I received a frantic call from a client on Christmas Eve. Her elderly mother had been in the hospital for almost ten days with a broken bone, but the hospital had her status listed as in for “observation.” The hospital wanted to discharge her to a rehabilitation facility, but if she was not officially “admitted” into the hospital, she would be responsible for the subsequent rehabilitation bill; potentially costing her thousands of dollars. Luckily, this client knew to call her attorney to help get her mother “admitted” into the hospital.

This is a perplexing dilemna, however, that many unsuspecting Medicare patients are facing. Despite staying in the hospital for numerous days, if the hospital has deemed the person an “observation” patient, he or she may be facing higher costs for the hosptial stay and the follow-up care because such treatment under “observation” will not necessarily be covered by Medicare.

It is my understanding that, historically, the “observation” status was intended by Medicare to be a period, usually within 24 to 48 hours, to give doctors time to determine whether a patient should be admitted to the hospital or whether the patient could be effectively treated as an outpatient. Apparently, Medicare felt that the hospitals were erring on the side of caution by admitting too many patients that could have been treated as outpatients. As legal disputes began to arise between hospitals and Medicare, because Medicare paid less for patients admitted to the hospital when Medicare believed the patient could have been treated as an outpatient, the length of time hospitals kept patients for “observation” began to stretch. Therefore, some people believe that hospitals have now gone too far in the opposite direction by keeping patients in the hospital for extended periods of time without officially admitting them. A patient may not even be aware that his or her status in the hosptial is for “observation” only or, more likely, the patient may not understand the costly implications to his or her status. Unfortunately, with more regulations and changes coming to the healthcare system, this area will likely remain a trap for the unwary.