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Medicare rules give full hospital benefits only to those with 'inpatient' status

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By Susan Jaffe
Kaiser Health News
Tuesday, September 7, 2010

After Ann Callan, 85, fell and broke four ribs, she spent six days at Holy Cross Hospital in Silver Spring. Doctors and nurses examined her daily and gave her medications and oxygen to help her breathe. But when she was discharged in early January, her family got a surprise: Medicare would not pay for her follow-up nursing home care, because she did not have the prerequisite three days of inpatient care.

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"Where was she?" asks her husband, Paul Callan, 85, a retired U.S. Army colonel. "I was with her all the time. I knew she was a patient there."

But Holy Cross had admitted her only for observation. Observation services include short-term treatment and tests to help doctors decide if the patient should be admitted for inpatient treatment. Medicare's guidance says it should take no more than 24 to 48 hours to make this determination.

Yet some hospitals keep patients under observation for days, and that decision can have severe consequences. Medicare considers observation services outpatient care, which requires beneficiaries to cover a bigger share of drug costs and other expenses than they would when receiving inpatient care.And unless patients spend at least three consecutive days as an inpatient, Medicare will not cover follow-up nursing home expenses after discharge.

The Callans owe $10,597.60 to Renaissance Gardens, the Silver Spring nursing home where Ann Callan spent three weeks.

"I'm going to fight this," Paul Callan says. "I don't care how long it takes, because I don't think it's right."

The Callans have since retained an attorney to pursue the matter, and hospital officials would not discuss details of the case "in anticipation of possible legal action," a spokeswoman said. However, Karen Jerome, a physician who is an adviser on care management at Holy Cross, said in a statement that the hospital has a policy of informing patients when they are in observation care and that patients receive a thorough review to determine their status.

While patients generally stay in observation status for no longer than 48 hours, she said, it is the patient's condition and need for medical care that doctors have to consider most, not the clock. Sometimes the patient does not meet criteria for inpatient care after 48 hours but hasn't improved enough to go home. When that happens, the hospital will keep the patient until he or she has "a safe discharge plan."

Conflicting mandates

Claims from hospitals for observation care have grown steadily and so has the length of that care, says Jonathan Blum, deputy administrator at the Centers for Medicare and Medicaid Services (CMS), the federal agency that runs Medicare. The most recent data show claims for observation care rose from 828,000 in 2006 to more than 1.1 million in 2009. At the same time, claims for observation care lasting more than 48 hours tripled to 83,183.

In a report to Congress in March, the Medicare Payment Advisory Commission said the increase may be explained by hospitals' heightened worries of more-aggressive Medicare audits of admissions and Medicare's decision in 2008 to expand criteria that allow patients to be placed in observation status. Yet the number of people admitted to inpatient status remained stable, the report said.

The trend is emerging as hospitals cope with increasing constraints from Medicare, which is under pressure to control costs while serving more beneficiaries. In addition to more stringent criteria for inpatient admissions, hospitals face more pressure to end over-treatment, fraud and waste.


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