Hospital Admission Doesn't Guarantee Inpatient Benefits

PHOTO: Ruth Grew, 84, of Maple Valley, Wash., whose recent hospitalization for back pain and other issues ended up not being covered by Medicare Part A hospital benefits.PlayCourtesy Hugh Grew
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At 84, Swiss-born Ruth Grew was living independently with osteoporosis, arthritis and hypertension, relying on a walker to get around her Seattle-area home. On a Wednesday in mid-October, however, the retired school librarian suffered sudden, searing back pain and incontinence and went to a nearby emergency room, where doctors admitted her for further tests and consultations with specialists.

A social worker at Overlake Hospital Medical Center in Bellevue, Wash., "dropped the bomb" on the Grew family two days later when she said Grew had been admitted on "observation status." Under that confusing designation, chronically ill Medicare patients are hospitalized yet considered outpatients. Hugh Grew, 58, was slack-jawed. The admissions papers his sister, Shirley, signed included a yellow Medicare form spelling out their mother's rights "as a hospital inpatient."

"Amid the adrenaline and the chaos and the anxiety," Grew's children had believed the signed papers meant "without a doubt" that their mother could count on Medicare hospitalization benefits.

The fallout didn't stop there. By that Saturday, after doctors determined Grew had spinal compression fractures, the doctor in charge of her case said that because she had no acute condition such as an infection and didn't need back surgery, she should be discharged. Only when her children brought her to a skilled nursing facility for physical and occupational therapy did they learn she'd be a "private patient" paying $2,800 a week. Because Overlake admitted her for observation, Grew didn't have the qualifying three-day "inpatient stay" that would trigger Medicare nursing home benefits.

Grew, widowed in 1992, likely will return to her Maple Valley, Wash., home this weekend. But because she's tapping more than $10,000 from money set aside for basic living expenses, she fears health costs could turn her into "a pauper," her son said. "She sees everything my father worked for … the things that he set up for her to have a comfortable life, certainly not an extravagant life, in her later years, all going away."

Grew is among an increasing number of chronically ill patients scratching their heads to learn that during hospital stays of up to 13 days, Medicare never considered them inpatients. In some cases, they're unaware of their "observation status," until billed for a share of diagnostic tests, prescription medications and other services Medicare covers more generously for inpatients. Shock frequently sets in when they need aftercare and find out they'll have to pay out-of-pocket.

Two non-profit organizations, The Center for Medicare Advocacy and the National Senior Citizen Law Center, filed a class-action lawsuit last week against Health and Human Services Secretary Kathleen Sibelius on behalf of seven Medicare patients with chronic ailments ranging from Parkinson's disease to cancer, who were admitted to hospitals, but remained outpatients. The suit filed in U.S. District Court in Hartford, Conn., alleges that admitting patients under "observation status" is illegal and that "improper classification" deprived them of Medicare Part A coverage for hospital and nursing home stays. Medicare Part B benefits covered a smaller share of costs.

Health and Human Services referred a request for comment to its Centers for Medicare & Medicaid Services (CMS), where a spokesman said, "We are not able to comment on pending litigation."

Advocates Want Patients Credited for All Time in Hospital

The Center for Medicare Advocacy met in September with federal health officials, but has received "no relief from the administration," said Judith Stein, the center's founder and executive director.

Rep. Joe Courtney, D-Conn., held a congressional briefing Oct. 20 during which Toby Edelman, the center's senior policy attorney in Washington, D.C., said that at the very least, all time spent in the hospital should count toward the three-day threshold for Medicare nursing-home coverage. That is part of proposed legislation supported by a coalition including AARP, the Alzheimer's Association and the American Medical Association.

The observation policy has left Medicare patients with hospital charges running into "thousands of dollars" for services and drugs they thought were covered. Edelman said she had just heard late Wednesday from Coralee Wolters, a Vermont woman "who broke her pelvis and arm and was in observation for five days" followed by "two weeks in a skilled nursing facility, at a cost of $4,000. These cases keep coming."

Such cases also have unintended consequences. Medicare recipients who cannot afford a nursing home stay might try fending for themselves, or rely on relatives' help. A client's grandson who left work to bring his grandfather home lost his job because he had no family leave benefit, Stein of the Center for Medicare Advocacy said.

Hospitals nationwide are struggling with the policy, too, said Dee Aust, Overlake's director of care management. "I think that we are very, very empathetic with Medicare recipients and family members who don't have a clear understanding of these guidelines before they arrive at the hospital," she said.

Outside auditors subcontracted by the Center for Medicare Advocacy "are heavily scrutinizing" inpatient stays, "looking to see if those stays should be outpatient for observation and in many cases, they are taking money back," she added

Dr. Kenneth R. Dardick, a Harvard-trained family doctor who practices in Mansfield, Conn., voiced frustration at what he considers an arbitrary determination sometimes made by an outside reviewer "who has never seen the patient."

"When I went to medical school and when I was an intern and resident, I never once attended a lecture or read an article that says, 'This is the way you should do observation.' It only exists as a billing structure by which hospitals are paid less for providing the same service," Dardick, 65, said.

He suggested that observation status skews 30-day re-admission rates, a key measurement of quality care. "The presumption is that if many patients are being discharged from the hospital and re-admitted within 30 days, that their original problem wasn't properly cared for," he said.

But when observation patients aren't counted as inpatients, their return within a month isn't counted as a re-admission.

The solution, Dardick said, "is to stop this charade. It seems to me that this is all driven by an attempt to save money. Instead of taking care of my patient, I have to argue with utilization management people about how this patient should be labeled. It doesn't make my care more effective."

Commercial health insurers tend to follow Medicare's cues and Dardick said he already had a couple of cases in which health insurers refused to pay him or the hospital for a patient's admission, such as that of a 45-year-old woman with chest pain and a family history of early heart attack.

"To the extent that this is allowed to occur with Medicare, you see it happening more and more with commercial insurance," he said. "It's very important that this policy be rejected for what it is."