On Medicare? When You Go to the Hospital, Make Sure You Are Admitted

One of the puzzling realities of the American healthcare system is that it is possible to be in the hospital without being a patient. It's even possible to be admitted to the hospital and to find out that the record of admission has been erased, weeks or months later. 

That is exactly what happened to 79-year-old Howard (his name changed for this article). Active and independent, Howard had a mild stroke, fell, and broke the wrist of his right hand. His son took him to the ER, and the attending physician admitted him to the hospital "just for observation." 

After the doctors confirmed that Howard's injuries were limited, they recommended that he spend a few weeks in a nursing home where he could get attention for his daily needs and "occupational therapy" to help deal with not being able to use his right hand, since he was right-handed. Howard progressed well for about a week, but developed a urinary tract infection. Just to make sure the infection was limited, the doctor put him in the hospital one more time. Antibiotics worked, and Howard was ready to go home at the end of his 20-day stay.

Then three months later Howard got a bill for $37,000 for 20 days of care from the nursing home.

Medicare Coverage for Hospitalization and Skilled Nursing Care

Everyone who has signed up for Medicare gets coverage under "Part A." Medicare Part A pays for up to 60 days of hospital care per year with just an $1184 deductible ($1216 beginnning in 2014), and smaller amounts after that. While most people on Medicare would have some difficulty paying an additional $1184, and it takes just an hour or less to run up this kind of charge, at least their bill will be limited if they don't stay in the hospital for 60 days or more.

Then Medicare also pays for 20 days' stay in a skilled nursing facility, if necessary, although it won't pay for a private room, TV, or other amenities. 

Read More: What Every American Has To Know About Signing Up For Medicare

Getting Stuck with the Bill for Follow-Up Care

The problem for many people who depend on Medicare is that just because they have been taken from the emergency room to a hospital room, seen the doctor in the hospital, received medications in the hospital, and been attended by nurses in the hospital doesn't mean they have been "admitted" to the hospital. In fact, even if they are admitted to the hospital, the hospital can change its mind later.

Why would a hospital change its mind about whether a patient has been "admitted?" It turns out that hospitals are compensated not just for the service they provide, but also for whether they have to readmit patients in the 30 days after their hospital stay. Because the hospital would have been penalized if it had reported that it admitted Howard twice in 30 days, even for legitimate reasons, it changed his first admission to "observation" in a hospital room, and disqualified Howard from Medicare coverage of his nursing home stay.

Which Hospitals Are Likely To Change Your Admission Status?

Nationwide, 4 out 5 hospitals have their payments from Medicare reduced because of unacceptable readmission rates. Eighteen hospitals will be fined 2% of the Medicare payments, and 154 will lose 1% of their Medicare payments for every Medicare patient, whether readmitted or not. These fines amount to over $1 million for many hospitals.

The Congressional Budget Office estimated that the government spent between $1 and $10 billion a year on hospitalizations that could have been prevented.

The way the rule is implemented, however, does not take into account whether a patient is admitted twice in 30 days for the same condition or not. Somone who is treated for cancer and then develops an infection, for example, accumulates a penalty for the hospital on all of its Medicare cases. A woman who has a baby and then breaks her ankle likewise earns a penalty for the hospital if she is admitted twice.

Certain kinds of hospitals are extremely likely to get penalized by Medicare, and are especially likely to retroactively change patient status:

• Teaching hospitals. In these kinds of hospitals, patients are seen by teams of doctors, residents, and medical students. Almost any doctor can find a reason that you should come back to hospital for further observation.

• Heart hospitals. If you have ever had a heart attack, coming into the ER with any kind of chest pain is likely to earn you at least an overnight stay.

• Charity hospitals. Hospitals that serve the poor have more readmissions for the simple reason that their patients are less likely to be able to buy their medications, live under greater stress, and have to go back to work sooner than patients who do not go to charity hospitals.

Also, some hospitals run "intermediate care units" that don't count as hospital admissions, either for purposes of fines applied against the hospital or for eligibility for Medicare benefits.

If you can plan your hospital stay, try to stay in a hospital that caters to higher-income patients. You will probably find it to be a much more pleasant experience, and you are far less likely to be readmitted, especially if you do not have Medicare Part B.

If you stay in the hospital and you are not admitted to the hospital, you can wind up paying the full cost of your follow-up care. Howard's bill was much lower than many. 

Read More: Six Special Situations In Signing Up For Medicare Part B

That's why Medicare has published a brochure entitled "Are You a Hospital Inpatient or Outpatient? If You Have Medicare--Ask!" This brochure outlines the questions Medicare recipients and their families need to ask to make sure they can avoid catastrophic bills later. Every year, over 1 million Medicare patients are held for observation in hospitals without admission, or have their admission status revised later. Don't be one of the 1 million per year who may get handed a crippling bill for services Medicare will not cover.