Social Security & Medicare Questions: Observation Care

Social Security & Medicare Questions: Observation Care

Q: My frail mother was in the hospital after passing out and falling. She stayed "in observation" for four days and received a number of tests for stroke, heart and circulatory problems. After discharge, her doctor said she needed nursing home care. The nursing home warned us that if mother's hospital stay was observation Medicare would not cover the nursing home stay. She has received several large bills for the hospital care. We can't afford to pay for this care out-of-pocket. Can you suggest anything? 


A: In recent years a growing number of Medicare beneficiaries are entering hospitals for observation care rather than as inpatients. The number rose 69% in five years according to the most recent national statistics, but over the same period Medicare hospital admissions have declined.

Medicare considers observation care as outpatient services, even though patients may stay in the hospital for several days. Outpatient care is covered under Medicare Part B not under Part A, which normally covers hospital care. Patients can have co-payments for doctor's fees, and every hospital service. That includes charges for any routine drugs your mother may take for chronic conditions like high cholesterol.

Because her stay was as an outpatient, not an inpatient, she also would not qualify for Medicare coverage of follow-up nursing home care, even though her doctor told her she needed it. To be eligible for nursing home care, beneficiaries must have spent at least three nights in the hospital admitted as an inpatient.

Hospitals are not required to tell patients whether they are inpatients or outpatients, so frequently beneficiaries never learn of their status until after they have been released. If you believe the services your mother received should have been billed as inpatient services check your mother's Medicare Summary Notice and follow the instructions to challenge the charges from the hospital listed under Part B of the notice. You may also challenge any charges from the nursing home for outpatient services.

If your mother enters the nursing home, you can ask the nursing home to submit a "demand bill" to Medicare.  When that is rejected (and under current rules it will be), then you can appeal and get a shot at overturning the decision.

Medicare has recently made revisions to its payment rules, but those changes do not drop the three day of inpatient care for nursing home coverage, or require hospitals to tell patients when they are getting observation care. Legislation has been introduced in Congress that would count observation stays as part of the three hospital days required for nursing home coverage.

To learn more, see the Medicare Publication “Are You A Hospital Inpatient or Outpatient” Publication No.11435. Call Medicare at 1-800-MEDICARE (1-800-633-4227).