Medicare's Observation Policy Comes Under Scrutiny

Medicare is launching a pilot program to determine whether relaxing its payment rules can help patients who require nursing home care after a hospital stay and then are charged thousands of dollars. Seniors are often unexpectedly required to pay for nursing home care because they were considered to be under "observation" in the hospital, rather than an inpatient. According to an article in the Washington Post, the new program may make it easier for hospitals to label patients as inpatients.

Medicare only pays for nursing home care if it follows a three-day inpatient hospital stay. Staying overnight in a hospital does not automatically make you an inpatient. Often the stay is classified as observation, which is considered outpatient care. If you are dismissed to a nursing home after being in the hospital for observation, you will be responsible for paying for your care.

Currently, if a hospital bills for an inpatient stay, but Medicare decides the patient should have been classified as under observation, then the hospital can lose its entire Medicare reimbursement. Therefore, hospitals are often reluctant to classify a patient as inpatient. The pilot program would allow the hospital to rebill Medicare for observation services if the inpatient care bill is rejected. The program is being implemented at 380 hospitals and will run for three years.

While Medicare implements this pilot program, the observation policy is being challenged through legislation and lawsuits.  As ElderLawAnswers previously reported, seven Medicare patients have filed a class action lawsuit challenging the policy, and Kaiser Health News gives an update on a bill introduced in Congress that would allow the days in observation to count toward the required three-day hospital stay.  

To read the Washington Post article about the pilot program, click here.  For more background on the issue from ElderLawAnswers, click here.

CMS Seeks Input on Its Policy

As part of a notice of proposed rulemaking published in the Federal Register on July 30, 2012, the Centers for Medicare & Medicaid Services (CMS) is asking for public comment on potential policy changes related to observation status. The Center for Medicare Advocacy says this is an excellent opportunity for all who have been or continue to be affected by CMS's current policy to voice their concerns and to describe the real harm it has caused and continues to cause.

"All those affected and those advocating for those affected should respond to the proposed rule," says the Center. Comments are due by no later than 5:00 p.m. (Eastern Time), September 4, 2012. The request for comments was published in the Federal Register at 77 Fed. Reg. 45061, 45155-45157 (July 30, 2012).   This can be found on the web at