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Navigating Health and Aging: Understanding 'observation status'

How many of us would like to show up at work each day and be told we are unable to continue our business? If you owned a coffee shop and were told you could not sell coffee, how long would you be in business? This is exactly what it is like in the world of medicine these days. You can operate a hospital, but the payer sources do not really want you to actually have people fill those beds. Of course, that is only if the patient is so sick that you are unable to send them home. Who gets to decide who is sick enough? Read on ...

Recently while having lunch at J Cafe, I overheard a few ladies lunching and chatting about hospitalization. There seemed to be confusion about what all of this "admitted versus not admitted" means.

Occupational hazard: My hearing zones in on way too many conversations about "Aunt Sally's hip replacement gone bad" or "Dad's colonoscopy," etc. This is not because I want to hear about someone's bunions or constipation. I just have (despite what my kids say) really good ears. They seem to be like trained search dogs ... My ears just perk up at the sound of medicine.

I try really hard not to eavesdrop. I try to tune it out, but sometimes I can no longer stand it, and then I have to add my two cents. Fed up with your doctor who doesn't look at you? I will tell you whom I like. Tired of the runaround to different specialists? I will jump right in with a recommendation. Maybe this is a medical addiction.

In this case, I had to weigh in on the "observation status." What is this "observation status," and why has it changed the face of medicine so much for the worse?

It used to be that if you were sick and needed to go to the hospital, you showed up and were triaged and seen by the staff. Then the doctor would decide if you needed to be admitted to the hospital or treated appropriately and sent home. Easy, right? Not so much these days.

Times have changed, and cost-cutting has added a new element, which is now called "observation status." You can go to the hospital, get assigned to a bed, have medical tests, procedures, possibly even surgery, and yet, you may not even be admitted. You can be considered outpatient for days - on observation status.

So what is "observation status" exactly? The Center for Medicare and Medicaid Services defines it in the Medicare Benefit Policy Manual: "Observation care is a well defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation services are commonly ordered for patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge." My definition differs. If you are a regular reader, here comes the rant: In a nutshell, "observation status" is the attempt for CMS to pay for less so that you, the consumer, will be expected to pay for more.

As far as well defined clinically appropriate services, I disagree with well defined. I visit clients in various hospitals and well defined is not the case. Clinically appropriate? How many of you have had a loved one booted out the door, your head spinning because you have no idea what happened in there and what is the next step? Whose fault is it and how did we come to this?

Back in 2003 -not Obamacare, folks - the Medicare Modernization Act began a program of Recovery Audit Contractors. By 2006, all states were included, and the seemingly equivalent of IRS auditors, RAC, began scrutinizing hospitals to evaluate whether they should have admitted patients or just observed them.

In other words, the RAC began to define how doctors and health professionals are to practice medicine. For example, the RAC can pull your records from three years ago, and consequently decide if you should have been considered to be observation status instead of being admitted. If this is determined to be true, then who pays? The hospital.

What does this mean to hospitals? This type of practice results in huge financial burden, losses and risks. Many hospitals are so afraid that big brother is going to come back and take money or refuse payment that you, my friends, are sitting in observation status for days!

As I have reminded you in previous articles, your hospital would love to take care of you. However, it has auditors breathing down its neck to make sure it makes the right decision on whether you are sick enough. Are these people doctors? Are they at the bedside hearing someone's pain? Are they seeing the subtle clinical nuances that cannot be conveyed in a code for billing purposes? No, they are not and cannot. This is a crime.

It may be worse than the all-too-dreaded socialized medicine that we all refuse to believe is being doled out to us. At least in Canada, most people surveyed know what to expect from their system and actually like their system. In our country, we hide the truth.

Where does that leave you? The costs are passed on to the consumers. Medicare Part A will pay for inpatient stays, not observation. Observation status is covered under Part B, where co-pays must be paid by the consumer.

Here's an example: If you or your loved one requires rehabilitation therapy in a skilled nursing facility, it will not be paid for if you were parked in observation, yet not admitted, for three days. This also means that if your doctor is not certain that your condition will require you to be admitted to the hospital for two midnights (the new two midnight rule) - and you were in fact admitted - the hospital may have payment withheld or rescinded. As a result, hospitals are more and more hesitant to admit patients.

This brings us right back to the beginning: How do you stay in business if you are unable to admit patients? You get bought up by large health systems or other hospitals - not that it solves the observation status issue.

What can you as consumers do? Ask the questions: Am I admitted or on observation? Why am I on observation? Why do I not meet the admission criteria? If you are admitted and do not feel that discharge is appropriate, you can appeal the discharge through Medicare.

Remember, your hospital does want to care for you. It is CMS that decides it does that. Finally, contact your representatives and ask them to support the Improving Access to Medicare Coverage Act (H.R. 1179 or S.569). This bill would allow observation nights to count toward the three-night requirement for Medicare coverage in a skilled nursing facility.

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