A hospital might hold you on observation status while they’re deciding if you need to be admitted or if you can be treated with outpatient care. They do this because Medicare has a rule that states hospitals may not be reimbursed for the care you receive if you are held for fewer than two nights.
Full Answer
What should I know about Medicare benefits and hospital observation?
Here’s what you should know about your Medicare benefits and hospital observation. What is observation care? “Observation care” is the term used by Medicare for services provided to patients who aren’t sick enough to be admitted but can’t be safely sent home right away.
What does observation status mean in a hospital?
Understanding Observation Status. Observation was meant to be a short period of time for providers to assess whether patients required admission for inpatient care, or could be discharged. Typically, this was meant to last fewer than 24 hours and only rarely spanned more than 48 hours.
What is a Medicare outpatient observation notice?
In 2017, Medicare changed the guidelines about observation care. If you’ve been under observation for 24 hours, the hospital must give you a Medicare Outpatient Observation Notice (MOON). The hospital has to explain why you’re under observation and how observation status affects you financially.
Why do hospitals treat patients in observation instead of admitting them?
Remember, the surgeries still are being done in hospitals and the postoperative care is essentially the same. But Medicare’s payment is lower. Some hospital critics say there is a second, more self-serving reason why hospitals treat patients in observation instead of admitting them: to avoid readmission penalties.
What does observation status mean in the hospital?
Observation status, when chosen initially, is when you are placed in a bed anywhere within the hospital, but have an unclear need for longer care or your condition usually responds to less than 48 hours of care.
Why do hospitals keep you for observation?
Observation is a special service or status that allows physicians to place a patient in an acute care setting, within the hospital, for a limited amount of time to determine the need for inpatient admission. The patient will receive periodic monitoring by the hospital's nursing staff while in observation.
What does Medicare consider observation?
You may get a Medicare Outpatient Observation Notice (MOON) that lets you know you're an outpatient in a hospital or critical access hospital. You must get this notice if you're getting outpatient observation services for more than 24 hours.
Does Medicare pay for under observation stay in hospital?
Key takeaways. Medicare Part B – rather than Part A – will cover your hospital stay if you're assigned observation status instead of being admitted.
How do you avoid observation status?
Recommendations To Mitigate Medicare Observation Status (1) Purchase a Medicare Advantage Plan or a Medicare Supplement plan which waives the inpatient requirement for a skilled nursing facility. Medicare will not cover your skilled nursing costs if you had observation status.
How long can a hospital hold you for observation?
A person who is assessed by qualified health professionals who determine the person meets these criteria, may be held in hospital against their will. This is referred to as being 'detained'. Patients may be detained in a designated facility for up to 24 hours under either: form 1 admission certificate.
What is considered an observation stay?
Observation Stay is an alternative to an inpatient admission that allows reasonable and necessary time to evaluate and render medically necessary services to a member whose diagnosis and treatment are not expected to exceed 24 hours but may extend to 48 hours, but no longer than 48 hours without a discharge or ...
What is a Medicare outpatient observation notice?
The “Medicare Outpatient Observation Notice”, or “MOON,” is a standardized document that Medicare developed for hospitals to use to explain observation status. All Medicare patients receiving observation services for more than 24 hours must receive a MOON.
What determines observation versus inpatient admission?
Inpatient status means that if you have serious medical problems that require highly technical skilled care. Observation status means that have a condition that healthcare providers want to monitor to see if you require inpatient admission.
What is the reimbursement that Medicare uses for observation services?
Observation services are reimbursed under the Outpatient Prospective Payment System using the CMS-1500 as an alternative to inpatient admission. To report more than six procedures or services for the same date of service, it is necessary to include a letter of explanation.
Does Medicare pay for observation codes?
Observation services with less than 8-hours of observation are not eligible for Medicare reimbursement and would be billed with the appropriate E/M level (99281-99285 or Critical Care 99291).
What is the two midnight rule?
The Two-Midnight rule, adopted in October 2013 by the Centers for Medicare and Medicaid Services, states that more highly reimbursed inpatient payment is appropriate if care is expected to last at least two midnights; otherwise, observation stays should be used.
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Why do hospitals treat patients in observation?
Some hospital critics say there is a second, more self-serving reason why hospitals treat patients in observation instead of admitting them: to avoid readmission penalties. In recent years, Medicare has been cutting payments to hospitals that readmit certain patients within 30 days. But if a patient is under observation, the penalties don’t apply.
How much does an observation patient have to pay for her stay?
But an observation patient is treated under Part B rules. Thus, an observation patient may have to pay as much as 20 percent of the costs of her stay (if she has it, Medicare Supplemental (Medigap) insurance may pick this up). But the real time bomb goes off after discharge.
What can hospitals do about sticker shock?
What can hospitals do about this sticker shock? To start, they need to do a better job explaining to patients and their families what observation means, both in the hospital and after discharge. Most observation patients get a Medicare form called a Medicare Outpatient Observation Notice (MOON). But that isn’t enough.
Does Medicare pay for observation stay?
While reimbursements differ depending on a patient’s condition, Medicare pays hospitals roughly one-third less for an observation stay than for an admission.
Is observation an issue with Medicare?
The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare issues, says this is not an issue. That argument will continue. But one thing is beyond dispute: Observation has major consequences for patients.
Does Medicare pay for skilled nursing?
But the key word here is “admitted.” Thus, even if an observation patient stays in a hospital for three days, Medicare will not pay for her skilled nursing care. Not a dime. Thus the patient must pay all her skilled nursing facility (SNF) costs.
Is an ED boarding an outpatient?
Unlike observation, which is an explicit choice, ED boarding is unplanned and forced by a temporary lack of beds.
How long do you have to be in hospital to receive an observation notice?
If you receive observation services in a hospital for more than 24 hours, the hospital should provide you with a Medicare Outpatient Observation Notice (MOON). This document lets you know that you’re receiving observation services in the hospital as an outpatient, and that you haven’t been formally admitted as an inpatient.
What insurance can help with hospital observation?
A licensed insurance agent can help you learn more about the ways a Medicare Advantage plan may help cover your hospital observation costs. They can also help you compare Medicare Advantage plans that are available in your area.
Does Medicare cover hospital costs?
Because your doctor hasn’t formally admitted you as an inpatient, Medicare Part A will not cover your hospital costs. Part B will typically cover the costs of your doctor services (such as certain tests like an EKG or ECG). If you were to be formally admitted for inpatient care, Part A typically covers your hospital costs ...
Does Medicare pay for outpatient lab tests?
If you receive observation services in a hospital, Medicare Part B (medical insurance) will typically pay for your doctor services and hospital outpatient services (such as lab tests and IV medication) received at the hospital. There are some important things you should know about what hospital observation status means for your Medicare coverage: ...
Does Medicare cover observation?
Medicare typically does cover observation in a hospital if it is deemed medically necessary by a doctor, but it’s very important that you understand how observation status may affect your out-of-pocket Medicare costs. Medicare Advantage (Part C) plans may also cover observation in a hospital if it’s ordered by your doctor.
Does Medicare Advantage have an out-of-pocket spending limit?
Original Medicare does not include an out-of-pocket spending limit.
Does Part A pay for hospital stays?
Even if you stay in the hospital overnight in a regular hospital bed, your Part A (hospital insurance) will not pay for your hospital costs if your doctor has not admitted you as an inpatient. For example, if you went to the emergency room (ER) for chest pain but you aren’t having an active cardiac event (such as a heart attack), ...
Observation status: what it is
Observation status means you’re receiving hospital care, but you haven’t been formally admitted yet. In other words, this technicality means you’re receiving outpatient care, which is not covered by Medicare Part A.
Financial repercussions
This can be a costly nightmare if you have opted out of Part B coverage. Even if you have Medicare Part B, you could still rack up thousands of dollars for inpatient services that are not covered because of this outpatient technicality.
What to do
Ask about your status. If you receive any type of hospital care, ask if you are being admitted or if you are being held on observation status.
How long does observation last?
Typically, this was meant to last fewer than 24 hours and only rarely spanned more than 48 hours. Over the past ten years, the incidence and duration of observation stays has increased significantly, magnifying the inherent problems with the policy.
Why is Medicare requiring 2 midnights?
The rule is intended to provide a clear time-based threshold for when a patient should and should not be admitted as an inpatient. Any patient whose hospital stay is expect to cover at least two midnights is generally considered inpatient, while any patient who requires less than two midnights would be observation.
Is 2 midnights considered inpatient?
Any patient whose hospital stay is expect to cover at least two midnights is generally considered inpatient, while any patient who requires less than two midnights would be observation. The two-midnight rule has been highly controversial and full enforcement began on December 31, 2015.
Is observation deductible under Medicare?
Medicare considers observation to be an outpatient service and is therefore paid under Medicare Part B. Medicare Part B services have both deductibles and cost-sharing for beneficiaries, which means that the cost to the patient of an observation stay is more variable than a traditional inpatient stay.
What happens when you are classified as an outpatient on observation status?
When hospital patients are classified as outpatients on Observation Status, they may be charged for services that Medicare would have paid if they were formally and officially admitted as inpatients. For example, patients may be charged for their medications.
Does long term care insurance pay for hospitalization?
Note: Most long term care insurance policies don't pay reimbursements when the beneficiary is hospitalized. Read your long term care insurance policy carefully and consult your insurance advisor about the best options for your current circumstances.
Does admission affect insurance coverage?
The admission status during hospitalization can significantly impact insurance coverage, so it is important to try to determine the status and advocate for the most favorable status.
Is an emergency room covered by Medicare?
Note: time in the emergency room is considered as outpatient status and therefore is not covered by Medicare Part A and does not count toward the three day inpatient admission required to qualify the patient for coverage by Medicare of their subsequent stay in a skilled nursing facility for rehabilitation.
Does observation status count as a nursing home stay?
Medicare only covers nursing home care for patients who have a 3-day inpatient hospital stay – Observation Status doesn’t count towards the 3-day stay.
Is observation status based on time spent in the hospital?
This classification will not be apparent based on where the patient is, how much time they spend in the hospital or what services they receive, as it is only a hospital billing code. But the billing code is crucial, because, according to the Center for Medicare Advocacy in its Frequently Asked Questions about Observation Status:
Why do physicians feel pressure from observation status?
Physicians feel the pressure of strained patient-physician relationships as a consequence of patients feeling the brunt of the financing gap related to observation status . Patients often feel they were not warned adequately about the financial ramifications of observation status.
What is observation billing?
Observation is basically considered a billing method implemented by payers to decrease dollars paid to acute care hospitals for inpatient care. It pertains to admission status, not to the level of care provided in the hospital. Unfortunately, it is felt that no two payers define observation the same way.
What did hospitalists do against the observation bill?
Hospitalists from all parts of the country advocated on Capitol Hill against the “observation bill,” and “meet and greets” with congressional representatives increased their opposition to the bill. These efforts may work in favor of protecting patients from surprise medical bills.
How can observation care be eliminated?
It has been proposed that observation could be eliminated altogether by creating a payment blend of inpatient/outpatient rates. Another option could be to assign lower Diagnosis Related Group coding to lower acuity disease processes, instead of separate observation reimbursement.
What are some examples of observation diagnoses?
A few examples of common observation diagnoses are chest pain, abdominal pain, syncope, and migraine headache; in other words, patients with diagnoses where it is suspected that a less than 24-hour stay in the hospital could be sufficient.
Can you be placed under observation care on Medicare?
A federal effort to reduce health care expenditures has left many older Medicare recipients experiencing the sticker shock of “observation status.” Patients who are not sick enough to meet inpatient admission criteria, however, still require hospitalization, and may be placed under Medicare observation care.
Does Medicare pay for skilled nursing?
Seniors can get frustrated, confused, and anxious as their status can be changed while they are in the hospital, and they may receive large medical bills after they are discharged. The Centers for Medicare & Medicaid Services’ “3-day rule” mandates that Medicare will not pay for skilled nursing facility care unless ...
What is observation status?
A: Observation Status is a designation used by hospitals to bill Medicare. Unfortunately, it can hurt hospital patients who rely on Medicare for their health care coverage.
How long do you have to provide notice of non-inpatient status?
Notice of non-inpatient status must be provided within 36 hours . CMS requires hospitals to use a standardized notice that it drafted, known as the Medicare Outpatient Observation Notice (MOON). After a space for the patient’s name and Medicare number, the MOON includes a blank space for the hospital to write in the clinical reason the patient is not admitted as an inpatient.
Is observation status considered an inpatient?
Patients may find themselves in the hospital, receiving medical services, tests, and treatment, sometimes for many days, but learn they are considered outpatients, in Observation Status, not admitted inpatients. This is understandably confusing for patients and families – and difficult for hospital physicians and personnel.
Can you appeal an observation stay with Medicare?
Unfortunately, seeking inpatient coverage from Medicare after an observation stay is very difficult. Medicare currently has no official method to appeal observation status, but as of August 2017 the Center is pursuing a nationwide class action lawsuit to establish a way to appeal. See our website for more detailed instructions on options
Why is observation status important?
The "observation status" designation can compromise the care they get because they have not been fully admitted to the hospital and are therefore not fully part of the hospital process of caring for patients.
How does a hospital make money from observation?
How the Hospital Makes Money From Observation Status. If a patient is assigned observational status, he is considered to be an "outpatient"—meaning he is not admitted to the hospital. It can be lucrative for the hospital to assign that patient outpatient status without formally admitting him. Here's how:
What happens if a Medicare patient is sent home and reappears in the emergency room?
That means that if a Medicare patient was hospitalized, then sent home, and reappears in the emergency room within 30 days, the hospital will be penalized for the readmission. By putting a patient on observational status, they could avoid this potential penalty.
Why are some patients admitted right away?
Others are admitted right away because they clearly need surgery or some other form of medical evaluation or treatment. Others may either be borderline, or they may need treatment for a short period of time—it's those patients who may be put on observational status.
Why do people go to the emergency room?
When patients go to the emergency room, a determination is made about whether they should be admitted to the hospital or not. Some patients are simply sent home with some sort of prescriptive treatment and follow-up care. Others are admitted right away because they clearly need surgery or some other form of medical evaluation or treatment. Others may either be borderline, or they may need treatment for a short period of time—it's those patients who may be put on observational status.
What to do if you have to go to the ER?
Further, if you do have to go to the ER and stay at the hospital, you should be able to enlist your healthcare provider to help you be sure you are fully admitted.
How to know if you have been admitted to a hospital?
Ask to see the paperwork which shows you have been admitted. If you see the word "observation" then ask to speak to the person who will fully admit you—and be assertive if you need to. You may need to find a hospital administrator and don't be afraid to argue about it.