FAQ: Hospital Observation Care Can Be Costly For Medicare Patients

I have addressed this issue with many of my Medicare clients, so that they can ask the right questions regarding their status if they go to a hospital and are told to stay overnight.  A variety of difficulties can arise when your status is considered to be "outpatient". 

This becomes especially acute when someone is on a Medicare Advantage plan, as most of those plans in recent years have classified all "outpatient services" as requiring 20% coinsurance from the client.  If held in an "observation" mode in a hospital, that means the patient would be billed 20% of each charge incurred while in the hospital's care.  This can lead to thousands of dollars of coinsurance that the patient may not understand he or she owes.

Just because you're in a bed, and staying overnight in the hospital does not necessarily mean that you've been admitted.

Here's a good Frequently Asked Questions article from the Kaiser foundation that explains this phenomenon in more detail:

Medicare Observation Care FAQ

CMS Proposal Would Penalize More Than 2600 Hospitals

This article points out some of the problems with penalizing hospitals for readmission of patients. One thing I've seen my clients experience personally is the phenomenon of being "held for observation" as an outpatient resulting in the Medicare patient being stuck with 20% outpatient coinsurance for everything that happens - which can be thousands of dollars in billing.  In their zeal to cut back on "short stays" in hospitals and "readmissions" -hospitals are hesitant to admit anyone as an inpatient.  As the article points out, they aren't clear on what parameters they are being measured on in the first place - they find out when they get the penalty.

You can read the complete article here:

Researcher Says CMS Proposal Would Penalize More Than 2600 Hospitals

Pay Close Attention!!! You're Probably Being Overbilled For All Things Medical!!

Billing!!  Yes, billing is what's bothering me today.  I had an episode with poison ivy that landed me in the emergency room on Memorial Day.  I went in, saw a doctor for approximately 5 minutes - he looked at me, pulled out a prescription pad & wrote a scrip for prednisone.  I walked out & that was it.

When I received the hospital facility bill, the billed amount was $2,115.75!  They made a 'contractual adjustment' of $1,344.14.  The insurance company paid $498.09, and my portion was $274.52.

Then the separate bill for the physician arrived.  That bill was $440.00.  Insurance paid $352.00 and my portion is supposed to be the remaining $88.00.

When I called the hospital to ask if I could have an itemized breakdown of how 5 minutes translated into $2,115.75 I was put on hold for a long time.  I told them I had a right to understand exactly how anything could cost that much.  Was it $1000 for the doctor to stare at me?  Maybe $1100 to pull out a pad to write the prescription on?  What exactly is the breakdown?

I was then told that they probably overbilled me!  (ya think?)  Turns out that these bills are coded according to a "level" scheme that is used as a guideline from the American College of Emergency Physicians.  My hospital bill was coded as a level 4, while the doctor bill was coded as a level 3.

When I asked what a level 4 encompassed, they said they couldn't share that with me.  Why, exactly, I don't know - but apparently everything is a big secret.  We're all just supposed to pay & shut up.

I asked her what level it would be if I had presented in the emergency room with a heart attack & she said level 5.  So, I asked how poison ivy could possibly be only one level below a life threatening condition like a heart attack & she said, again - that I was probably over billed.

I looked up the levels myself (www.ACEP.org), and it turns out that my bills most likely should have been coded as a level 2, which encompasses things like "rashes, sunburn, etc.".  Also, probably for a much more reduced charge.

I then called the insurance company so that they can flag the account, since I'm now having both bills audited.  Insurance technically should have examined it & potentially denied the claim, but the answer I got from them is that since they didn't know exactly what took place in the emergency room, they often simply pay the bill. And yes, it's true - how would they know exactly what services were provided?  They have to trust the provider to some degree, since they are administering the medical care & should be allowed to proceed as needed in an emergency situation.

So, ever wonder why everything is so expensive?  The providers are robbing the insurance companies blind, and then that cost is being passed along to YOU the consumer of health care - both in the form of higher premiums and in the form of higher portions of co-insurance.  Shameful!! 

Take this as a warning - Pay very close attention to any billing you receive - you may not owe as much as you think you do.

Here's what's "got my goat" today about our Medical system . . . .

I had a Doctor's appointment scheduled for next week, and today got a call from the office today stating that when I come in I'd have to bring $100 "earnest money".  I've never been asked for this before, since I have a $40 co-pay to see a specialist.  But - since the practice was sold to the adjacent hospital, they are now saying that my doctor is an "outpatient clinic" and the co-pay no longer applies.  Therefore, I'd have to pay out of pocket until meeting my deductible.

Basically, they've redefined what an office visit is or is not - simply to suit themselves.  No one cares that I've paid for my insurance & included features like co-pays because I was willing to pay the premium for them.

With the advent of health care reform arriving on the scene, I've been seeing more consolidation - on the insurance company side of the business & now on the provider side.  As providers begin to consolidate, it seems they are re-defining what certain visits are, as well as, how certain hospital stays can be billed.

One example of what's happening with 'in-facility' stays, is the new phenomenon of keeping someone overnight (mainly after a visit to the emergency room) for "observation", and giving the impression that the patient has been admitted, when in fact, they have not.  What happens here can make a huge difference to some of my Medicare Advantage beneficiaries, since they pay a daily hospital rate if they are an inpatient that includes everything that happens while they are there (all tests, surgeries, etc).  If they are kept in an outpatient status, that same Medicare Advantage beneficiary would be subject to paying 20% of everything that happens there - so it's very much like 'a-la-carte' billing - resulting in a much higher bill.

Today, the patient has to be ever vigilant & ask very pointed questions about how they will be billed prior to having procedures done.  We're entering an age where none of this is about the patient & patient care, but is all about the money and the various corporate entities that are deciding everything about how care will be administered.

Look alert!  Make sure that if you have any type of serious illness or ongoing need for care, you involve a family member or friend to advocate on your behalf.  When you become seriously ill, you just won't have it in you to fight the good fight.

As for my situation, I told them to cancel my appointment and that I'd find another doctor who would honor my insurance with the features that I've been paying for. . . .