Officials worry Medicare pushing seniors out of hospitals prematurely to cut cost

Stacey Singer / Cox Newspapers /


Published Jul 18, 2013 at 05:00AM / Updated Nov 19, 2013 at 12:31AM

WEST PALM BEACH, Fla. — At 7:30 in the morning, George Matsoukas’ phone rang with urgent news about his 96-year-old mother, who had fallen and broken her pelvis two days earlier.

It was their family physician, with what seemed to him a bizarre and unreasonable demand: Matsoukas needed to come immediately to remove his frail mother from JFK Medical Center in Atlantis, Fla. Matsoukas, a retired community college instructor who lives in West Palm Beach, was baffled.

His mother, Aspasia Matsoukas, couldn’t stand, walk or use the bathroom on her own. She suffered from mild dementia and was in pain. Yet they would not admit her to the hospital, he was told. Further, they wouldn’t transfer her to a skilled nursing facility, either. They said George Matsoukas, who is 70, had to deal with that himself.

“They wanted her out,” he said.

Matsoukas soon learned that his family had fallen in to a Medicare cost-cutting Twilight Zone known as “observation status” — a world where a patient can be anywhere in a hospital, receiving treatment for days, yet never “admitted” according to their hospital bill.

The consequences of an “observation status” determination can be severe for consumers: Medicare, the nation’s health insurance plan for people older than 65 and some others, won’t pay a dime toward a stay in a skilled nursing home or rehabilitation hospital without a previous three-day, criteria-appropriate admission.

Plus, patients are on the hook for outpatient hospital co-payments and drug costs, bills that they wouldn’t have gotten if they had been admitted. Worse, because there’s no out-of-pocket cap on these observation hospital bills, some consumers have been hit with shockingly high charges that even Medigap supplemental insurance won’t cover.

The American Hospital Association says it’s not their fault. Hospitals are in an impossible situation, caught between understandably angry consumers and a new cadre of third-party Medicare billing auditors known as RACs, or “recovery audit contractors,” they argue. Since 2006, RAC auditors have been able to win “bounties” for catching coding errors and fraud. One of their most lucrative “errors” is to flag inappropriate admissions.

The consumer outcry is finally beginning to be heard. An advocacy group has filed a class action lawsuit accusing Medicare of denying seniors their right to hospital coverage; a bill with over 70 co-sponsors in Congress would force Medicare to change its policy; and the federal agency itself has proposed clarified rules, but in a way that many warn will hurt even more consumers.

Most hospitals in U.S. lack observation units

The day his mother was ordered out of the hospital, George Matsoukas was forced to quickly assemble $6,700 before she could be transferred.

“I called all over. Nobody would accept her without up-front payment,” Matsoukas said. “Some of them wanted over $15,000.”

That was June 3. His mother is still in the rehabilitation hospital today, reluctant to stand or step, although she’s undergoing regular physical therapy. When he visits, he hears the same story from many other patients and their families, people who landed in the same Medicare purgatory, observed, not admitted.

“I couldn’t comprehend how she wasn’t in the hospital when she was in the hospital,” Matsoukas said.

Recent studies have shown a sharp uptick in the use of “observation” status instead of admissions. Brown University’s Zhanlian Feng and colleagues, writing in the policy journal Health Affairs last year, found a 34 percent jump in the use of observation status in just two years — from 2007 to 2009. By 2011, the number of observation hospital stays was over 1.6 million, according to federal data.

Scholars looking to control Medicare’s runaway spending actually suggest using observation more, but in properly designed observation units with specialized staff and clear protocols.

Only a third of U.S. hospitals have such low-cost observation units, according to a team led by Brigham Women’s Hospital Observation Unit Director Dr. Christopher Baugh, writing in Health Affairs last year. If every hospital had such a unit, Medicare could save more than $3 billion a year, his group wrote.

In an interview, Baugh explained patients would save, too, because calling something “observation” without a properly designed observation program simply results in cost shifting. Observation units have a long history of offering consumers more efficient and lower-cost services, but they are designed to be used only for certain conditions where clarity is needed — chest pain, fainting and asthma attacks, for example.

Broken pelvises, which Matsoukas’ mother suffered in a June 1 fall, aren’t among them.

“For a 96-year-old with a broken pelvis, I know what the medical need is now and I know what it’s going to be three days from now,” Baugh said. “I think there are policy reforms that Medicare needs to make to account for these situations. They are a vulnerable population that is falling through the gaps.”

The U.S. Department of Health and Human Services has proposed clarifying its rule to say all hospital stays of two nights or less are automatically presumed observation, a proposal that groups — including the Center for Medicare Advocacy — think may worsen the situation.

The Connecticut-based center has filed a class-action lawsuit on behalf of Medicare beneficiaries, Bagnall v. Sebelius, which recently received its first hearing.

Meanwhile, bipartisan bills have been filed in Congress. They would require Medicare to treat observation and inpatient stays equally when determining nursing home care coverage. The bill is supported by groups like AARP and the American College of Emergency Physicians. The emergency physicians note that Medicare’s three-day requirement for coverage of skilled nursing care is itself obsolete, a 50-year-old relic of a time when hospital stays were much longer.

For inpatients who have had a three-day hospital stay, Medicare provides a benefit of 20 days of nursing home care, followed by another 80 days of partial coverage.

George Matsoukas, who got his mother into the Consulate Health Care rehabilitation home in West Palm Beach, said he has learned that a doctor’s ruling can be appealed within the hospital, to its quality improvement organization — but it has to be done during the hospital stay.

He tried to take his complaint to Medicare, to no avail. He was told they wouldn’t second-guess his mother’s doctor. So he has filed a complaint with the state Board of Medicine against the doctors who made the call.

“My mom is the victim of a bureaucratic system that is broken,” Matsoukas wrote in his complaint.

“How could a senior in her condition not be admitted to the hospital, and be sent on to the care she needed in dignity and in a positive way?”

Outpatient vs. inpatient

For Medicare beneficiaries, it matters. Here’s why:

• Inpatients have better coverage under Medicare Part A. There’s a one-time deductible of $1,184 for up to 60 days’ care.

• Outpatients’ bills are covered under Medicare Part B. Patients must pay both their deductible and 20 percent of doctors’ charges. They’ll probably also have to cover the hospital’s charges for medications.

Medicare only pays its nursing home benefit following a “qualifying hospital stay.” That requires a three-day inpatient stay; any time spent in observation doesn’t count toward the three days. Plus, the day of discharge doesn’t count toward the three days.

Note: Rules may differ for beneficiaries with a Medicare Advantage plan.

Source: Centers for Medicare & Medicaid Services