The Costs of Staying Out of the Hospital

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One of my home health patients recently went to the hospital for stroke symptoms. When he came back home, he was very frustrated because he thought he had been admitted to the hospital. His anger was foiled by the hospital’s decision to treat him for one and a half days in observation, admit him, and then reverse that decision, making his entire time there classified as observation.

As The Affordable Care Act is implemented, hospitals are being financially penalized for unwarranted and repeated inpatient hospital use. As a result, hospitals have begun using a new type of service, called the Emergency Department Observation Unit. A person is often placed in one of these “observation beds” for 24-48 hours after making a trip to the hospital, to observe and determine if hospital admission is needed. Used properly, these observation units assist in the diagnosis and treatment for a variety of conditions. The additional time allows hospital to evaluate whether or not a patient really needs an inpatient stay.

At times, the demand for these type of beds increases to the point that a person may be placed in a normal hospital room and not realize that the bed is really being used as an observation bed. It’s estimated that nearly a third of all US hospitals have implemented the use of observation units.

So what’s the catch? It may not be clear to the individual in the bed that he is really in an observation bed. Observation beds are considered an outpatient service, using a separate bill type than an inpatient bed. So, a Medicare patient that isn’t admitted and placed in the observation bed will be responsible for the 20% not covered by Medicare A if he does not have Medicare B coverage. The patient will also be responsible for any deductible before his insurance picks up the tab. A typical observation bed stay will cost this person upward of $5,000.

A major shortcoming families should understand is that a family member’s placement in one of these observation beds for 2 days will not qualify for the necessary minimum 3 hospital days for Medicare to cover admission to a skilled nursing facility. A brief skilled nursing facility stay would be covered under Medicare IF he had a 3 day hospital stay. This brief admission to a skilled nursing facility is often helpful for rehabilitation before returning home, especially in situations like a stroke.

What’s person to do? Ask. Medicare requires that the patient receives written notification of the status of services being received and costs associated. However, not all hospitals have yet implemented this rule. According to Medicare guidelines, a hospital can evaluate a patient in an observation bed, admit the patient as an inpatient, and then change the patient’s status back to observation only, if the patient’s treatment didn’t require for an inpatient stay. This means again, that all of patient’s care will be billed for as an outpatient.

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