HEALTH CARE/Joan Retsinas

Down the Linguistic Rabbit-Hole of Medicare

Plop! These past two years a lot of Medicare beneficiaries have plopped down the linguistic rabbit-hole of Medicare.

Consider the commonsense meaning of “observation.” You watch; you wait. Detectives do it. So do scientists. They don’t intervene, but simply stare, until something happens, forcing them to intervene.

Medicare bureaucrats, though, have crafted a new meaning. They’ve turned “observation” into a payment category for hospital patients. Physicians have long admitted patients for “observation:” the staff waits and watches, deciding whether to intervene. Will the medication work? Will the angina worsen? That is the old-fashioned definition. But this new definition carries a different denotation.

Patients admitted for “observation” still wear a wrist-band, get into a bed, receive meals, medications, and tests. In fact, “observation” patients may not know they are in this select group. They feel like regular inpatients; they undergo the same tests, eat the same meals, see the same rounds of physicians. Sometimes they stay up to a week before being discharged.

For hospitals, the difference is salient. Medicare gives hospitals much more money for patients admitted as “regular” inpatients. For regular inpatients, Medicare reimburses the hospital a set payment, determined by the patient’s diagnosis. For “observation” patients, the hospital receives far less money, almost a room-and-board fee, because, ostensibly, the patient is there solely for “observation,” not treatment.

That at least is the commonsense explanation for this Jesuitical distinction among hospitalized patients. In the topsy turvy world of Healthcare Wonderland, you can discard commonsense.

Medicare has been concerned with hospitals that discharge patients too quickly, and the federal insurer looks at the frequency of patients’ re-admissions. To save money (remember: they are paid by diagnosis, not by length-of-stay), hospitals want to discharge patients as quickly as they can. This makes sense not just fiscally but medically: most patients would recuperate better outside the hospital, among familiar people, away from the infections that lurk in hospitals. Yet many elderly patients end up back in the hospital, weeks, maybe days, after discharge. These patients who bounce in and out of the hospital show up on Medicare data-sheets.

Medicare scrutinizes the bouncers. Indeed, Medicare scrutinizes all admissions. If an inpatient receives a treatment that might be rendered on an outpatient basis, then Medicare does not consider that admission appropriate for an inpatient admission. If Medicare judges an admission as “inappropriate,” Medicare won’t pay. In 2005, Medicare launched an audit, searching for inappropriate admissions. The fight-fraud goal is to retrieve money — as much as a billion dollars — from wayward hospitals.

One solution for hospitals has been to admit more patients under “observation status.” On Medicare data sheets, these patients do not raise the same insurance red flags.

Revenue-wise, hospitals are in a bind. If they admit too many “observation” patients, their revenue plummets. On the other hand, if they admit too many regular patients whose admission is deemed inappropriate, their revenue plummets. Hospitals, though, are not the ultimate losers in this rabbit-hole. Patients are.

For patients discharged to rehabilitation or skilled nursing, either in a nursing home or at home, the designation matters. Medicare will pay for post-discharge rehabilitation and skilled nursing care only if the patient has been in a hospital, as a regular inpatient, for at least 3 days. “Observation” patients, no matter how long their hospital stay, do not quality.

Medicare attorneys, reporters, Congressional representatives, watchdog groups — all have started to receive complaints from patients who progress from hospital to nursing home, expecting Medicare to pay — to discover that it won’t. In the fine-print manifestos and the exhaustive explanations given to patients, staff may try to explain this strange definition of “observation,” but many patients grasp the ramifications only when they get a bill for post-discharge rehabilitation. In Bloomberg News (July 12, “Medicare Fraud Effort Gives Elderly Surprise Hospital Bills”), Drew Armstrong tells of one 76-year old man, discharged after 8 days in a Connecticut Hospital, who faced a $36,000 bill for rehabilitation.

Elderly advocates have proposed a regulation limiting observation status to 48 hours. In the meantime, it behooves patients to ask, on admission, not just their diagnosis and treatment plan, but also their payment status.

Only Alice would understand this Medicare hole.

Joan Retsinas is a sociologist who writes about health care in Providence, R.I. Email

From The Progressive Populist, September 1, 2010

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