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Advocates at the Center for Medicare Advocacy are working on 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 has not only not been unable to obtain a determination of Part A status, but the hospital refuses to submit a claim under Part A because of alleged fears that it will be accused of double billing. Because the hospital refuses to submit a claim, she cannot obtain a Part A denial, cannot appeal that decision, and therefore cannot establish a qualifying 3-day hospital stay. In turn, that inability deprives her of the opportunity to have Medicare cover her for 100 days in a skilled nursing facility, with the result that she has had to deplete her private savings.

The hospital's actions violate its own rules and Medicare law. The hospital's notice specifically states that observation status is designed for patients staying in the hospital less than 23 hours.  Medicare regulations define an inpatient as one who has been admitted and is in the institution for a 24-hour period or longer. 42 C.F.R. § 440.2(a)(1). 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 is assuming that the hospital obtains 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 now contemplating whether legal action should be taken against the hospital or CMS, but is also 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.

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