‘Observation’ Hospital Stay  Can Cost You Big Money

‘Observation’ Hospital Stay Can Cost You Big Money

When you’re in the hospital, a difference in billing classifications can cost you thousands of dollars.

Medicare sometimes classifies a hospital stay as an observation stay or an outpatient visit, rather than an admittance — even if you’ve stayed for one night. That difference might sound technical, but the result is not: Patients can wind up footing a much bigger percentage of the bill.

On average, Medicare pays about three times more for short inpatient stays than for observation stays, according to the Office of Inspector General, U.S. Department of Health and Human Services. 

If a physician estimates a patient will be in the hospital through two mid- nights, they are typically admitted. For less than two nights, they are typically kept in observation status.

Observation stays can stick you with the bill in other ways, too. Medicare requires a three-day inpatient admission before it covers a follow-up stretch at a skilled nursing facility.

 “We are seeing more seniors impacted by observation stays,” says Kyle Exline, executive director of The Clare, a Chicago senior living facility. “An observation stay can feel very much like they are admitted, and typically a patient simply assumes that they are admitted.”

The number of observation stays doubled since 2006 to nearly 1.9 million in 2014, according to the Centers for Medicare & Medicaid Services. So it’s smart to be clear on your status.

Exline says The Clare educates residents to ensure they are asking the right questions when they have a hospital stay, as it can have a serious financial impact if they need short-term rehabilitation.

One good observation: Illinois now requires hospitals to provide oral and written notice within 24 hours after a patient is placed under observation status with a description of the financial implications. Patients can appeal observation billing status but only while they are in the hospital, Exline says, so the notice is key.

Originally Published in the Spring/Summer 2018 issue