Observation Status: What You Need to Know

Written by Audrey Siegel on . Posted in Health & Wellness

This article is part of a series for Kol HaBirah on“Getting the Most Out of Your Hospital Stay.”

 Dr. Laura Wells* was a scientist, accustomed to drawing conclusions based on her own observations. In the year before Dr. Wells’ death, however, her daughter Carol* learned that her mother was in fact the one being “observed.”


What is Observation Status?

Carol believed her mother had been admitted to the hospital as a patient, but she found out later that her mother was in fact admitted under “observation status.” Carol only received this information when the skilled nursing facility (SNF) her mother planned to enter after discharge from the hospital informed the family that Medicare would not pay for her mother’s stay.

Medicare only pays for a stay in an SNF when a patient is transferred after staying as an admitted patient in the hospital for three consecutive nights, they told Carol. Observation status does not count in this calculation; rather, Medicare considers observation status to be an outpatient service.

Staying in a hospital bed, with nurses checking in on them and a doctor ordering tests, patients may not recognize any difference between being admitted to the hospital and receiving observation care. There are, however, major differences.

Financial Ramifications

A patient receiving observation care is responsible for Medicare copays and for the cost of any regular medications they take and receive in the hospital. Outpatient observation status is paid for by Medicare Part B, while inpatient hospital admission is paid for by Medicare Part A. Medicare beneficiaries who are enrolled in Part A, but not in Part B, may be responsible for their entire hospital bill if they are classified under observation status. Most importantly, as stated above, Medicare will not cover a stay in a rehabilitation or nursing care facility if the patient was transferred from observation care.

Elderly patients with health issues — in addition to the crises that brought them to the hospital — are often unable to go back home easily and are not necessarily eligible for an SNF, leaving them with seemingly few good alternatives. Patients and families often only realize that they are in this vulnerable state when the patient is already in the hospital.

Hospitals Must Inform Patients of Their Status

In 2015, Congress passed the Notice Act, which requires hospitals to inform Medicare patients — who receive outpatient or observation care for more than 24 hours — that they are being treated as outpatients and explain what their costs may be within 36 hours of the start of the outpatient care. A few states, including Maryland, already required this type of notification prior to the passing of the act. Even alert patients with astute caregivers, however, can miss consequences of this notification in the midst of processing medical information and juggling other aspects of their lives.

Wells was eventually able to go to the nursing care facility and have Medicare cover her cost. Her daughter and advocate, Carol, learned from the doctor managing her case that Wells required another test, which eventually resulted in Wells’ patient status changing from observation to a full admission.

Be Prepared: Ask the Right Questions

In a talk delivered on June 25 at the Kemp Mill Synagogue (KMS) in Silver Spring, Maryland, Dr. Ira Rabin, vice president of Medical Operations at MedStar Washington Hospital Center, educated people about this topic. He recommended that patients and families learn as much as they can quickly and that they should call their insurance carrier and begin asking questions as soon as possible. In addition, family members should ask if the patient’s case has been reviewed by a utilization nurse or case manager and request confirmation of the patient’s status.

This is important because a status can change over the course of a hospital stay, so it is best to find out the patient’s status early and regularly. Rabin reminded families to focus on the problem that brought the patient to the hospital, and to save outpatient work for later, as costs of other types of care may not be covered. Families should appoint one person to be the spokesperson for the patient, and have that person, with the patient’s permission, give their contact information to the medical team. Rabin also urged everyone to begin making a discharge plan as soon as a patient arrives in the hospital.

Local Resources

Making a discharge plan can be especially important if a Medicare patient is kept under observation status and never formally admitted. Reviewing options early can prevent grief later. Find out who in the hospital can assist with creating a discharge plan.

The local Jewish community has a role to play here as well. Synagogue groups and local support organizations such as Bikur Cholim can help with services such as transportation, meals, support groups, counseling, and even give caregivers a break.

No patient or family should feel discouraged or isolated, especially after learning that their loved one may not be able to go to a skilled nursing facility after discharge from a hospital. There are resources for dealing with this information prior to leaving the hospital and programs in place that can assist later.

* Names and identifying information have been changed for privacy.

By Audrey Siegel

 Audrey Siegel is the executive director of Bikur Cholim of Greater Washington. She is a former New Yorker who has enjoyed living in Silver Spring with her family for the past 27 years. Audrey hopes to hike or bike every nature trail in Montgomery County, so wave if you see her along the way.