When your parents go to the hospital and need to stay over night or longer, be sure the medical staff admits them as official patients and not for observation (which means that technically they are not admitted at all).
People hospitalized for observation do not qualify for Medicare’s skilled nursing care benefit after leaving the hospital, and they will have much higher out-of-pocket costs because many Medicare benefits require formal admission as an inpatient to a hospital, not a stay for observation, which is more like outpatient status.
Much has been written recently about this situation. Brown University gerontologists published their findings in the June 2012 Health Affairs (abstract), explaining that the number of observations rose 34% when compared to standard hospital admissions in 2007-2009. The study analyzed a huge amount of data — the Medicare claims of 29 million individuals between 2007 and 2009.
A report on the study in the June 4, 2012 Kaiser Health News, Study: Hospital Observations Stays Increase 25 Percent in Three Years, points out how researchers also found that patients under observation stayed in the hospital longer than admitted patients — some “observed” for longer than three days.
Interesting Quote from the Kaiser Article
The researchers also suggested that hospitals may be motivated to put patients in observation care since they would not be counted as a readmission if they returned to the hospital. New Medicare rules that take effect later this year will penalize hospitals for patients who are readmitted within 30 days.
Paula Span’s New York Times article, In the Hospital, but Not Really a Patient, offers a lot more information about this situation, and she also points out that hospitals are not required to tell patients how they classify a hospital stay, so it is up to the patient and family members, especially adult children, to clarify the situation.
This Medicare.gov document, Are You and Inpatient or an Outpatient? (downloadable PDF) explains the differences between inpatient and outpatient standing, and includes information about observation hospital status.
Other Articles to Read
- Hospital billing Shifting Costsh – Politico
- Observation Stays for Medicare Patients Create Coverage Problems – California Watch
As Our Parents Age So Do We 
Very good point you make here and I am glad you raised the subject. I’d like to add one point though. You state, “People hospitalized for observation do not qualify for Medicare’s skilled nursing care benefit after leaving the hospital,” If you are talking about skilled nursing care as part of home health services covered by Medicare this is partially correct. Requirements for skilled nursing care, physical therapy, occupational therapy, speech therapy, and/or a social worker through a home health agency are three-fold. The patient must meet home bound status, must have had a significant change in medical condition (with, or without admission to the hospital), and services must be ordered by a medical provider. All three criteria must be met.
If you have further questions on this subject call the director or administrator of a home health agency for clarification. As a long-term administrator in home health I have found that the factor involving home bound status is the largest barrier to patients being eligible for home health services paid for by Medicare.
Thank you for providing such valuable information.
LikeLike
Thanks for expanding on this topic and providing more information about home care. I appreciate your additional details.
In my post I was I was addressing the topic in a bit more narrow fashion. If Medicare is to pay the fees resulting from admission to a skilled nursing facility (SNF), a patient must be officially admitted to the hospital for three days — but not for observation — prior to release to the SNF.
LikeLike
Yes, you are correct about the differentiation for a SNF. I’m sorry if I jumped in without thinking of that. After 16 years as a director and administrator of home health care I tend to be rather focused in on that rather than thinking of other skilled care such as SNFs.
Keep up the great info. Your posts are very valuable.
LikeLike