ELLSWORTH — It’s a common scenario for many seniors: a medical episode prompts a hospital stay and, later, a transfer to a nursing home for rehabilitation.
That rehabilitation stay will likely not be cheap, but Medicare will cover it — up to 100 days of the nursing home stay, with the first 20 paid in full.
Unless it won’t.
In recent years, families around the country have been blindsided by thousands of dollars in hospital and nursing home charges they thought would be covered by Medicare. Instead, because the patient was placed “under observation” during the initial hospital stay, families have been left to cover the cost.
The problem is this: while most hospitals make no distinction between the care provided to an inpatient and the care given to a patient under observation, observation status is an outpatient designation.
Patients who are under observation sleep in the same beds, see the same nurses and doctors, receive the same care and get the same tests as those who are admitted as inpatients. But they are billed differently.
To qualify for Medicare Part A to pay the bills, a patient must spend three consecutive nights (what many refer to as the “three midnights rule”) as an admitted inpatient to qualify for skilled nursing care upon discharge.
This means Medicare treats observation stays entirely differently when it comes time to pay.
“If you’re in observation status, those midnights don’t count,” said Debbie Grover, care management manager at Northern Light Maine Coast Hospital. “So your stay at a nursing facility or in a swing bed would not be covered. It would be private pay.”
And that may be no small fee. A week at a nursing home for rehabilitation cost around $2,000 in 2017, according to a study by the Lincoln Financial Group.
“That’s where it’s confusing to patients,” Grover continued. “They get the same care whether they’re observation or inpatient. They’re in the same beds and they have the same nursing care.”
It’s not only rehab costs that patients may have to pay out of pocket. Inpatient stays are covered under Medicare Part A, with a one-time deductible. Medicare Part B covers outpatient care, including observation stays, but does not cover certain tests and medications that would be covered under Part A.
This can be confusing, said Northern Light Maine Coast President John Ronan. A patient could be admitted to the hospital as an inpatient and pay $500 for a test and then have the same test two months later as an observation patient and pay far more.
From the patient’s perspective, said Ronan, “I’m at the same hospital, I’m in the same bed — it could be the exact same bed — getting the same care, but what the insurance covers is different.”
There have been attempts to deal with the problem. In early 2017, the Centers for Medicare and Medicaid Services began requiring hospital staff to inform patients when they are placed under observation for more than 24 hours.
Last month, Sen. Susan Collins (R-Maine), along with senators from around the country, reintroduced the Improving Access to Medicare Coverage Act of 2019.
The bill would close a loophole in Medicare policy and allow for the time patients spend in the hospital under “observation status” to count toward the requisite three-day hospital stay for coverage of skilled nursing care.
But this is the fifth time the legislation has been introduced in the Senate, with similar bills put forward in the House yearly since 2009. Past legislation has languished in committees and subcommittees in both chambers.
Collins spokesman Christopher Knight did not respond to a question about whether the bill had a chance of passing this time.
“When seniors require hospitalization, their focus should be on their health and getting well, not on how they were admitted,” said Collins in a statement.
“The consequences of this distinction between an observation stay and inpatient admittance can result in thousands of dollars in unexpected bills for seniors. There is widespread recognition that this issue must be addressed, as evidenced by the fact that 20 senators from across the ideological spectrum have co-sponsored the Improving Access to Medicare Coverage Act.”
So why not admit all overnight hospital patients as inpatients?
The use of observation status has been growing in recent years, in part, say researchers, because of competing incentives. Medicare will pay for skilled nursing rehabilitation care if a patient is admitted for three nights. But Medicare auditors penalize hospitals for admitting patients who, in Medicare’s estimation, don’t truly need it, sometimes forcing hospitals to return funds if the admittance is found to be unnecessary.
In part to avoid such audits, hospitals have turned to the “middle ground” of the observation stay, Ronan said.
Many also use software and checklists to help avoid the possibility of improperly admitting patients and inviting an audit. Physicians can review the software’s decision and make a final call, but those who go against it and admit a patient must be able to justify to Medicare why they did so.
There is also the dramatically altered Affordable Care Act health care landscape, in which hospitals are penalized for high readmission rates.
Under Affordable Care Act rules, hospitals face a financial penalty if they readmit patients with certain conditions within 30 days. The idea behind the penalties is to ensure that hospitals are treating patients effectively, not simply admitting them over and over again for the same issue.
But if a patient hasn’t technically been admitted in the first place, he or she won’t count as being readmitted when returning to the hospital for the same problem.
This confluence of rules means there may be an incentive for hospitals to keep certain patients under observation, rather than admit them and risk paying the readmission penalty if they return, write researchers in a 2014 paper published in the journal Medical Care.
Kristin Cyr, vice president of nursing and patient care services at Maine Coast, said the hospital usually has several patients under observation.
That day there were five out of 26, she said.
Debbie Grover said figuring out whether a patient qualified for paid rehab was simpler before the observation stay came into effect.
“It used to be that if a patient needed to go to a nursing facility for rehab they’d just go into the hospital and be admitted for three midnights and then they could go,”
Grover said. “Now it’s a little harder.”