said.
The Center for Medicare Advocacy advises patients who discover they have been placed on observation status to seek the help of their primary doctor to get the status changed to inpatient.
Currently the center is pursuing a nationwide class action lawsuit on behalf of Medicare beneficiaries to establish a way to appeal observation status.