Stop Calling Inpatients Outpatients: Medicare Created Observation Status – Ask Them to Change It!

This summer, the New York Times article “New Medicare Law to Notify Patients of Loophole in Nursing Home Coverage”* told the story of one of many people who contact the Center for Medicare Advocacy for help with hospital “outpatient” Observation Status. These patients stayed in the hospital for multiple days receiving skilled care, but were coded for billing purposes as “outpatients,” often with disastrous financial consequences for the individual.

Ms. Cannon was a patient in a hospital outside Philadelphia where she was said to be an “outpatient” on Observation Status for six and a half days. After discharge from the hospital, Ms. Cannon spent nearly five months in a nursing home for rehabilitation and skilled nursing care at a cost of over $40,000. Unfortunately, the hospital insisted that Ms. Cannon had never been formally admitted as an inpatient, despite being treated inside the hospital. This distinction has far reaching implications under federal rules; in short, Medicare would not pay for her nursing home stay. She was responsible for the entire cost.

The Center for Medicare Advocacy and the National Committee to Preserve Social Security and Medicare are fighting to fix this. Sign the petition urging Medicare to stop the misuse of “Observation Status” today.

The Center hears stories like Ms. Cannon’s every week. “Outpatient” Observation Status hurts Medicare beneficiaries and reduces trust in the Medicare program and between patients and their physicians. We know that, but we need to make sure the Medicare agency knows it too. For example:

So-called “outpatient” Observation Status is not about the location or care a patient actually receives. It’s a billing code used by hospitals to protect from overzealous auditors.
Medicare beneficiaries in “outpatient” Observation Status cannot get any Medicare coverage for post-hospital nursing home stays, resulting in huge, unexpected expenses that beneficiaries think Medicare will cover. Too often, people go without this care because they can’t afford it.
Medicare beneficiaries in “outpatient” Observation Status do not have a right to hospital discharge planning, so must figure out next steps on their own.
Medicare beneficiaries in “outpatient” Observation Status usually must pay for prescription drugs in the hospital – another surprise cost.
Medicare beneficiaries in “outpatient” Observation Status cannot appeal after-the-fact to try to change their status from hospital outpatient to inpatient.

“Observation Status” may seem like just a matter of paperwork, but for Medicare beneficiaries it can ruin lives – and it can happen to anyone.

That’s why you need to urge the Medicare agency to protect beneficiaries. Sign our petition today.

Thank you,

Judith Stein, J.D.