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Cut hospital bills by understanding your admission status

This column first appeared in the SA Express-News on October 17, 2016.

Dear Mr. Premack: I am retired and was hospitalized this spring after a fall. I didn’t break anything. Now I have received a large bill from the hospital and a denial of Medicare coverage for the two days in the hospital. I thought that Medicare, of which I have both Part A and Part B, would have covered this bill less any deductibles. What did I miss, and must I pay this bill? – N.E.

Hospitals often admit patients a

nd classify them as being in “observation status”. To the patient, the experience is no different from being an inpatient, and the patient is not made aware that they have not been given inpatient status.

Why should the status difference matter? First, Medicare reimbursement for observation may not be as complete as it would be for inpatient care. This may increase the patient’s share of the hospital bill. Second, observation status does not allow a follow-up nursing home stay for rehabilitation.

Many seniors who are injured are transferred from the hospital to a nursing home for continued rehab. Medicare will pay up to 20 days in a skill nursing facility for rehab, but only if the patient has had inpatient status in a hospital for 3 days directly before the transfer. When a patient has been assigned observation status, those days in the hospital do not allow a subsequent nursing home transfer to be covered by Medicare.

In 2014, the most current year for which there are statistics, about 2 million people were hospitalized with observation status. Many of them were shocked to get higher hospital bills and, like N.E., did not understand why their stay was not more fully covered by Medicare.

Consequently, a new federal law was recently enacted. It is called the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act), and it took effect on August 6, 2016. The Notice Act requires hospital staff to inform Medicare patients when they have been assigned observation status. The notice must be given both verbally and in writing.

However, the law has some issues that may make it less helpful. First, the patient may not fully understand the implications of being assigned observation status. The written notice form approved by the Center for Medicare Services (CMS) is not entirely clear on the financial burdens. Second, notice is required only if the patient is in the hospital for more than 24-hours and less than 36-hours. But any patient who is in observation for longer – say 72 hours (3 days) – will not receive the notice, and it is those patients who may subsequently be denied coverage for rehab in a skilled nursing facility.

The Kaiser Family Foundation suggests that patients always ask about their admission status, and to insist that if their doctor feels they must be in a hospital then 1) the doctor should admit them as an inpatient or 2) if the doctor refuses, the patient should insist on going home. People who have already received a higher hospital bill (like N.E.) can 1) pay the bill, 2) ask their doctor to reclassify their stay and resubmit the billings, or 3) file a Medicare appeal.

Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via or


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