Stop Calling Inpatients Outpatients: Medicare Created Observation Status – Ask Them to Change It!

This summer, the New York Times article “New Medicare Law to Notify Patients of Loophole in Nursing Home Coverage”* told the story of one of many people who contact the Center for Medicare Advocacy for help with hospital “outpatient” Observation Status. These patients stayed in the hospital for multiple days receiving skilled care, but were coded for billing purposes as “outpatients,” often with disastrous financial consequences for the individual.

Ms. Cannon was a patient in a hospital outside Philadelphia where she was said to be an “outpatient” on Observation Status for six and a half days. After discharge from the hospital, Ms. Cannon spent nearly five months in a nursing home for rehabilitation and skilled nursing care at a cost of over $40,000. Unfortunately, the hospital insisted that Ms. Cannon had never been formally admitted as an inpatient, despite being treated inside the hospital. This distinction has far reaching implications under federal rules; in short, Medicare would not pay for her nursing home stay. She was responsible for the entire cost.

The Center for Medicare Advocacy and the National Committee to Preserve Social Security and Medicare are fighting to fix this. Sign the petition urging Medicare to stop the misuse of “Observation Status” today.

The Center hears stories like Ms. Cannon’s every week. “Outpatient” Observation Status hurts Medicare beneficiaries and reduces trust in the Medicare program and between patients and their physicians. We know that, but we need to make sure the Medicare agency knows it too. For example:

  • So-called “outpatient” Observation Status is not about the location or care a patient actually receives. It’s a billing code used by hospitals to protect from overzealous auditors.
  • Medicare beneficiaries in “outpatient” Observation Status cannot get any Medicare coverage for post-hospital nursing home stays, resulting in huge, unexpected expenses that beneficiaries think Medicare will cover. Too often, people go without this care because they can’t afford it.
  • Medicare beneficiaries in “outpatient” Observation Status do not have a right to hospital discharge planning, so must figure out next steps on their own.
  • Medicare beneficiaries in “outpatient” Observation Status usually must pay for prescription drugs in the hospital – another surprise cost.
  • Medicare beneficiaries in “outpatient” Observation Status cannot appeal after-the-fact to try to change their status from hospital outpatient to inpatient.

“Observation Status” may seem like just a matter of paperwork, but for Medicare beneficiaries it can ruin lives – and it can happen to anyone.

That’s why you need to urge the Medicare agency to protect beneficiaries. Sign our petition today.

Thank you,

Judith Stein, J.D.

Executive Director
Center for Medicare Advocacy, Inc.

Max Richtman, J.D.

National Committee to Preserve Social Security and Medicare

* See

September 28, 2016 at 4:53 pm Leave a comment

It Isn’t That Complicated: You Don’t Have to Improve

As the New York Times reports today, people don’t have to improve to qualify for Medicare-covered care in most settings.  Unfortunately, older and disabled people are constantly told otherwise – and refused care as a result. The Centers for Medicare & Medicaid Services could fix this pretty easily.  Just issue a CMS Ruling stating definitively and clearly that skilled nursing and therapy can be covered to maintain a patient’s condition or slow deterioration.  It’s the law. Disseminate the Ruling to all Medicare providers and adjudicators.  Post it on the CMS website.

If there’s the will, there’s the way.



September 12, 2016 at 8:05 pm Leave a comment

As We’ve Been Saying!

Finally, the Center’s long-time concerns about costly misuse of public Medicare funds may be gaining attention. For years we’ve been pointing to Medicare overpayments for prescription drugs and to private Medicare Advantage plans. These huge expenditures help pharmaceutical and insurance industries, not older and disabled people. If these costs were reigned in, billions of dollars would be freed to cover necessary health care and sustain the Medicare program. This week these matters received some much needed publicity:

Prescription Drug Pricing

An excellent and well-timed (given #Epi-gate) article appeared in this week’s Journal of the American Medical Association discussing the reason drug costs are so high in the U.S. According to the article, the major cause is the “granting of government-protected monopolies to drug manufacturers, combined with restriction of price negotiation at a level not observed in other industrialized nations.” Thus, state the authors, “providing greater opportunities for meaningful price negotiation by governmental payers” is one of the conclusions. A “possible solution” is described as “Price negotiation: Enable Medicare to negotiate drug prices for individual Part D plans and to exclude coverage for expensive products that add limited clinical benefit; experiment with value-based drug pricing and rational prescribing reimbursement models for Medicare.” For more information, see

Medicare Advantage Overpayments

NPR recently published an article from the Center for Public Integrity entitled “Medicare Advantage Audits Reveal Pervasive Overcharges” (August 29, 2016) by Fred Schulte. The article reports on recently-released federal audits of 37 Medicare Advantage (MA) plans relating to overpayments made in 2007. According to the author, these “audits reveal how some private Medicare plans overcharged the government for the majority of elderly patients they treated, often by overstating the severity of certain medical conditions, such as diabetes and depression.”
As discussed in previous Alerts, including one in May 2016 entitled “Government Auditor Finds Billions in Improper Payments to Medicare Advantage Plans Coupled with Inadequate Oversight by Federal Regulator,” MA “upcoding” – when an MA plan reports an enrollee as being more sick than they actually are in order to obtain a higher risk-adjusted payment from the Medicare program – remains a problem that policymakers must address, particularly as they weigh policy proposals that would shift additional costs on to Medicare beneficiaries.

August 31, 2016 at 9:45 pm Leave a comment

Joining Forces With The John A. Hartford Foundation to Help Hospital Patients

July 14, 2016 – The Center for Medicare Advocacy (CMA) is thrilled to be partnering with The John A. Hartford Foundation to improve care for older adults with long-term and chronic conditions. With the Foundation’s generous two-year grant, CMA will be able to focus on solutions for older adults caught in the web of hospital “outpatient” Observation Status, which reduces access to key health and therapeutic care.

Over the two-year grant period, CMA, will gather existing resources and collect stories from beneficiaries, produce and update advocacy materials, and conduct extensive outreach and education that will improve observation status policy through regulatory change, improved federal guidance, and increased awareness by legislators. The grant funding for this project will also strengthen CMA’s advocacy on other important issues, including increasing access to oral health care for older adults.

“Outpatient” Observation Status is a policy created by the Centers for Medicare & Medicaid Services to classify certain very short hospital stays for billing purposes. The intent was to identify, and pay less for, these stays.

Medicare hospital patients are increasingly classified as “outpatients” on Observation Status, rather than admitted inpatients. This is true even for patients who are in the hospital for many days, for diagnosis, tests, nursing, physician care and treatment. Unfortunately, Observation Status results in myriad unintended consequences. For example, Medicare coverage for post-hospital nursing home care is often entirely unavailable for Observation patients since it requires a 3-day prior inpatient hospital stay. Thus, Observation Status “outpatients” are ineligible for Medicare nursing home coverage even if they were in the hospital for many days or weeks.

Hospital Observation Status has profound consequences for the quality and cost of care available for older, vulnerable Medicare patients. It also harms hospitals and nursing homes, the Medicare appeals process, the integrity of the Medicare program – and shifts costs to State Medicaid budgets. With support from The John A. Hartford Foundation, CMA will be able to enhance efforts to reduce the harm caused by Observation Status and to advocate for better care for older adults.

“We are very pleased to support the passionately driven and highly expert staff at CMA, led by the indomitable Judith Stein,” said Terry Fulmer, PhD, RN, FAAN, president of The John A. Hartford Foundation. “As our Foundation works to create age-friendly hospitals and health systems, CMA’s important policy work will raise visibility and diminish the negative impact of the Observation Status classification of older hospitalized adults through outreach and education.”

July 14, 2016 at 8:05 pm Leave a comment

Elder Abuse in Nursing Facilities: The Over-Administration of Antipsychotic Drugs to Nursing Home Residents

Today, June 16, 2016 is World Elder Abuse Awareness Day (#WEAAD2016 ). Each year, an estimated 5 million older persons are abused, neglected, and exploited. Often overlooked are less obvious, but no less dangerous forms of abuse.  The overuse of antipsychotic drugs in skilled nursing facilities is one such form.

The Administration on Aging defines a subcategory of elder abuse – “physical abuse” – as “inflicting physical pain or injury on a senior, e.g. slapping, bruising, or restraining by physical or chemical means.”  Administering antipsychotic drugs to more than a quarter of a million nursing home residents clearly meets this definition of elder abuse and, left unanswered, is a national scandal.

Despite the clear, consistent, and ever-growing body of evidence that antipsychotic drugs should not be prescribed for older people, hundreds of thousands of nursing home residents are given these drugs on a regular basis.  The Centers for Medicare & Medicaid Services (CMS) reports that, in the first quarter of 2016, information self-reported by nursing facilities indicates that 20.77% of 1,300,222 nursing home residents – 270,056 individuals – took antipsychotic drugs.  The overwhelming majority of these residents have not been diagnosed with a psychosis that could possibly support the administration of antipsychotic drugs.  Instead, these residents have dementia or are otherwise unable to explain with words what is causing them stress or discomfort.

Why are residents chemically restrained and abused?  There are two critical reasons: inadequate staffing levels at nursing facilities and inadequate enforcement of federal standards of care.

Read more…

June 15, 2016 at 4:25 pm Leave a comment

New GAO Report re: Overpayments to MA Plans

We are troubled by both the scale of estimated improper payments to Medicare Advantage plans due to inappropriate upcoding – at a rate of 9.5% or $14.1 billion in 2013 – and CMS’ lack of progress on recouping and deterring such payments.

We hope that policymakers who protect MA profit at all costs, while at the same time often proposing to shift more costs on to the majority of beneficiaries in traditional Medicare – take heed of this GAO report and ensure that the recommendations are implemented.

Read the GAO report at:

May 9, 2016 at 8:16 pm Leave a comment

Medicare Has Already Been Privatized. And That’s Not Good News.

As Drew Altman of Kaiser Family Foundation wrote in the Wall Street Journal (4/15/2016):
“To some degree many changes long sought by conservatives are already happening incrementally: More than half of Medicaid beneficiaries are in private managed-care plans. Almost one-third of Medicare beneficiaries are enrolled in private Medicare Advantage Plans this year, rather than the traditional program, and the share is projected to grow to more than 40% by 2026. The same is true of private health insurance. Conservatives complain about the ACA, but their preferred vision of health insurance–with high deductibles and lots of “skin in the game” plans–is dominating in the marketplace. The trend is reinforced by many of the policies being sold in the ACA’s insurance marketplaces.”

April 18, 2016 at 1:40 pm Leave a comment

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We provide effective, innovative opportunities to impact federal Medicare and health care policies and legislation in order to advance fair access to Medicare and quality health care.

Judith A. Stein, Executive Director

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