Patients left owing thousands because hospitals classify them as outpatients

In August, Linda Brocato broke her leg and spent three days in Glenbrook Hospital in Glenview.

Already using a wheelchair because of multiple sclerosis and complications from mercury poisoning, Brocato had a straight-leg cast that made it impossible for her to move around her Prospect Heights condominium, where she lives alone. So Brocato spent about two months in a nursing home until the cast came off.

It wasn't until she got home that she realized her $13,000 nursing home bill wasn't going to be covered by Medicare because the hospital had classified her as an "observation" patient for her entire three-day stay rather than an "inpatient."

That decision, Brocato says, made no sense and left her in a "gotcha" situation for the nursing care she needed during her recovery.

"What else could I do? I couldn't go to the bathroom (by myself). I couldn't take a shower. I couldn't get into bed. I couldn't even get down the hall. I was stuck," said Brocato, 61, who is now paying the bill off at a rate of $100 per month using her disability check.

What happened to Brocato is a growing problem nationwide. U.S. hospitals doubled their use of "observation" status between 2006 and 2008, according to the Centers for Medicare & Medicaid Services.

In Illinois, the numbers are even higher. In the past five or six years, the number of observation care patients jumped from 50,000 to 320,000 a year, according to Pat Merryweather, senior vice president of the Illinois Hospital Association.

The observation classification which often is not fully understood by patients or communicated to them prevents Medicare and some private health insurance companies from paying for post-hospital nursing care, X-rays and certain lab tests and medications.

Hospitals are using the observation classification more often, even for two- and three-day stays, because it's what the strict, new Medicare rules require, Merryweather said.

Glenbrook Hospital classified Brocato as "observation" because that's what the Medicare rules required, said Colette Urban, spokeswoman for NorthShore University HealthSystem, which operates Glenbrook and three other hospitals.

"We are just as frustrated as our patients. We don't set policy, but we have to follow the rules," Urban said.

However, in a letter to the American Hospital Association in July, the CMS stated there has been no policy change for how hospitals approach these cases, and it's up to the hospital to decide what's "reasonable and necessary."

Some hospitals might lean toward the "observation" label to try to avoid aggressive Medicare audits, which come with "huge financial repercussions," says Susan Dressler, a longtime certified claim assistance professional with Health Claim Assistance in West Chicago.

Dressler said hospitals receive less reimbursement from Medicare for observation patients, which helps keep them under the radar from the Recovery Audit Contractors, which review inpatient claims. Merryweather, however, says fear of audits isn't a factor, because misclassifying a patient can lead to not getting any Medicare payment at all.

Regardless of who's to blame, legislators recognize the problem this is causing for hospital patients nationwide. On July 29, Democratic U.S. Rep. Joe Courtney of Connecticut introduced House Bill 5950, the "Improving Access to Medicare Coverage Act of 2010."

Now in committee, the bill would require hospitals to classify a patient as "inpatient" if the person is hospitalized for more than 24 hours. It would be retroactive to January 2010.

U.S. Rep. Jan Schakowsky, a recently re-elected Democrat from Evanston, is among the bill's supporters.

"People don't really understand, in the midst of hospitalization, what this is. If I'm not really admitted, what am I doing in the hospital?" Schakowsky said. "I totally understand wanting to save money on Medicare expenditures but this is not the way to do it. You don't want doctors to overtreat people and overcharge Medicare. On the other hand, we can't just leave people, especially older people, in a situation like this."

Change can't happen soon enough for Melvyn and Marcille Alper. The Evanston couple is stuck with a $10,000 nursing home bill after Melvyn, 86, fractured his shoulder and spent three days in NorthShore Skokie Hospital in August, but was classified as an observation patient and never an inpatient.

Marcille said it wasn't until the paramedics were waiting with a gurney to take Melvyn from the hospital to the nursing home that the hospital staff explained to her that Medicare wasn't going to cover his nursing home stay or even the ambulance ride.

Alper, 85, said she had no choice but to have her husband go to the nursing home, because she couldn't care for him herself. She said Melvyn couldn't even get out of bed on his own, and she's not strong enough to push or lift his wheelchair.

"If he falls again, this could happen again. I don't know what I'd do. We don't have the money for this," she said. "It can break you. It can absolutely break you. It's unreal. Especially at this age."

Medicare administrators are aware of the problem, and CMS spokeswoman Ellen Griffith says they're taking it "very seriously" and studying the reasons why it's happening.

In the meantime, the CMS has put out an informational pamphlet, "Are You a Hospital Inpatient or Outpatient? If You Have Medicare Ask!" and encourages beneficiaries to call 1-800-MEDICARE if they have questions about their patient status.

Merryweather said the Illinois Hospital Association and the American Hospital Association favor changing the Medicare rules on observation status because it's a lose-lose situation for the patients and the providers.

Merryweather also believes it would help to move toward electronic health record keeping and for Medicare to make its billing software available to hospitals. That would eliminate the time-wasting administrative work of submitting and resubmitting bills and allow the staff to immediately alert the patient whether services will be covered.

Until there's a change, Dressler says patients will continue to be vulnerable to getting huge bills that won't be reimbursed. She calls it "almost like hospital malpractice" and fears hospital administrators, leery of Medicare audits, are overriding decisions made by doctors and increasing the use of observation status.

"They don't understand the financial repercussions this has on people," she said, invoking the traditional doctors' oath to practice medicine ethically. "Where's the Hippocratic oath in all this? That mystifies me."

Even if you're hospitalized for days, you still might be considered an “outpatient” and it can reduce coverage by Medicare or private insurers. Here's what to do.

1. In the hospital, ask if you're an inpatient or an outpatient. If you're classified as “observation,” that means outpatient.

2. Based on the answer, immediately ask what services are covered or not covered, including nursing home care, X-rays, medications and lab tests.

3. Medicare beneficiaries with questions can call 1-800-MEDICARE or go to www.medicare.gov/Publications/Pubs/pdf/10050.pdf.

Source: Centers for Medicare and Medicaid Services