Appealing a switch to ‘hospital observation status’

A federal court has ruled that hospitalized Medicare beneficiaries who were switched from inpatient to observation status can appeal the decision, making it easier for them to receive coverage for subsequent nursing home care. The ruling appears to bring to an end more than a decade of litigation on behalf of Medicare recipients.

Medicare covers nursing home stays entirely for the first 20 days, but only if the patient was first admitted to a hospital as an inpatient for at least three days. In part due to pressure from Medicare officials to reduce costly inpatient stays, hospitals often do not admit patients but rather place them on observation to determine whether they should be admitted. Even if a hospital originally admits a patient, a hospital review board can switch the patient from inpatient to observation status, before or after the patient’s stay. If the patient does not have a full three days as an inpatient, Medicare will not cover a subsequent nursing home stay — potentially costing the Medicare recipient thousands of dollars.

There are other consequences to being considered “under observation.” Instead of billing you under Medicare Part A, which covers inpatient services, the hospital will bill you under Medicare Part B. This means that you will owe a co-payment for every service offered. Your total co-payment could be much larger than the one-time deductible you have to pay under Part A.

In 2011, a group of Medicare beneficiaries sued the federal government in a class action lawsuit, arguing that they should have the right to appeal when their status is switched from inpatient to observation status. After more than a decade of litigation, in January a federal appeals court affirmed a lower court’s ruling in favor of the beneficiaries, noting that Medicare allows appeals of other decisions. According to the court, “the decision to reclassify a hospital patient from an inpatient to one receiving observation services may have significant and detrimental impacts on plaintiffs’ financial, psychological, and physical well-being.” The court ordered Medicare to set up an appeals process and notify beneficiaries of their appeal rights.

If you are in the hospital and told you that you are under observation status, you can ask the hospital doctor to be admitted as an inpatient. You should also contact your primary care physician to ask if he or she can call the hospital and explain the medical reasons that you need to be admitted.

If you are kept in observation status and transferred to a nursing home and denied coverage by Medicare, you can appeal both the hospital’s denials of hospital admission as well as subsequent nursing home charges. The appeal process can be very complicated, and you may need the help of an attorney to navigate it.