Resource Center

In the Hospital, but Not Really a Patient

On Labor Day weekend in 2009, Miriam Nyman, 83, arrived by ambulance at Rhode Island Hospital. She’d fallen, a result of a degenerative brain disorder, and broken her neck. She and her daughter, Tamar Lasky, waited in the emergency room for eight hours until finally, close to midnight, Dr. Lasky needed to go home to sleep.
Miriam Nyman and her daughter, Tamar Lasky.Miriam Nyman and her daughter, Tamar Lasky.

When she arrived to resume her vigil the next day, Dr. Lasky recalled, “they said, ‘She’s in Room 624.’ She was in a bed, with a gown and a wrist bracelet, chart on the wall.” She had tests; aides fed and washed her. Her daughter visited daily, conferred with staff, took notes. After four nights, a physician declared that her mother no longer required a hospital, and Dr. Lasky, who’d been caring for her mother in her home, braced for a nursing facility search.

That’s when she learned that her mother’s entire stay had been classified as “observation days” and that Mrs. Nyman had never been formally admitted to the hospital.

“I just freaked out,” Dr. Lasky said. “The three-day hospital stay is what you need to get Medicare coverage for skilled nursing care” for up to 100 days at a time. But because Mrs. Nyman had been an outpatient, not an inpatient, she was suddenly facing about $35,000 in uncovered nursing home expenses.

At the time Dr. Lasky, though she’s an epidemiologist and health care consultant, had never heard of this distinction. But a major analysis of Medicare data, just published in the journal Health Affairs, shows that elderly hospital patients are increasingly likely to be held for observation and less likely to be admitted. Often kept in the hospital for 48 hours or even longer and treated as though they were inpatients, they don’t realize that they’re not.

At discharge, they’re shocked by how much more they have to spend. The observation trend, apparently a consequence of policies meant to reduce Medicare expenditures, leaves patients facing higher co-pays for drugs and hospital services, plus the full (and astronomical) cost of subsequent skilled nursing. Moreover, just to make things even more confusing, Medicare rules allow a hospital to retroactively change a patient’s status from admitted to observed.

“The whole thing is like ‘Alice in Wonderland,’” said Judith Stein, founder and director of the Center for Medicare Advocacy, which last year filed a class-action suit against the federal Department of Health and Human Services on behalf of elderly patients who spend days under hospital observation.

How many are there? Zhanlian Feng, an assistant professor of health services, policy and practice at Brown University, and his co-authors looked at all the observation stays from 2007 to 2009 and compared them with all the inpatient admissions over the same three years.

“It’s surprising, the rate of increase over this relatively short period,” Dr. Feng said. Observation stays rose 25 percent, to more than one million in 2009 from 814,692 in 2007. The monthly number of observation stays increased to 2.9 per 1,000 Medicare beneficiaries from 2.3 per 1,000; the number of inpatient admissions per 1,000 fell from to 22.5 from 23.9.

When the researchers looked at the length of observation periods, “we saw that number rising a lot, too,” Dr. Feng said. The average number of hours — 28.2 — had increased 7 percent. But nearly 40 percent of elderly patients were on observation for 24 to 48 hours. Almost 45,000 beneficiaries were under observation for more than 72 hours in 2009, and those are the people who will not qualify for Medicare coverage if they’re discharged to nursing homes. “The label makes all the difference,” Dr. Feng said.

Nobody is happy about this situation, despite the generally acknowledged need to lower health care costs. Hospitals know that unnecessary admissions and readmissions can now trigger federal audits and financial penalties; they don’t have to worry about readmitting people who were never admitted. Nursing homes will see their reimbursements suffer.

As for patients like Mrs. Nyman, a former librarian and an artist, paying for the nursing home where she still lives meant she had to spend her assets much more quickly to become a Medicaid patient.

Medicare has published an online brochure to help families grasp whether they’re getting the more comprehensive Part A coverage as inpatients or Part B coverage as outpatients. Ms. Stein thinks there’s a better solution.

“This is something Medicare can fix without Congressional action,” she said. The Center for Medicare Advocacy wants to eliminate the distinction between inpatient and observation status, or at least limit observation to 24 hours. Further, “a person should get a written notice that they’re on observation status, why that might matter and how they can contest it,” Ms. Stein said. (Medicare officials declined to comment on pending litigation.)

Meanwhile, bills requiring Medicare to count all days spent in the hospital toward skilled nursing coverage, regardless of classification, have been introduced in both houses of Congress. Despite bipartisan sponsorship, they’re going nowhere.

So for now, it’s up to patients and families to be aware of this nontrivial difference. Maybe, as Dr. Lasky only half-joked, patients should arrive wearing medallions around their necks, engraved, “Am I an inpatient?”