UNDERSTANDING MEDICARE’S COVERAGE OF OBSERVATION STAYS
Hospital services are not just covered by Medicare Part A. Some services, like outpatient hospital services, are covered under Medicare Part B. Outpatient hospital services include x-rays, minor surgeries and observation stays.
An observation occurs when a physician orders that a patient stay in the hospital so their condition can be monitored, but they are not admitted to the hospital. The patient being held for observation is an outpatient, not an inpatient, even if they stay in the hospital overnight. Observations stays are usually reserved for hospital patients who come into the emergency room and have symptoms that require the hospital physicians to monitor them. This monitoring should lead to a decision about whether or not to admit the patient to the hospital with an inpatient status or release the patient after observation.
Usually, the decision to admit or release a beneficiary in the hospital for observation can be made in less than 48 hours. This is why it is very important to encourage all beneficiaries and their caregivers to ask their doctors if they are an inpatient or an outpatient. Oftentimes, patients assume that because they have been placed in a hospital bed or a hospital room, they are automatically an inpatient. This is not the case; a doctor must sign a form that actively admits someone as an inpatient.
When a beneficiary enters the hospital under observation, their care is charged to Medicare Part B. This means that they are subject to Part B coinsurances and deductibles for the time that they were an outpatient in the hospital. If a patient has Original Medicare, they will have a 20 percent coinsurance after they meet the $140 deductable in 2012. If a patient has a Medicare Advantage plan, they will have to pay that plan’s co-payment for outpatient services.
How someone is admitted to the hospital affects his or her transfer to skilled nursing facilities (SNFs). Someone with Medicare must have a three-day qualifying inpatient stay in a hospital to qualify for Medicare coverage of SNF care. The day the person becomes an inpatient counts toward the qualifying days and the day they were discharged from the hospital does not. However, if someone enters the hospital under observation, their status is that of an outpatient instead of an inpatient, which will affect whether they qualify for SNF coverage. Clients must ask their doctor about their inpatient status to be sure they are an inpatient for the qualifying number of days.
In some cases, a hospital can retroactively assign someone to an inpatient status so they can qualify for SNF care. This means that once someone leaves the hospital, his or her patient status can be changed from outpatient to inpatient. However, someone’s status cannot be changed from inpatient to outpatient after they leave the hospital. If a doctor is changing a patient’s status from inpatient to outpatient, that beneficiary must be notified of the change before they are discharged. It is important to remind clients that while doctors may retroactively change hospital statuses from outpatient to inpatient, this does not often happen. Beneficiaries should ask their doctors about their inpatient status while they are in the hospital.