Seniors Beware: “Observation Status” for Hospital Stays Means No Medicare Coverage for Oft-needed Rehab

Senior citizens are increasingly being denied needed rehabilitation care and socked with unexpected medical bills as the result of a growing trend of labeling Medicare hospital stays as “observation” visits, according to a survey of aging experts released today by the National Association of Professional Geriatric Care Managers (NAPGCM). The survey release comes at a time when Congress is considering a proposal to change Medicare law to stop the problem.

The NAPGCM survey of 315 geriatric care managers from around the nation was fielded July 12-16, 2013. Among the survey’s key findings:

  • Over 80% of the geriatric care managers surveyed said that inappropriate hospital observation status determinations by Medicare are a significant problem facing seniors in their community. Additionally, 75% of those responding said that the problem is increasing in their community.
  • Over 81% of the care managers polled identified failure to receive needed rehabilitation or other services as a major problem stemming from unfair observation status rulings. Additionally, 79% of those surveyed cited that the rulings lead to financial hardship on seniors and their families and 75% cited emotional stress as a significant negative impact of the rulings.
  • 70% of the geriatric care managers responding said that contacting a hospital physician was the most helpful action step that can be taken to resolve problems associated with inappropriately being classified as in “observation status.”

“Seniors are being unfairly charged thousands of dollars and denied needed rehabilitation services,” said Jullie Gray, NAPGCM President. “Care managers are having some success in helping seniors avoid this Medicare trap, but the law needs to be changed,” she added.

Observation Status Means Classification as Outpatient, Despite In-patient Stay

Observation status refers to the classification of a patient in a hospital as an outpatient, even though the person is placed in a bed in the hospital, stays overnight, and receives medically necessary care just as an inpatient would. A key issue is that classification as an outpatient may make a senior ineligible for Medicare coverage of often-needed rehabilitation following a stay at a hospital.

Current Medicare law requires a patient to be in the hospital, classified as an inpatient, for three days in order to have Medicare cover the costs of rehabilitation in a skilled nursing facility (SNF). Seniors also face higher prescription drug co-payments if their hospital stay is labeled as an “observation” visit.

Five-Day Observation Status Hospital Stay Leaves Woman Without Coverage for Needed Rehab

In response to the NAPGCM survey, a certified geriatric care manager, Mary Ann Wonn of Boston, cited the example of a 76 year-old woman who went to the emergency room when she experienced sudden pain in her leg and was not able to put weight on it. The woman was diagnosed with a blood clot in her leg and stayed in the hospital for 5 days, receiving medications for the clot and pain.

After 5 days she was stable but still unable to walk and could not safely go home. So she was sent to a rehabilitation facility for further rehabilitation. The woman’s family said there was nothing about her hospitalization that flagged her status was anything but that of an inpatient. However, at the time of hospital discharge, they found out that their mother was classified as under observation status. As a result, Medicare would pay nothing for her rehabilitation stay in a skilled nursing facility. Ms. Wonn, who was hired by the family at this point, encouraged them to follow up regarding the observation status determination, but they did not want to pursue it as they were too emotionally drained.

“It was very unfortunate that this took place–if I had been involved while she was in the hospital, I would have advocated for her to be admitted as an inpatient,” said Ms. Wonn.

Pending Bipartisan Legislation Would Correct Coverage Gap

The problem has captured the attention of some in Congress. At a meeting earlier this month in Binghamton, New York on the topic, U.S. Senator Charles Schumer highlighted the case of Mary Opie, whose mother, Mrs. Marie O’Malley, was admitted last year to a local hospital after a fall that left her with arm and shoulder injuries. Because she was admitted under “observations status,” Medicare won’t cover over $7,000 in bills for long-term rehab and now she and her family have to foot the bill. It was eventually found she had torn, ruptured and severed several tendons.

Legislation aimed at fixing the problem has gained bipartisan support in the U.S. House and Senate. The “Improving Access to Medicare Coverage Act” ( H.R. 1179/S.569) would allow “observation stays” to be counted toward the three day mandatory inpatient hospital stay for Medicare coverage of skilled nursing facility services. NAPGCM has signaled its support for this legislation and is participating in a coalition advocating its passage.

The National Association of Professional Geriatric Care Managers (NAPGCM) was formed in 1985 to advance dignified care for older adults and their families. Geriatric Care Managers are professionals who have extensive training and experience working with older people, people with disabilities and families who need assistance with caregiving issues. They assist older adults who wish to remain in their homes, or can help families in the search for a suitable nursing home placement or extended care if the need occurs. The practice of geriatric care management and the role of care providers have captured a national spotlight, as generations of Baby Boomers age in the United States and abroad. For more information or to access a nationwide directory of professional geriatric care managers, please visit

President of Deborah Fins Associates, PC, since 1995, Deborah Liss Fins is a licensed independent clinical social worker and certified geriatric care manager. Drawing on more than 30 years of professional experience in geriatric care management, DFA offers comprehensive assessments and planning, guidance in selecting appropriate care, help identifying resources for financial support and professional consulting. Please contact us to set up a complimentary initial telephone consultation.


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