fb-pixel Skip to main content

Dan Oudenhoven had every reason to believe his 84-year-old mother had been admitted to a Wisconsin hospital last month. She spent four nights there after a fall left her disoriented and unable to articulate what was wrong. X-rays were taken, blood was drawn, and she was treated for a urinary tract infection and outfitted with an IV line. She slept in a bed like other patients, ate the same bland institutional food, and was visited by the same doctors and nurses.

But Oudenhoven hadn’t been told that his mother was “under observation” as an outpatient for all that time. It turned out to be an important — and expensive — distinction. On the advice of the hospital, he had his mother transferred to a nursing home to receive physical and speech therapy. Soon after, he learned that Medicare had rejected a claim for the nursing home’s $415 daily fee. The reason: His mother had not technically been a hospital inpatient for at least three consecutive days prior to the transfer, not counting the day of discharge. It’s a Medicare requirement that is both confusing and punitive.


“If you’re a layperson going to a hospital and they say you’re staying overnight, you assume you’re being admitted,” Oudenhoven said last week. “Now I’m sitting here with an invoice for over $6,000 that’s not being covered by anybody. Her pocketbook’s going to cover it.”

Increasingly, hospitals have chosen to keep some patients, like Oudenhoven’s mother, under observation — rather than formally admitting them — for days on end. Administrators hope to avoid the heightened attention that inpatient admissions can bring from private auditors hired by Medicare to root out what they consider excessive spending. Patients can become pawns in this game that pits providers against payers. For reasons that only a bureaucrat could attempt to justify, hours spent under observation don’t count toward the three days of care needed to trigger Medicare coverage for post-hospitalization nursing home care.

A federal law scheduled to be implemented later this year is intended to minimize the financial shock some Medicare patients suffer when they move from a hospital to a nursing home, but it doesn’t go nearly far enough. The law, known as the Notice Act, mandates that Medicare patients treated under observation status for more than 24 hours be formally told — orally and in writing — that they may be responsible for their hospital care and prescription drug costs, as well as any follow-up treatment they receive in a nursing facility. Medicare officials estimate that 1.4 million notices will be issued annually.

More information is always better, but what are patients supposed to do with the knowledge that they likely will incur huge expenses? Head for the exit? Toby Edelman, senior policy attorney at the Center for Medicare Advocacy, a Washington, D.C.-based nonprofit, fears the Notice Act actually might lead to increased patient stress under already difficult circumstances. “When they find out they’re not admitted, they’re going to be really upset,” she said.


There is, however, hope for a more meaningful change in the rules. Legislation has been introduced in both the Senate and House that would allow the use of observation time to satisfy the three-day requirement for Medicare coverage of a nursing home stay. The measures enjoy rare bipartisan support on Capitol Hill, but it’s still uncertain if and when they might advance. “Everybody wants the time to be counted,” Edelman said, “but Congress isn’t exactly passing a lot of bills these days.”

In the meantime, Medicare patients and their families will continue to get stuck with unwarranted bills of a different kind. It’s enough to make a person sick.