Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

Observation status: When you’re not a hospital inpatient

Gene Uzawa Dorio, MD
Physician
February 8, 2014
447 Shares
Share
Tweet
Share

Two decades ago, a decision was made by Medicare policymakers that carotid endarterectomies would not be allowed. Their claim was too many were being done costing Medicare money. The following year, data revealed a sharp rise in debilitating strokes, so wisely, surgical criteria was developed recommencing the use of this quality-of-life saving operation.

For years, there have been other misjudgments against Medicare patients that are only now becoming apparent. Let me clarify a particular problem which wishes not to be clarified: observation status.

You would think when seeking life-threatening medical care at a hospital, treatment begins in the emergency room followed by admission to an inpatient bed. But under the controversial designation “observation status” determined by Medicare bureaucrats, you are still considered an outpatient even with oxygen in your nose and an IV in your arm.

Much has been written in the news about observation status, but I find despite broad media coverage, my physician colleagues don’t know the consequences of this complex and convoluted designation. The difference between being admitted versus being under observation status is now a costly problem for our seniors and caregivers, and even more difficult to understand.

As is typical, government has made rules and laws so complex, lawmakers don’t even understand them. The layers of observation status started when they initiated diagnosis-related group (DRG) to determine hospital payments. For a specific diagnosis, the time and intensity of care was predetermined, and the hospital would be paid a set Medicare DRG amount.

For example, if your admitting diagnosis is pneumonia, you are allowed four inpatient days, and the hospital is paid a flat fee of $6,000. Should your stay be 10 days, the hospital must shoulder the added cost of care. Conversely, if you stay only two days, they still get paid the flat DRG fee of $6,000 and make money.

Apparently somewhere along the line, hospitals prematurely discharged patients and still got their fee, which Medicare did not like. So they layered on observation status to counter any abuse.

In my profession, if I recommend treatment or surgery, I carefully look at potential risks and complications to advise my patients of their impact. Not surprisingly, our legislators are inept at this scrutiny (as they were with endarterectomies), and therefore peeling this onion with all its layers has made many people cry.

What are the consequences?

As a Medicare patient under observation status, you are considered an outpatient even though you are laying in a hospital bed. Therefore, you are financially responsible for 20% of all tests and services you might receive. If a $1500 MRI is ordered, your out-of-pocket cost just for that test is $300. Add a few more tests plus any doctor or hospital fees, those 20% dollars start to mount up. On the other hand, if you were an inpatient, you would be only responsible for the yearly Medicare deductible which is a little over $1,200 (even less with secondary insurance).

Also, any oral or IV medication that might be ordered is out-of-pocket possibly including $10 for one Tylenol pill. But if you were designated an inpatient, it is included in your care.

The worst horror stories surround patients who have had stokes, or broke their hip and had it surgically repaired. To have post-rehabilitation paid by Medicare, there is a 3 day hospitalization qualifier that is not met should you be admitted under observation status. For further care, you might easily have to pay over $20,000.

Adding up all out-of-pocket costs usually far exceeds the amount you would have paid if your status was inpatient. As complex as this is to explain, ask to see the hospital bill of anyone you know who was admitted under observation status. It will astound you.

What can you do?

If you are a Medicare patient in a hospital, make sure you know your status. Should you be observation, question the case manager whether there might be justification to make it inpatient. Discuss with your physician the need to minimize testing, and bring your own medications from home to be distributed by nursing.

Finally, become educated in this problem, as we should all work to mitigate the effects of observation status in the Medicare system.

Most patients feel this is cost shifting to place greater financial burden on our elder seniors. Realize your elected federal legislators who initiated observation status and Obamacare will never face these problems as they are exempt from the layers of confusion they have imposed upon us.

Infuriating as this might be, the American people might attempt a rare victory if we toss the onion back in their direction, and make them cry too.

Gene Uzawa Dorio is an internal medicine physician.

Prev

Approach patients as one human caring for another

February 8, 2014 Kevin 2
…
Next

What to do when your patient dies

February 8, 2014 Kevin 7
…

Tagged as: Hospital-Based Medicine, Medicare

Post navigation

< Previous Post
Approach patients as one human caring for another
Next Post >
What to do when your patient dies

More by Gene Uzawa Dorio, MD

  • “Is your surgeon really skilled? The hidden threat to public safety in medicine.

    Gene Uzawa Dorio, MD
  • Next of kin in the medical decision making process

    Gene Uzawa Dorio, MD
  • The nursing home crucible

    Gene Uzawa Dorio, MD

More in Physician

  • Revealing America’s expansion: the dark truth of Native American suffering and unjustified abuses

    Anonymous
  • From journalism to medicine: Unveiling the untold stories of patients’ medical conditions

    Veronica Bonales, MD
  • A mentor’s legacy in medicine, leadership, and embracing evidence-based care

    Arthur Lazarus, MD, MBA
  • Breaking free from restrictive covenants to combat burnout

    Raya E. Kheirbek, MD
  • From medical student to intern: Discovering a deeper connection with patients

    Johnathan Yao, MD, MPH
  • A physician’s typical day, as envisioned by a non-clinician health care MBA: a satire

    Jennifer Lycette, MD
  • Most Popular

  • Past Week

    • Boxing legends Tyson and Foreman: powerful lessons for a resilient and evolving health care future

      Harvey Castro, MD, MBA | Physician
    • We need a new Hippocratic Oath that puts patient autonomy first

      Jeffrey A. Singer, MD | Physician
    • Is chaos in health care leading us towards socialized medicine? How physician burnout is a catalyst.

      Howard Smith, MD | Physician
    • A physician’s typical day, as envisioned by a non-clinician health care MBA: a satire

      Jennifer Lycette, MD | Physician
    • Decoding name displays in health care: Privacy, identification, and compliance unveiled

      Deepak Gupta, MD | Physician
    • The rising threat of lung cancer in Asian American female nonsmokers

      Alice S. Y. Lee, MD | Conditions
  • Past 6 Months

    • It’s time to replace the 0 to 10 pain intensity scale with a better measure

      Mark Sullivan, MD and Jane Ballantyne, MD | Conditions
    • “Is your surgeon really skilled? The hidden threat to public safety in medicine.

      Gene Uzawa Dorio, MD | Physician
    • Unveiling the hidden damage: the secretive world of medical boards

      Alan Lindemann, MD | Physician
    • Breaking the cycle of racism in health care: a call for anti-racist action

      Tomi Mitchell, MD | Policy
    • Revolutionize your practice: the value-based care model that reduces physician burnout

      Chandravadan Patel, MD | Physician
    • An inspiring tribute to an exceptional radiologist who made a lasting impact

      Kim Downey, PT | Conditions
  • Recent Posts

    • Revealing America’s expansion: the dark truth of Native American suffering and unjustified abuses

      Anonymous | Physician
    • Unlock financial freedom: The physician’s guide to lucrative multifamily syndications and wealth accumulation

      Pranay Parikh, MD | Finance
    • From Moscow Mule to the opioid crisis: Unveiling the tragic legacy and urgent solutions

      Osmund Agbo, MD | Meds
    • From journalism to medicine: Unveiling the untold stories of patients’ medical conditions

      Veronica Bonales, MD | Physician
    • Unlocking resilience: a powerful journey from trauma to transformation [PODCAST]

      The Podcast by KevinMD | Podcast
    • Overcoming the lies of depression: Senator John Fetterman’s struggle with mental health

      Harvey Max Chochinov, MD, PhD | Conditions

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

View 2 Comments >

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

CME Spotlights

From MedPage Today

Latest News

  • Schools Aren't Prepared to Treat Asthma Attacks
  • Closing the Diversity Gaps in Urologic Oncology Leadership
  • Certain NSCLC Patients May Be Able to Stop Immunotherapy at 2 Years
  • No Survival Benefit With Immune Checkpoint Inhibitor Rechallenge in Metastatic RCC
  • Happy Sleep, Happy Couple?

Meeting Coverage

  • Closing the Diversity Gaps in Urologic Oncology Leadership
  • Certain NSCLC Patients May Be Able to Stop Immunotherapy at 2 Years
  • No Survival Benefit With Immune Checkpoint Inhibitor Rechallenge in Metastatic RCC
  • Happy Sleep, Happy Couple?
  • Once-Nightly Narcolepsy Drug Preferred by Patients Over Twice-Nightly Dose
  • Most Popular

  • Past Week

    • Boxing legends Tyson and Foreman: powerful lessons for a resilient and evolving health care future

      Harvey Castro, MD, MBA | Physician
    • We need a new Hippocratic Oath that puts patient autonomy first

      Jeffrey A. Singer, MD | Physician
    • Is chaos in health care leading us towards socialized medicine? How physician burnout is a catalyst.

      Howard Smith, MD | Physician
    • A physician’s typical day, as envisioned by a non-clinician health care MBA: a satire

      Jennifer Lycette, MD | Physician
    • Decoding name displays in health care: Privacy, identification, and compliance unveiled

      Deepak Gupta, MD | Physician
    • The rising threat of lung cancer in Asian American female nonsmokers

      Alice S. Y. Lee, MD | Conditions
  • Past 6 Months

    • It’s time to replace the 0 to 10 pain intensity scale with a better measure

      Mark Sullivan, MD and Jane Ballantyne, MD | Conditions
    • “Is your surgeon really skilled? The hidden threat to public safety in medicine.

      Gene Uzawa Dorio, MD | Physician
    • Unveiling the hidden damage: the secretive world of medical boards

      Alan Lindemann, MD | Physician
    • Breaking the cycle of racism in health care: a call for anti-racist action

      Tomi Mitchell, MD | Policy
    • Revolutionize your practice: the value-based care model that reduces physician burnout

      Chandravadan Patel, MD | Physician
    • An inspiring tribute to an exceptional radiologist who made a lasting impact

      Kim Downey, PT | Conditions
  • Recent Posts

    • Revealing America’s expansion: the dark truth of Native American suffering and unjustified abuses

      Anonymous | Physician
    • Unlock financial freedom: The physician’s guide to lucrative multifamily syndications and wealth accumulation

      Pranay Parikh, MD | Finance
    • From Moscow Mule to the opioid crisis: Unveiling the tragic legacy and urgent solutions

      Osmund Agbo, MD | Meds
    • From journalism to medicine: Unveiling the untold stories of patients’ medical conditions

      Veronica Bonales, MD | Physician
    • Unlocking resilience: a powerful journey from trauma to transformation [PODCAST]

      The Podcast by KevinMD | Podcast
    • Overcoming the lies of depression: Senator John Fetterman’s struggle with mental health

      Harvey Max Chochinov, MD, PhD | Conditions

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Observation status: When you’re not a hospital inpatient
2 comments

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...