For the sake of this article, we’re going to look at inpatient vs. outpatient status. That’s because, for the patient, they can feel like the same thing but they have vastly different outcomes when it comes to billing. This is especially so if the billing is for a Medicare patient because Medicare makes distinctions between observation and inpatient status. Observation and inpatient status reflect Medicare’s billing status not the patient’s care status.Once a patient is in the hospital, physicians and hospitals take a look at the severity of the illness and the intensity of the patient’s care needs to determine classification as either inpatient or outpatient. The Centers for Medicare & Medicaid (CMS) has specific guidelines that must be met. Severe symptoms are considered medically necessary. That’s a term that is vitally important.
A hospital utilization review committee can change the status to observation if they feel that the admission does not meet the hospital’s inpatient criteria. Certain procedures and diagnosis do not support inpatient admission because they are not “medically necessary. Some of those include:
- Outpatient blood administration
- Awaiting transfer to another facility
- Overnight care as part of planned diagnostic testing
- Services provided concurrently with chemotherapy
But other health situations can also be considered to lack medical necessity. They include mild asthma/COPD, atrial arrhythmias and uncomplicated presentations of chest pain.
You’re probably familiar with outpatient care in the form of x-rays or a procedure like a colonoscopy. In those types of situations the patient knows prior to the procedure that the care will be considered outpatient. However, if you enter the hospital because of chest pain for instance, that period of medical uncertainty means that your status can change during your stay (up until the time you leave). A patient under observation may end up receiving hospital services including overnight stays of multiple nights while you’re under observation.
Observation status didn’t use to be quite the issue it is today but insurance providers have been cracking down on short term inpatient stays as part of that medically necessary rating. In addition, one of the aspects of the Affordable Care Act (Obamacare) was for Medicare to begin penalizing hospitals that readmitted patients within a month of care. In 2012, about 70 percent of hospitals in the U.S. were dinged for high readmission rates. One way for hospitals to avoid readmissions is to simply not admit patients. In an AARP study that looked at hospital observation data from 2001 through 2009, Medicare claims grew by more than 100 percent.
For patients, this little tit for tat between the government and medical providers is that the patient who was previously protected by Medicare Part A, no longer qualifies under that insurance. Part A pays all but an inpatient deductible ($1,184 in 2013) but under outpatient status the patient can be charged for every line item, potentially adding up to tens of thousands of dollars worth of medical costs to the patient’s bill. To add insult to injury, if for some reason a patient does not qualify for inpatient status and gets transferred to a nursing home, the nursing home costs are also not covered 100 percent as they would be under Medicare. In addition to higher expenses, patients under observation do not get the same level of care. The AARP study found that there is limited evidence to support observation status for periods of time under 24 hours.
If you are a patient or a family member of someone who is a patient and you have been in the hospital for several hours, it’s best to track someone down to find out what status the hospital stay is.
In Separate But Related News
Dedicated observation unit could save hospitals $1 billion annually
In a study in the journal Health Affairs, researchers found that a dedicated facility for observation services would better serve the patient’s needs. Patients in outpatient status are often largely ignored translating into poorer care conditions. The authors of the study found that if that care could be provided in dedicated facilities, patients could return to their lives more quickly (patients in the study spent 23 percent to 38 percent less time in the hospital. Most hospitals in the U.S. treat patients on observation status inefficiently. Treating them in a dedicated unit could save money, in the billions of dollars a year.
- About 7 percent of observation patients spend more than 48 hours in the hospital in that status but only 0.1 percent of observation patients in a dedicated unit do so.
- Patients in a dedicated unit are likely to get care faster and less likely to lose their nursing home benefits.
Rehospitalization rates fall as penalties climb
Fewer than 18 percent of Medicare patients returned to the hospital within a month of discharge in the eight months since Medicare began levying penalties against hospitals for readmissions. The government has pointed to the number of readmissions before as indicators of poor care and beginning in August of 2012 began fining hospitals with what it saw as excessively high percentages of readmissions. In the first year of the program, Medicare fined about 70 percent of all U.S. hospitals for higher than expected readmissions. According to Medicare, new data indicate that nationally readmission rates dropped by 130,000. Find the article here.