The number of local people suffering from influenza this winter has sometimes pushed the hospital near its patient capacity. During the January 18th Hospital Commissioners meeting, Chief Nursing Officer Jackie Mossakowski praised Jefferson Healthcare workers for doing a tremendous job working extra to cope with higher than usual patient volume, explaining, “We’re not staffed for running 25 beds...everybody is working extra to meet the needs of our community.” She also noted that Jefferson Healthcare chose not to cancel elective surgeries during this period. (3:00)

Our hospital cannot exceed its 25-bed limit and keep critical access hospital status. This status determines how Medicare reimburses the hospital for its services. Commissioner Kees Kolff asked, “What would happen if we exceed the 25-bed limit?” Chief Executive Officer Mike Glenn explained the hospital could increase capacity in the emergency department and hold patients there. “The 25-bed limit is for inpatient status patients, but you can admit observation patients on top of that, so there would be a way to work through it.” (5:00)

Glenn’s response interested me and I’d like to learn more about how Jefferson Healthcare assigns observation status to patients. Since the advent of the Affordable Care Act, observation status has become a controversial way that some hospitals game the Medicare reimbursement system. By assigning patients to observation status for billing, rather than medical, reasons, hospitals can avoid readmission penalties from Medicare.

http://www.aarp.org/content/dam/aarp/research/public_policy_institute/health/2013/rapid-growth-in-medicare-hospital-observation-services-AARP-ppi-health.pdf

Since inpatient and observation patients may receive identical services during their stay at the hospital, one may wonder what difference their status makes?

Thousands of dollars, for many observation patients.

Medicare doesn’t always cover many of the services (like medicine!) observation patients receive while in the hospital. Medicare beneficiaries using Part A, but not Part B, are responsible for their entire hospital bill if they are assigned observation status instead of being admitted as inpatients. Observation patients transferred to skilled nursing facility won’t get Medicare coverage for their time there. For patients who are assigned observation status, the difference is more than semantic. The Center for Medicare Advocacy offers a more detailed examination of this issue.

http://www.medicareadvocacy.org/medicare-info/observation-status/

It is important to our hospital’s viability to maintain its status as a critical access hospital, but Glenn’s suggestion that we do so by admitting patients under observation status would appear to place those patients under a greater financial burden. It sounded like his response was off-the-cuff to an extemporaneous question, so the hospital’s policy in this situation may turn out to be more nuanced. I hope the commissioners will return to this issue, and clarify how the hospital can make sure it maintains its critical access status without exposing some patients to unexpected financial liability. In the meantime, a new law called the NOTICE Act requires hospitals to inform patients if they are on observation status for more than 24 hours. Given the amount of money potentially at stake, I’m not sure I’d want to wait even that long, if I were the patient.

https://www.nytimes.com/2016/08/07/us/politics/new-medicare-law-to-notify-patients-of-loophole-in-nursing-home-coverage.html?_r=1