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Over the last several years, many unsuspecting seniors and disabled persons have been opening the mail to receive large bills for health care procedures and medications they assumed were covered during a recent hospital stay. Even worse, some patients have transferred to rehab after a hospital stay only to find out their skilled nursing care wasn’t going to be covered and they would be billed at a cost of over $400 per day for care they needed to recover from an illness or injury.
These situations are both a result of a technical, financial loophole in Medicare billing called “Observation Status” – and thankfully, as of August 2016 hospitals will be required to notify patients in writing if their stay is not going to be covered, so there should be less surprises in the mailbox.
But that doesn’t make the billing issue any easier to understand, and it doesn’t ensure that people who need hospital care will be able to afford it. Here are a few of the key points you need to know about Observation Billing, Medicare Part A/B coverage and Skilled Nursing Rehabilitation.
Outpatient Services – Covered under Medicare Part B (Outpatient Insurance) includes medical services that are typically performed in the community such as doctor visits, lab work, x-rays and some home health care.
Observation Status – If the hospital determines that they are “watching you” overnight or collecting information to determine an accurate care plan and diagnosis, then you are probably being admitted under “Observation Status.” This means that any medications and services provided for pre-existing conditions will likely be billed under Medicare Part B, probably at a much higher rate than anything you would pay if you were getting those same meds from a local pharmacy.
Inpatient Hospital Services – Covered under Medicare Part A (Hospital Insurance) and includes all hospital services, including semi-private rooms, meals, general nursing, drugs as part of your inpatient treatment, and other hospital services and supplies. This includes the care you get in acute care hospitals, critical access hospitals, inpatient rehabilitation facilities, long-term acute care hospitals.
Qualifying Stay – This is the Medicare requirement that says in order for someone to have Skilled Nursing Facility (SNF) rehabilitation covered under Medicare Part A, he/she must be admitted to an INPATIENT hospital bed at midnight for three nights in a row. The tricky part is that if the hospital is billing your stay as OBSERVATION status, then you don’t qualify for the SNF benefit coverage.
How to reduce the costs of care:

  • If you are being admitted under observation status, ask the hospital staff if you can bring in medications from home. Cleveland Clinic and University Hospitals both have policies in place regarding this process. This can drastically reduce the expense of Outpatient/Observation Care because medication is often the highest part of bills that patients receive.
  • You also have a right to question your bill. Errors are not uncommon, and rates are often negotiable for patients who are willing to pay their bill in full. Don’t hesitate to contact our Care Coordinators if you need help navigating this process.
  • Finally, if you need rehab, but a SNF stay isn’t going to be covered, consider going to assisted living or supportive senior apartments where there is staff to help you. The cost of these will be lower than paying privately for a bed at rehab facility. Your doctor can then order Home Care services for nursing care, home health aides and physical and occupational therapy which can be billed under Medicare Part B at a much lower out-of-pocket cost that nursing home care.

There is still much work that needs to be done in order to avoid burdening seniors with the expense of care under the current Medicare guidelines and legislation has been put forth by Senator Sherrod Brown that would allow Observation Status to be considered a qualifying hospital stay for skilled rehab benefits. He presented this bill with the support of many Cleveland-area hospitals and nursing homes including Cleveland Metrohealth and Menorah Park, but the Improving Access to Medicare Coverage Act has not received the congressional support it needs to become law.