Health Law

Little-known hospital billing practice can nix Medicare coverage of later nursing-home stay

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Under rules implementing the Affordable Care Act, hospitals can be penalized if too many patients return for further treatment within 30 days of being discharged.

So, to avoid the penalty, a number of hospitals are admitting return patients under “observation status” to keep them out of the readmission statistics. Although patients get the same treatment, taxpayers save money because the hospitals generally get reimbursed at a lower “outpatient” rate for observation patients, the Wall Street Journal (sub. req.) reports.

However, the practice can prove costly for consumers. As outpatients, they may be required to cover a larger portion of the bill than they would be charged as inpatients. And, for those who need to spend time at a nursing home after being released from the hospital, Medicare won’t pay the bill. Under the program, individuals must be formally admitted to the hospital for three days prior to the nursing home stay for it to be covered by Medicare, and “observation” patients don’t meet that requirement.

“That’s always a shock, every time—just because they were in a hospital bed doesn’t mean they were admitted,” former Hydro, Oklahoma, nursing home administrator Leonna O’Neal tells the newspaper. After learning the bad news about the lack of Medicare coverage, “very few will actually stay if they have to pay,” she said.

Among those who did ante up are retired teacher Bob Wellentin, 87, and his wife Dolores, now 86. She spent four days in a Puyallup, Washington, hospital in June 2014 on observation status after falling on the steps of the deck in their back yard.

The two months she spent in a nursing home after that cost the couple over $20,000. To pay the bill, they converted a life insurance policy to cash and turned in certificates of deposit they had intended to be used to provide for their burials, the WSJ article reports.

Dolores Wellentin came to the hospital by ambulance and was found to have a fractured shoulder and sacrum. She was also in severe pain and couldn’t walk, the newspaper says. However, her condition was appropriate for observation status, according to the hospital, which said the couple was informed the woman’s stay wouldn’t put her in a position to qualify for a subsequent nursing home stay covered by Medicare.

The hospital is “mindful of the impact of these decisions on patients and families,” it told the newspaper, but pointed to Medicare rules that can restrict its options.

Bob Wellentin said the $20,000 bill was a hardship for the couple. They filed an appeal with Medicare, hoping that reimbursement might still be forthcoming.

See also: “New York Times article on hidden hospital costs sparks calls for change, suggestions for consumers”

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