A federal court case is shining light on the growing problem of inappropriately classifying hospital patients as “observation status” in an effort to cut down Medicare costs.
Bagnall v. Sebelius, a case in which a half-dozen patients have filed a class action, points to the medical and financial hardships aggressive Medicare audits are causing many Medicare beneficiaries. While post-hospitalization care at skilled nursing facilities is covered for Medicare beneficiaries who have been hospital inpatients for at least three consecutive days, patients who are deemed under observation are left to foot the bill.
The plaintiffs in this case all received a level of care that required them to physically remain at the hospital, and most of the plaintiffs had to be hospitalized for several days and nights. Three of these patients even received a written notice from Medicare that listed their rights as hospital inpatients.
Meanwhile, the hospitals characterized these patients as observation status, in several cases overruling the physicians’ orders admitting them as inpatients and retroactively reclassifying them.
This practice led to bills ranging from $4,000 to $30,000 for the patients involved in the case. Several were required to pay large bills up front before they could be admitted to skilled nursing facilities, while others were able to negotiate payment plans. One plaintiff couldn’t afford her necessary care and was forced instead to move to an assisted living facility, where she later died.
“Hospitals are incentivized to label patients as outpatients on so-called ‘observation status,’ even if they receive the same treatment as beneficiaries who have been formally admitted,” the Litigation Center of the AMA and State Medical Societies and seven other medical associations stated in a friend-of-the-court brief filed Thursday.
The brief points to Medicare’s aggressive auditing practices, such as those of the recovery audit contractors, as the driving factor for a dramatic increase in the average time of hospital “observation.”
In efforts to avoid such audits, hospitals have applied screening criteria to second-guess the admitting physician’s decision regarding whether a patient’s condition is severe enough to justify admission to a specific level of care.
In the federal court case, the medical associations’ brief concludes that the Medicare system is constructed so that a patient’s admission status is determined based on financial policies, “not medical facts and not the judgment of their treating physicians.”
Learn more about the AMA’s work to address the problems with Medicare’s auditing programs.
