Hospitals must soon notify observation care patients about potential charges

Cost calculation

A new law will require hospitals to notify patients about potential charges for observation care services if they weren't admitted as an inpatient and are moved into a skilled nursing facility. 

Medicare enrollees can be liable for all charges if they are held in observation care and transferred to a skilled nursing facility for follow-up care. Such a protocol does not meet the standard for the two-midnight rule for Medicare to provide coverage. The New York Times reported that patients could wind up being on the hook for $40,000 or more in unexpected bills as a result of such transfers and admissions.

Observation care can be financially problematic for patients even if they're not admitted as an inpatient. Since Medicare pays for observation care at the outpatient rate, patient co-payments can often be higher than if they were inpatients. The number of observation status patients has risen in recent years, particuarly as hospitals have been under pressure to reduce readmissions.

While the new law is officially in force as of Saturday, the notifications by hospitals will not be mandatory until January, according to NYT. The notification would give observation care patients and their families the option to be reclassified as an inpatient.

“The financial consequences of observation stays can be devastating for seniors,” Sen. Susan Collins, a Maine Republic and chair of the Senate Special Committee on Aging, told NYT.

Consumer advocacy groups for older Americans support the change. “Medicare beneficiaries are spending more and more time in the hospital without being formally admitted,” Joyce A. Rogers, a senior vice president of AARP, told NYT. “(That) can expose beneficiaries to unexpectedly high out-of-pocket costs amounting to thousands of dollars.”

- read the NYT article