Most Medicare beneficiaries understand that they may face out-of-pocket costs if they have to stay in a hospital. What they might not know is that their hospital status can impact their coverage. Over the years, some beneficiaries have been hit by greater costs and ineligibility for nursing care coverage due to their “observation status,” but a recent court ruling gives these beneficiaries a new Medicare appeal option.
Inpatient, Outpatient and Observation Status
Medicare says that a beneficiary’s hospital status can impact how much they pay for hospital services.
- Inpatient status is used when patients are formally admitted into the hospital under a doctor’s order. The day before discharge is considered the last inpatient day.
- Outpatient status is used when patients are receiving outpatient surgery, lab tests, X-rays, emergency department services or other hospital services and the doctor has not ordered to admit you into the hospital as an inpatient.
Many patients might assume that they must be considered an inpatient if they spend the night in the hospital, but this is not necessarily true. It’s possible to spend the night in the hospital while classified as outpatient. This is sometimes called observation status.
The Financial Impact of A Patient’s Status
Medicare Part A covers hospital care and Medicare Part B covers doctor’s services. After the deductible is met, Medicare Part A covers the first 60 days of hospital stay with a $0 copay. However, Part A coverage does not apply if a patient is not granted inpatient status.
Furthermore, and sometimes more importantly, a patient’s status can impact their eligibility for skilled nursing care coverage under Medicare. Patients who have an inpatient hospital stay of at least three days may qualify for skilled nursing home coverage. Patients who are classified as an outpatient may not qualify.
Medicare gives several scenarios as examples. In one of these examples, you go to the hospital and the doctor formally admits you as an inpatient. Later, the hospital and doctor change their minds, and you are switched to outpatient status. You have to be told of this in writing before you’re discharged. Medicare Part B will pay for doctor services and hospital outpatient services, but because your status was changed to outpatient, Medicare Part A will not pay for anything.
Additionally, the patient in this example may not qualify for skilled nursing care coverage, even if the doctor recommends it.
Appealing A Patient’s Status
In an eight-page document on determining whether you’re considered inpatient or outpatient, Medicare urges beneficiaries to ask their providers. Medicare also notes that patients need to be notified if their status is switched from inpatient to outpatient. However, what’s not clear is what patients are supposed to do if they disagree with their status.
Now, thanks to a court ruling, there is an answer. KHN says that a federal appeals court has ruled that Medicare beneficiaries have the right to appeal the decision to change their status from inpatient to observation. According to the article, hundreds of thousands of Medicare beneficiaries have been denied coverage for nursing home care because of decisions like this, and they now have the right to seek reimbursement. Before this ruling, beneficiaries who had received observation status were unable to file an appeal.
Agents - Be sure to educate your clients about this important topic.
- For more information on how to file appeals, see the Medicare’s How Do I file an Appeal?
- Do you have questions? We’re here to help. Contact us.
