Medicare is a federal program that provides medical coverage to certain individuals – those over age 65, younger folks with disabilities, and people with End Stage Renal Disease. This coverage is critical to get those populations needed care.
Medicare Part B covers things like doctor’s visits and outpatient care; it is not free. Medicare Part A provides coverage for hospital stays, certain stays in a long-term care facility, and some types of home health care. It is provided at no cost for individuals who have paid Social Security taxes for a proscribed amount of time.
In order for Medicare Part A to cover long-term care facility costs, certain requirements have to be met. The patient must have days left in their benefit period and also have a qualifying hospital stay. A qualifying hospital stay generally means that the patient must have been admitted to the hospital for three days. The important thing is that the patient cannot be classified as observation status during those three days. If the requisite conditions are met, the patient can qualify for thirty days of care in a long-term care facility. The long-term care needs must relate to the reason the patient was in the hospital and the patient must enter the long-term care facility within a short time, usually about 30 days, from leaving the hospital.
What often happens is that a hospital will change a patient’s classification from being an admitted patient to observation status and thus thwart the patient’s ability to receive their 30 days of care within a long-term care facility. Eleven years ago, a lawsuit was filed to challenge this practice and to provide an appeals process when a patient’s status gets changed from inpatient to observation.
After more than a decade, the litigation has culminated into a ruling that was recently issued by the United States Court of Appeals for the Second Circuit. The lawsuit was filed by a slew of patients (or their estates) who had their status at the hospital changed without their consent and thus resulted in benefits for their subsequent care at a long-term care facility being denied.
The reason that hospitals often change a patient’s status from inpatient to observation is how the hospital can bill Medicare. If the hospital admits the Medicare patient as inpatient status but the claims representative from Medicare doesn’t agree that the patient should be of that status, then Medicare will not reimburse such claim. In addition, in order for Medicare to pay for a claim for observation status, there has to be a doctor’s order stating that the patient should be in observation status. And such doctor’s order cannot be done retroactively. So, if an inpatient claim is denied, the doctor cannot go back and write an order saying the patient was in observation status and rebill Medicare.
Let’s go through an example. Edna was admitted to the hospital as inpatient status and stayed three days. Thereafter, the hospital bills Medicare and the claim was denied, stating that Edna should not have been classified as inpatient. Because Edna’s doctor did not write an order during her stay that indicated she was in observation status (she was in inpatient status, after all), then the hospital has no recourse to bill Medicare because a doctor’s order for observation status cannot be retroactive. The hospital is left holding the bag for Edna’s care.
This conundrum led to many hospitals to prefer to list a patient as being in observation status, just to be sure they could get paid through a Medicare claim. But, as discussed, classifying a patient as observation status has adverse effects on that patient being able to get their subsequent long-term care paid for through Medicare.
Enter the recent court ruling. The court in this case found that when patients are reclassified as observation status from inpatient status, there should be a way to appeal that decision. The patient should get a say on whether they feel the decision is fair and give reasons or evidence on why the reclassification should not occur. This case is a big win for Medicare patients and will pave the way for them to have more control over their care and benefits.