Medicare recipients may face large bill for care

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Medicare recipients who need more time to recuperate after leaving the hospital could be hit with unexpected expenses if they don't qualify for the standard 20-day stay in a nursing home because their four-day hospitalization was billed as an outpatient "observation" instead of an inpatient admission.

While a room can still be theirs, they will likely face an upfront payment of hundreds of dollars to claim it.

The problem has become more common in the past year as patients end up squeezed between a federal health care agency trying to control spending and hospitals and nursing homes trying to avoid unpleasant surprises. As a result, a patient could be treated at a hospital for congestive heart failure for four days then, because the stay didn't count as an admission, owe $250 a day for follow-up nursing home care.

It doesn't happen all the time, "but until 2012 we rarely saw it. It was just not a typical problem," said JoAnne Reifsnyder, chief nursing officer for Genesis HealthCare, a national network of skilled nursing facilities with 51 locations in Pennsylvania, including Highland Center in Brackenridge and Laurel Ridge Center in Uniontown, Fayette County.

What has changed is Medicare's interpretation of what constitutes an inpatient hospitalization -- and several days in a hospital bed receiving treatment under a doctor's care does not necessarily meet the criteria.

In June, Brown University researchers published a study that found nationally the ratio of Medicare patients classified as outpatient "observations" rather than inpatient admissions had increased 34 percent from 2007 to 2009."It has grown significantly in the past 12 to 18 months," said Denis Lukes, vice president for payer relations and reimbursement for the Hospital Council of Western Pennsylvania. "If anything, they're becoming more aggressive."

Last summer, the Centers for Medicare & Medicaid Services proposed increasing payments for outpatient services and noted it is "concerned about recent increases in the length of time that Medicare beneficiaries spend as outpatients receiving observation services." The agency asked for public comment on potential policy changes.

The agency has an online guide at that advises patients to ask hospital staff if they are being treated on an inpatient or outpatient basis.

Currently, the agency itself is referring inquiries about the observations-versus-admissions issue to its lengthy online listing of what services are covered:

Historically, an outpatient observation would be a period of time when a person is being evaluated for something like chest pain or is receiving short-term treatment while doctors decide if further, inpatient care is needed.

But, in an attempt to hold down costs, the scope of "observations" now can include spine fractures or overnight stays that last several days while the patient undergoes tests and receives treatment.

While the move toward classifying more hospital stays as observations is also an issue with private insurers, Medicare poses particular problems because of the large number of Medicare beneficiaries and because of Medicare's auditing process, which allows the agency to retroactively check and change a hospital stay from inpatient to outpatient for up to five years.

When that happens, a hospital can lose its entire reimbursement payment -- and, in some cases, the hospital will then bill the patient.

Hospitals can appeal if Medicare reverses an inpatient claim and makes it an observation, Mr. Lukes said, but, "It's a very costly process to take on."

He added that Medicare now uses Recovery Audit Contractors to review claims for improper payments and then collect the money. The program went nationwide in 2010. "The firm gets paid a percentage of what they recover, so there's a very high incentive for them to deny the coverage."

Hospitals have long decried the trend among all insurers, including government insurers such as Medicare and Medicaid, to classify even overnight hospital stays as "observations" rather than admissions, thus reducing by more than half the reimbursement to the hospital.

With Medicaid, which provides coverage for low-income families, observations are not reimbursed at all.

Now Medicare beneficiaries and other patients are paying the price, too. Under Medicare rules, a beneficiary is entitled to a nursing home stay following a minimum three-day hospitalization. But it must be a three-day admission -- and neither time spent in the emergency room nor the day of discharge count.

In other words, someone can be receiving hospital treatment for congestive heart failure over four days but Medicare may consider it an observation. Then, when the patient transfers to a nursing home afterward, there's no coverage -- and the facility may start charging $250 a day or more.

In November 2011, the Center for Medicare Advocacy -- a national nonprofit based in Connecticut and Washington, D.C., that advocates for Medicare beneficiaries -- filed a class-action lawsuit against U.S. Secretary of Health and Human Services Kathleen Sebelius -- which may explain why the agency is not commenting publicly now.

The suit alleges that the agency is wrongfully denying Medicare beneficiaries coverage by classifying inpatient stays as outpatient observations, and thus exposing Medicare patients to large bills for their hospital and skilled nursing stays.

Meanwhile, nursing homes and hospitals feel as if they are unfairly blamed by patients when they have to deliver the bad news that a patient doesn't qualify for nursing home care coverage.

Ms. Reifsnyder said Genesis tries to determine if a person qualifies before they arrive, and also will try to work out a payment plan if they don't.

She is hopeful this issue will get worked out as national health care reforms kick in. But in the meantime, she said, "The current rules do not fit the needs of the population."

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Steve Twedt: or 412-263-1963.


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