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Denied Claims Blog

One Word That Could Cost You Thousands of Dollars

December 16, 2016

Lee Barrows‘ husband was treated at a Connecticut hospital. He stayed there for 5 days before being transferred to nursing home care. Now, Lee Barrows is getting hit with a huge bill because Medicare refuses to pay the claim. Why? Because of one word: observation.

Her husband was never actually admitted to the hospital. Instead, he was classified under observation status, meaning he was technically an outpatient. There are different coverage rules for observation status and, because Medicare only covers nursing home care after a 72-hour inpatient hospital stay, they won’t cover the cost of that care at all.

Medicare Puts Pressure on Hospitals to Limit Hospital Admittance

In recent years the number of observation stays has risen dramatically — 25% from 2007 to 2009. And they are getting longer. Although they are not supposed to exceed 48 hours, the percentage that do increased from 3% of hospital claims in 2006 to 7.5% in 2010.

Oddly, hospitals can expect 5 to 10 times less reimbursement from Medicare for observation patients. So what is causing this trend?

Hospitals are fearful of Medicare audits. According to doctors, Recovery Audit Contractor (RAC) auditors are paid by Medicare based on their results, giving them an incentive to be strict as to whether or not a hospital admittance was really necessary. Getting paid less for observation patients, or trying to collect straight from the patient what Medicare does not pay, is easier than risking the RAC audit.

Class-Action Lawsuit Targets the Root of the Problem

On Nov. 3, 2011, a class-action lawsuit was filed on behalf of 7 plaintiffs, including the Barrows family. The suit was filed against Kathleen Sebelius, the Secretary of Health and Human Services. It claims that placing patients on observational status violates the Medicare Act, the Freedom of Information Act, the Administrative Procedure Act and the due process clause of the Fifth Amendment.

Don’t Be Caught Off Guard

That this information is not immediately offered to patients and their advocates is unthinkable, but often they are not told until after the hospital stay. If you or a loved one are treated at a hospital, be sure to ask directly about your status as a patient. Are you there on observation or as an inpatient? If you are there under observational status, Medicare Part A will likely deny your claims and you will end up with the bill, not just for the hospital care but any subsequent nursing home care. If you have Medicare Part B or private insurance, get ready to pay for test fees and copays.

Claims Denied Unfairly

Sadly, patients often have to fight to get their claims approved by their insurance carriers. If your claim was unfairly denied, do not give up. Contact us immediately for a free consultation with a lawyer to explore your options and the best course of action.

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