Everything you ever wondered about Observation Status

Kathryn Carlson is Warren General Hospital Executive Director of Operations

Imagine you are sick and come to a hospital for care. The doctor decides to have you admitted to the hospital, but puts you in “Observation Status”. You have heard some things about Observation that makes you nervous but aren’t sure exactly what being in that status will mean for you. Why can’t the doctor admit you as an Inpatient? Who makes up these rules, anyway?

All hospitals are required to screen patients who are admitted as inpatients to see if they are appropriate for an inpatient level of care. The rule that requires screening is established by the Federal Government through the Centers for Medicare and Medicaid Services, commonly referred to as CMS. Other insurance companies commonly follow these rules and most, if not all, commercial insurers have additional rules about what kinds of illnesses require inpatient treatment versus observation.

As a patient, you should be aware that observation services are billed as outpatient services. That means that tests and treatments will be covered by your insurance company the same way they would be if they had been ordered by your doctor’s office. For example, if you would pay $20 for a chest x-ray that your doctor orders when you see him or her for a checkup, you would be billed the same $20 for a chest x-ray as an observation patient. Inpatient services are billed as inpatient and coverage is dependent upon your insurance plan. Someone with Medicare A&B would be responsible for 20% of their inpatient hospital bill unless they had secondary insurance that would cover some or all of the 20%.

Does that mean you will pay more for observation services than an inpatient hospitalization? No! While this is dependent upon your individual insurance coverage, it does not mean that observation is more expensive. What it may impact is coverage of a nursing home stay when you are discharged. Right now, Medicare requires that a patient have a 3 midnight stay as an inpatient in a hospital in order for Medicare to pay for a nursing home. If you are in observation status, that stay will not count toward the 3 midnights needed for this coverage. Hospitals have to follow insurance criteria for inpatient admissions, as mentioned above. A patient who needs nursing home care may not necessarily qualify for an inpatient stay. The Medicare website, www.medicare.gov gives good examples of how this coverage works.

So now what? If you are in the hospital and are an observation patient, ask questions! You can ask to speak to a case management team member or ask your nurse.

This article brought to you by the Eldercare Council of Warren-Forest Counties.

Kathryn Carlson is Warren General Hospital Executive Director of Operations.

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