Plop! These past two years a lot of Medicare beneficiaries have plopped down the linguistic rabbit-hole of Medicare.
Consider the commonsense meaning of “observation.” You watch; you wait.
Medicare bureaucrats, though, have crafted a new meaning. They’ve turned “observation” into a payment category for hospital patients. Physicians have long admitted patients for “observation”: Will the medication work? Will the angina worsen? That is the old-fashioned definition. But this new definition carries a different denotation.
Patients admitted for “observation” still wear a wristband, get into a bed, receive meals, medications, and tests. Sometimes they stay up to a week before being discharged.
Medicare gives hospitals much more money for patients admitted as “regular” inpatients.
For “observation” patients, the hospital receives far less money, almost a room-and-board fee.
Medicare has been concerned with hospitals that discharge patients too quickly, and the federal insurer looks at the frequency of patients’ readmissions. To save money (remember: they are paid by diagnosis, not by length-of-stay), hospitals want to discharge patients as quickly as they can. Yet many elderly patients end up back in the hospital, weeks, maybe days, after discharge. These patients who bounce in and out of the hospital show up on Medicare data sheets.
Medicare scrutinizes the bouncers. Indeed, Medicare scrutinizes all admissions. If Medicare judges an admission as “inappropriate,” Medicare won’t pay.
One solution for hospitals has been to admit more patients under “observation status.” On Medicare data sheets, these patients do not raise the same insurance red flags.
For patients discharged to rehabilitation or skilled nursing, either in a nursing home or at home, the designation matters. Medicare will pay for post-discharge rehabilitation and skilled nursing care only if the patient has been in a hospital, as a regular inpatient, for at least three days. “Observation” patients, no matter how long their hospital stay, do not quality.
Elderly advocates have proposed a regulation limiting observation status to 48 hours. In the meantime, it behooves patients to ask, on admission, not just their diagnosis and treatment plan, but also their payment status.
Only Alice would understand this Medicare hole. •
Joan Retsinas is the managing editor of Medicine & Health/Rhode Island, a monthly journal of the Rhode Island Medical Society.
