Observation status can trigger significant hospital fees for drugs

USA TODAY reports on “Patients held for observation can face steep drug bills”.


Find the article at USA TODAY Money  http://www.usatoday.com/money/industries/health/drugs/story/2012-04-30/drugs-can-be-expensive-in-observation-care/54646378/1.

The article features a diabetic patient in the hospital for sudden chest pains whose charge for insulin during her 18-hour would have been enough to cover her out-of-pocket expenses for a three-month supply under her private Medicare Advantage plan.

Even though her health plan covers medical and drug expenses, her policy would not pay the hospital drug bill because the hospital never formally admitted her; instead, it billed the visit as observation care, which is considered outpatient service.
The “observation label” reportedly excludes thousands of patients every year from full Medicare coverage. Many have spent more than a day in the hospital and had regular hospital rooms and service and never realized they weren't admitted. These “observation patients” face paying a larger share of their hospital bills than inpatients, since they usually have a co-payment for doctors' fees and each hospital service.

The problem in many of these instances is that Medicare does not pay for routine drugs that observation patients need for chronic conditions such as diabetes, high blood pressure or high cholesterol — drugs that they could have brought from home if the hospital allowed it and the patient had time to get them. Apparently Medicare has no rules for what hospitals can bill for non-covered drugs, so they can charge any amount. The article reports that Medicare officials recommend to hospitals — but do not require — that patients remain under observation for no more than 24 to 48 hours. After that, the patients should be switched to inpatient status or discharged, the officials recommend. But patients can linger in observation for several days and often don't know they haven't been admitted.

Medicare does not limit the prices for drugs that it does not cover, hospitals use their pharmacies to help generate revenue to subsidize the other operating costs of the facility, said Miriam Mobley Smith, dean of the College of Pharmacy at Chicago State University. She said the "upcharge" is based on numerous factors, including personnel, insurance and facility costs. And the article states that even patients with private Medicare Part D drug insurance may find that their policies don't cover their everyday — or "self-administered" — drugs given to them in the hospital: "These drugs may be covered under certain circumstances," according to the Medicare website. But there is no requirement that Part D beneficiaries must be fully reimbursed for these drugs.

USA TODAY reports that the most recent government statistics show the number of observation claims that hospitals submitted to Medicare rose 46% to 1.4 million from 2006 to 2010, and the number of cases lasting longer than 48 hours more than tripled. The article also states that the American Hospital Association, in a 2010 letter to Medicare officials, cited several factors to explain that growth, including increasingly restrictive Medicare criteria for the hospital admission and rising use of audits to monitor hospital decisions and billing. In addition, it said, physicians sometimes try to keep seniors in the hospital because they may not be well enough to be home, even when they're not sick enough to be admitted.

There is a class-action lawsuit, filed by the Center for Medicare Advocacy, based in Connecticut, against the federal government on behalf of “observation patients” – who, because of their observation status, become ineligible for Medicare coverage for nursing home care when they leave the hospital. The lawsuit seeks to either eliminate the “observation status” or require hospitals to tell patients when they are admitted for observation and allow them to appeal the designation.

The article is written by Susan Jaffe of Kaiser Health News. Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a non-profit, non-partisan health policy research and communication organization not affiliated with Kaiser Permanente.