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Advocates at the Center for Medicare Advocacy recently settled a case involving an individual who was in a hospital bed for four days but was never "formally admitted ". Instead, the hospital accorded her "observation status ". Although Medicare Part B covered her, she was not only not unable to obtain a determination of Part A status, but the hospital refused to submit a claim under Part A because of alleged fears that it would be accused of double billing. Because the hospital refused to submit a claim, she could not obtain a Part A denial, could not appeal that decision, and therefore could not establish a qualifying 3-day hospital stay. In turn, that inability deprived her of the opportunity to have Medicare cover her for 100 days in a skilled nursing facility, with the result that she had to deplete her private savings. Under the settlement , her time in the hospital will be treated as inpatient for purposes of her skilled nursing facility coverage.

The hospital 's actions violate its own rules and Medicare law. The hospital 's notice specifically stated that observation status is designed for patients staying in the hospital less than 23 hours. The Medicare Intermediary Manual, ' 3112.8, states that "[i]n only rare and exceptional cases do outpatient observation services span more than two calendar days " and requires the hospital to seek an exception. No exception was sought or obtained in this case.

The Center assumes that hospitals obtain a financial or some other benefit from improperly maintaining a patient at observation status rather than admitting her. But, the effect on the individual 's ability to obtain skilled nursing facility coverage, as this case indicates, is critical. The Center is interested in whether this problem of abusing "observation status ", with its ultimate effect on skilled nursing coverage under Medicare, is occurring elsewhere. If advocates are seeing or have seen this problem, please contact Gill Deford in the Center 's Connecticut office, at (860) 456-7790. Click here for information regarding the Lormore v. Shalala case.

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