TRS, 70 years old and on Medicare, went to the hospital ER with chest pains. After running some tests, the ER doctor was concerned and decided that TRS needed to spend a day or two at the hospital. TRS was put in a hospital room and hooked up to an IV and monitor. Three days later, feeling much better, he was released.

Then he got the bill and suffered a real heart attack.  

It turns out that the hospital had not really admitted TRS – instead, it had placed him in the hospital bed on an “Observation Status.” TRS, who did not have Medicare Part B, was now personally responsible for the full cost of the hospitalization.  

Observation Status is a billing code that is used by hospital administrators and doctors to avoid being charged back by government auditors and subjected to Medicare readmission penalties. The number of patients cared for under Observation Status has doubled since 2006.    

For a patient, being placed on Observation Status has two huge drawbacks. The first, as noted above, is that the billing is now considered an out-of-pocket expense and not a hospitalization. For many seniors, that means a huge bill.

The second drawback is more insidious. Suppose that instead of having heart palpitations, TRS had suffered a stroke and needed nursing home care when he was discharged from the hospital. Medicare will not pay for nursing home care unless the patient had previously been an inpatient in a hospital for the preceding 3 days. Since Observation Status isn’t the same as inpatient status, Medicare will not cover the nursing home cost for TRS.  

Ouch. In 2012, the average monthly cost for a nursing home was $8,000. That’s on top of the average hospital stay cost of $10,400.  

It’s difficult for patients and their families to fight an Observation Status. Even so, here are some steps that TRS could have taken.

At the beginning of the hospital stay, before ever being transferred to a hospital bed. TRS, or his family, should have asked if he was being admitted as an inpatient or on Observation Status. They should have strongly urged the hospital doctor to admit him as an inpatient based on his needed care, tests and treatments.  

If that was denied, then he should have asked his regular physician to contact the hospital doctor to urge admission as an inpatient.  

TRS could always refuse to be admitted and then seek treatment at another hospital, or choose to tough it out at home [on the other hand, it isn’t worth jeopardizing your life to save money].

If TRS does need nursing home care and Medicare denies coverage, he can file an appeal. And if the hospital failed to give him notice about his Observation Status, then he can file a complaint with the Texas Health Department.

Hammerle Finley Law Firm. Give us a call. We can help.

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The information contained in this article is general information only and does not constitute legal advice.