Many of you may already understand the difference between “observation status” and “admission” when it comes to hospital stays but for those that do not, it can be a real awakening when the bills start to come. Observation Status is a designation used by hospitals to bill Medicare and is classified as an “outpatient” category. When hospital patients are classified as outpatients on observation status, they may be charged for services that Medicare would have paid if they were properly admitted as inpatients. More importantly, patients will not be able to obtain any Medicare coverage if they need nursing home care after their hospital stay. Medicare only covers nursing home care for patients who have a 3-day inpatient hospital stay and observation status does not count towards the 3-day stay.
To try and help alleviate this issue, Congress approved legislation termed the NOTICE Act to require hospitals to provide written notification to patients 24 hours after receiving observation care, explaining that they have not been admitted to the hospital, the reasons why, and the potential financial implications.