Unbiased Analysis of Today's Healthcare Issues

Fixing the “Observation Status Loophole”

Written By: Jason Shafrin - May• 22•13

In order for Medicare to reimburse post-acute care in a skilled nursing facility (SNF), Medicare beneficiaries must have a 3-day hospital stay. Some hospital stays, however, are not counted as hospital stays; rather, they may be defined as “observation status” care that do not merit an inpatient admission. Patients may stay overnight at the hospital and receive similar care as if they were admitted, but hospitals may still classify the patient as under “observation status”. A New York Times article cites a paper by Feng, Wright and Mor that state that “…elderly hospital patients are increasingly likely to be held for observation and less likely to be admitted. Often kept in the hospital for 48 hours or even longer and treated as though they were inpatients, they don’t realize that they’re not.”

Recently, however, Senator Charles Schumer has proposed legislation that would address this issue. Schumer proposed a new U.S. Senate bill would change a Medicare provision preventing many seniors from getting coverage for skilled nursing therapy after hospital “observation stays.” Specifically, observation stays will be counted toward the 3-day mandatory inpatient stay for Medicare coverage of skilled nursing facility services after a hospital visit. The bill is called the Improving Access to Medicare Coverage Act of 2013 and is co-sponsorred by Sen. Sherrod Brown.

A Clinical Vignette

From the N.Y. Times:

On Labor Day weekend in 2009, Miriam Nyman, 83, arrived by ambulance at Rhode Island Hospital. She’d fallen, a result of a degenerative brain disorder, and broken her neck. She and her daughter, Tamar Lasky, waited in the emergency room for eight hours until finally, close to midnight, Dr. Lasky needed to go home to sleep.

When she arrived to resume her vigil the next day, Dr. Lasky recalled, “they said, ‘She’s in Room 624.’ She was in a bed, with a gown and a wrist bracelet, chart on the wall.” She had tests; aides fed and washed her. Her daughter visited daily, conferred with staff, took notes. After four nights, a physician declared that her mother no longer required a hospital, and Dr. Lasky, who’d been caring for her mother in her home, braced for a nursing facility search.

That’s when she learned that her mother’s entire stay had been classified as “observation days” and that Mrs. Nyman had never been formally admitted to the hospital.

“I just freaked out,” Dr. Lasky said. “The three-day hospital stay is what you need to get Medicare coverage for skilled nursing care” for up to 100 days at a time. But because Mrs. Nyman had been an outpatient, not an inpatient, she was suddenly facing about $35,000 in uncovered nursing home expenses.

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