Tuesday, June 4, 2019

Medicare Inpatient and Outpatient Hospital Stays - What are the Differences?

If you are on Medicare and are rushed to the hospital, you may be told by emergency room staff that they are admitting you to the hospital as an outpatient, or for observation.  If you are sick enough to be kept overnight in the hospital, you probably are not paying full attention to what is going on.  Your only concern is being treated for your condition and feeling confident you are getting the best possible care.  However, whether or not you are admitted as an inpatient or an outpatient does make a difference for your future care and could have a significant financial impact on you.  Here are a few things you and your family need to know.

Why You Might Be an Outpatient Rather than an Inpatient

What if you are rushed to the hospital with chest pain, but the tests performed by the emergency room doctor do not indicate you have had a heart attack?  Rather than sending you home, they may decide to keep you overnight for observation.  You may stay in a special observation unit or you could be in a regular hospital room.  You will spend the night, or even several nights, in the hospital, and will probably need to sign some paperwork, but you are listed as an outpatient, under care for observation. Other than that, your treatment will be the same as if you had been admitted as an inpatient, but the decision could affect both you and your hospital in other ways.

Why Does the Hospital Admit Patients as Outpatients?

The simple reason why this happens is because Medicare has rules governing who can be admitted as an inpatient, and these rules have become stricter because outpatient care is cheaper for Medicare.

In 2011, Medicare spent $690 million for outpatient care.  By 2016, that amount increased to $3.1 billion and has continued to rise since then.  Simultaneously, the cost of reimbursements for inpatient care has decreased.  Hospitals do not like these Medicare rules because they get paid about one-third less to care for an outpatient than they do an inpatient.  In most cases, the patients receive the same care, but the hospitals are paid less to provide that care.

Hospitals face stiff penalties from Medicare if they do not follow the strict guidelines for admission as an inpatient.  If the hospital is audited and Medicare determines they admitted people as inpatients when they should have been admitted as outpatients, the hospital has to return the full amount of the Medicare reimbursement they received.  In fact, in 2016, outside audits forced hospitals to return over $400 million to Medicare for incorrect Part A (hospitalization) charges.

More Procedures are Becoming Outpatient Procedures

Approximately twelve years ago, a neighbor of mine had knee replacement surgery. She spent three nights in the hospital and a week in a rehabilitation center.  Since she was an inpatient during the three night hospital stay, Medicare Part A covered her hospital expenses, as well as the additional week in the rehab center.  This was helpful to her recovery, since she lives alone and would not have been able to care for herself for the first week after her surgery.

In 2018, the rule changed.  Total knee replacements are now considered outpatient procedures.  Even though nothing has changed about the procedure or the required after-care, Medicare now reimburses hospitals less money and patients who cannot afford to pay out-of-pocket for a stay in a rehabilitation facility must find someone who will take care of them.

Even in situations when the hospital does have some discretion about whether the patient should be admitted as an inpatient or outpatient, many of them are hesitant to admit people as inpatients.  This is because Medicare penalizes hospitals when they admit someone as an inpatient and the patient is readmitted within 30 days.  If the patient is only in the hospital under observation, the penalties for re-admittance do not apply.

Hospital Admittance as an Outpatient can Hurt You Financially

At first, you may assume that it really does not make a difference to you whether you are admitted as an inpatient or an outpatient, as long as you receive the same care.  However, being an outpatient can hurt you financially.

If you are admitted to a hospital as an inpatient, you are covered under Medicare Part A.  If you are admitted as an outpatient under observation, you are covered under Medicare Part B.  Under Part B, you may be liable for up to 20 percent of the cost of your hospital stay, unless your Medicare Supplement (Medigap) or your Medicare Advantage plan covers this extra cost.

After you are released from the hospital, the financial pain may continue. If you need to go to a skilled nursing facility or rehabilitation facility after your discharge from the hospital, Medicare will not pay for any of the cost of the rehab if you were in the hospital as an outpatient or if you were an inpatient for less than three days.

On the other hand, if you were admitted to the hospital as an inpatient and spent at least three nights there, Medicare will pay fully for the first 20 days of skilled nursing care and partially for an additional 80 daysThe cost of skilled nursing can be substantial, so this is an important consideration for patients.

The rules regarding inpatient vs. outpatient hospital stays have saved Medicare millions of dollars in reimbursements to skilled nursing facilities.  In fact, it resulted in a decrease of 15 percent in skilled nursing days covered by Medicare between 2009 and 2016.  However, it also forced patients to either pay out-of-pocket for skilled nursing or do without it.

What Can Patients do to Protect Themselves?

Patients and their families need to understand the difference between an inpatient and outpatient hospital admittance.  If they believe they should be in the hospital as an inpatient, particularly if they expect to need skilled nursing care after they are released, they should appeal any decision to only list them as outpatients. Patients also need to set aside funds to cover the cost of skilled nursing whenever it is unlikely Medicare will pay for it.

In addition, you should ask in advance whether or not your Medicare Supplement or Medicare Advantage plan will cover any of the cost of skilled nursing care when you purchase your policy.  If not, you may want to set aside money for these types of events.

You may also want to check with Medicare.gov periodically, so you stay up-to-date on changes.

For more information on a variety of Medicare topics and issues, including ways the Medicare program could be strengthened, use the tabs or pull-down menu at the top of the page to find links to hundreds of additional helpful articles on Medicare, Social Security, where to retire in the US and overseas, financial planning, common medical problems and more.

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