A federal court ruled that hospitals may retain a patient in their building under “observation status” rather than formally admitting them, and that such “observation status” does not count as a hospital stay for nursing home Medicare qualification purposes.
Medicare (not to be confused with Medicaid or Title 19) provides a limited nursing home benefit. If a nursing home resident spends three nights in a hospital and then is discharged to a nursing home for some type of rehabilitation services, the nursing home resident is entitled to Medicare benefits at the nursing home for up to 100 days. Medicare will pay the entire bill for the first 20 days and, for the next 80 days, Medicare will continue to pay a portion of the bill and the nursing home resident must pay a portion. In 2021, the nursing home resident must pay $185.50/day and Medicare pays the balance (many nursing home residents have a Medicare supplemental insurance policy to cover the $185.50/day). The Medicare benefit can save a nursing home resident tens of thousands of dollars.
So what does “observation status” have to do with all of this?
Under Medicare regulations for hospitals, if a hospital admits a patient and treats that patient for a particular diagnosis (limited to such diagnoses as heart attacks, heart disease and pneumonia) and then discharges the patient to a nursing home or back home, if that patient is then readmitted to the hospital for the same diagnosis within 30 days of the original discharge, then Medicare financially penalizes the hospital for not taking care of the problem correctly the first time the patient was there.
What this leads to, for some patients with a risky diagnosis, is hospitals not formally admitting the patient on their first visit. The patient may be in the hospital for several days, but is never formally admitted “upstairs.” The patient stays in a curtained enclosure off of the Emergency Room, for example. This way, when the patient does leave the hospital, then if that same patient with that same diagnosis returns to the hospital within 30 days and is formally admitted this time, the admission is not a readmission—it is the first admission and, consequently, the hospital is not financially “dinged” by Medicare.
Why is this unfair to the nursing home resident?
Because when that patient, who was under observation status at the hospital for 4 or more days, is transported to a nursing home for some sort of rehabilitation, he or she is expecting to receive nursing home Medicare benefits because they were in the hospital for the needed stay.
What a nasty surprise it will be when that resident learns that he will now have to pay privately what Medicare would otherwise have covered. All because they did NOT have the prerequisite 3 night hospital stay needed to get the nursing home Medicare benefit, nor were they ever formally admitted to the hospital and the resident.
Sound unfair? It is.