Home Caregiver Support Communications and Conversations Medicare Coverage:How Hospitals Are Deceiving Medicare Patients

Medicare Coverage:How Hospitals Are Deceiving Medicare Patients

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An article by Matthew Shepard, of the Medicare Advocacy Organization,confirmed a serious violation by hospitals to put money in their pockets, with total disregard to the financial consequences of the Medicare recipient. The negative consequences suffered by Medicare patients that required post hospital care has been financially devastating to as many as 600, 000 Medicare recipients.

A memorandum, released by the Department of Health and Human Services’ Office of Inspector General (OIG) addresses the Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries.

Simply put, Medicare presently requires a 3-day stay in the hospital (a patient must be in for 3 midnights) in order for a patient to qualify for skilled care benefits.

There are several motivating financial factors that have led to an increase in the use of observation stays versus inpatient stays.

Medicare and the Medicare patient reimburse more money to the hospitals for short inpatient stays than for the observation stay.

Medicare presently financially punishes the hospital for a Medicare patient returning to the hospital within the first 30 days after discharge. The hospitals, in an effort to not be affected financially, will provide the returning patient with the level of service required, but bill is under observation stay benefit. This negatively impacts the Medicare patient financially when more care is required in a skilled setting.


According to Mr. Shepard, “The Medicare program and Medicare beneficiaries pay more for short inpatient stays than for observation stays:

  • The Medicare program paid an average of $5,142 for each short inpatient stay, compared to $1,741 for each observation stay.
  •  * Medicare beneficiaries paid an average of $725 per inpatient stay, compared to $410 for each observation stay (and $528 if drug costs were included in each observation stay).
  •  Medicare beneficiaries had 617,702 hospital stays lasting more than three nights that did not qualify them for Skilled Nursing Facility care.

The OIG report notes that 617,702 observation and long outpatient stays lasted more than three nights. In some of the stays, patients were first classified as outpatients and were subsequently admitted as inpatients. “

The article shared some interesting stories of individuals that contacted the Medicare Advocacy Group: “Medicare will not pay for a SNF stay under Part A unless the beneficiary has been classified as an inpatient for at least three consecutive days, not counting the day of discharge. The Center for Medicare Advocacy hears daily from beneficiaries who are denied Medicare coverage for their SNF stay because of observation status. One recent call involved an 86-year old woman who was hospitalized with a broken shoulder. Initially admitted as an inpatient, the woman was reclassified by the hospital as an outpatient. She stayed three midnights and then went to a SNF for rehabilitation, where she paid, out-of-pocket, $7,600 for the first month and was told she would be billed $10,000 for the second month. A second recent call involved an 87-year old woman who fractured her shoulder. Called an outpatient by the hospital for her entire four-day stay, she paid $10,650 for her subsequent one-month stay in the SNF. A third beneficiary, an 89 year-old woman was hospitalized for three days with pneumonia and sent home. She returned to the hospital the next day, having fallen and broken her hip. She remained in the hospital for six days as an “outpatient in bed” and then went to a SNF, paying out-of-pocket for her care.

The Center for Medicare Advocacy has materials on its website to help beneficiaries and their families with observation status, and you can contact your senators and representatives about legislation to end the problem at http://org.salsalabs.com/o/777/p/dia/action/public/?action_KEY=8514.