By Law, Hospitals Now Must Tell Medicare Patients When Care is ‘Observation’ Only

The new notice drafted by Medicare officials must be provided after the patient has received observation care for 24 hours and no later than 36 hours. Although there’s a space for patients or their representatives to sign it “to show you received and understand this notice,” the instructions for providers say signing is optional.

Some hospitals already notify observation patients, either voluntarily or in more than half a dozen states that require it, including California and New York.

Doctors and hospital representatives still have questions about how to fill out the new observation care form, including why the patient has not been admitted. During a conference call Feb. 28, they repeatedly asked Medicare officials if the reason must be a clinical one specific for each patient or a generic explanation, such as the individual did not meet admission criteria. The officials said it must be a specific clinical reason, according to hospital representatives who were on the call.

Atlanta’s Emory University hospital system added a list of reasons to the form that its doctors can check off, “to minimize confusion and improve clarity,” said Michael Ross, medical director of observation medicine and a professor of emergency medicine at Emory. Emory also set up a special help line for patients and their families who want more information, he said.

The form also explains that observation care is covered under Medicare’s Part B benefit, and patients “generally pay a copayment for each outpatient hospital service” and the amounts can vary. But Ross said “this wording may be antiquated.” Medicare revised some billing codes last year to combine several observation services into one category. That means beneficiaries are responsible for one copayment if the observation stay meets certain criteria.

The new payment package also includes coverage for some prescription drugs to treat the emergency condition that brought the observation patient to the hospital, said Debby Rogers, the California Hospital Association’s vice president of clinical performance and transformation. Other drugs for that condition will be billed under Part B with separate copayments, she said.

But patients will have to pay out-of-pocket for any medications the hospital provides for preexisting chronic conditions such as high cholesterol, and then seek some reimbursement from their Medicare Part D drug plans for any covered drugs.

Yet, Ross said, most observation visits are less expensive for beneficiaries than a hospital admission if they stay a short time, which the inspector general’s report also concluded. Doctors should “front load” tests and treatment so that the decision to admit or send the patient home can be made quickly. “If you get them out within a day, they are more likely to go back to independent living as opposed to needing nursing home care,” he said.

Last summer, Judy Ehnert’s 88-year-old mother had a bad fall and broke her wrist. Following surgery, and additional complications, hospital officials told the family she would be kept for observation but she would need to go to a nursing home to recover. When the family learned what observation care meant, said Ehnert, a retired bookkeeper who lives in West Fargo, N.D., “that’s when we blew a cork.”

Then, after a few days in observation, Ehnert’s mother contracted an infection and she was admitted to the hospital. “Her care was totally the same, in the same room, with the same doctor, the same nurse.” And Medicare covered her nursing home care.

“That’s what I expected at her age,” Ehnert said. “I always thought that’s what Medicare was for.”