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The difference between ‘observation’ and ‘admission’ hospital stays

Created date

August 20th, 2013

Did you know that an overnight hospital stay may be characterized by Medicare in two very distinct and different ways? Your stay may be classified as observation or admission, even though in both cases, you are physically occupying the very same hospital bed and receiving the very same care. While this may seem odd, it is important to understand how your stay is characterized because it has profound implications for how the cost of your care will be paid. If you are admitted, your stay is covered by Medicare Part A benefits; if you are being observed your stay is covered by Medicare Part B and Part D benefits. Depending on your supplemental or Medicare Advantage insurance coverage, there are frequently more copays with an observation stay than an admission stay. Being under observation means you have a medical problem that requires hospital care and a stay, but your condition isn t considered serious enough to warrant an actual admission to the facility. This classification is on the rise; from 2006 to 2010 the number of observation claims submitted to Medicare rose 46% and stays longer than 48 hours tripled.

Can be costly

If you have an observation stay, you might be in a position of even greater financial liability if you go to a skilled nursing facility (SNF) for therapy and rehab after your hospital stay. Under the current rule, Medicare will only cover a SNF stay if you ve been in the hospital for three midnights under admitted status. You are financially responsible for most of the cost of the rehab stay if your admission to hospital was for observation under standard Medicare rules. If you have Medicare Advantage such as the Erickson Advantage Plan, you may have the rehab stay covered independent of your hospitalization status. When you review your insurance options, it is certainly worth checking whether you will have rehab coverage after an observation stay. While this may seem overwhelming, please know you are not at the mercy of the system when it comes to this problem. Asking the right questions can save you a lot of headaches. When in the hospital, speak with a case manager, patient advocate, clinical staff, or hospital administrative staff. Also, don t leave your doctor out of the loop. A survey of physicians found that 77% are very concerned about the issue of their patients being placed on observation status, especially if it s without their knowledge. If your doctor disagrees with the hospital's decision about your status, ask them if they can help. Finally, you have the right to appeal any of Medicare s noncoverage decisions. In most instances, if your initial appeal is denied, you can escalate it to a second or even third level of review. This appeal process is in place for almost all private insurances as well. Although it might seem like a lot of paperwork, it could save you thousands of dollars in the end. It s important to know that you are not without support in this process. Your doctor can be one of your best advocates. Don t be afraid to ask for help. 

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