Know Your Rights: Observation Status

by David Goldfarb

Medicare has limited coverage for nursing home care.  Also, Medicare will only cover care you get in a nursing home if you first have a “qualifying hospital stay.” A qualifying hospital stay means you’ve been a hospital inpatient for at least three days in a row.

Your doctor may order “observation services” to help decide whether you need to be admitted to the hospital as an inpatient or can be discharged. During the time you’re getting observation services in the hospital, you’re considered an outpatient. This means you can’t count this time towards the three-day inpatient hospital stay needed for Medicare to cover your nursing home stay.

The federal law and state law have some protections so that people aren’t surprised when they are told they’ve been on “observation status” and therefore don’t have the requisite three day hospital stay to trigger Medicare coverage for a nursing home.  The federal government regulates observation status. Beginning no later than March 8, 2017, hospitals are required to give patients both oral and written notice when they are outpatients and not admitted as inpatients.  Hospitals must use the written notice developed by the Centers for Medicare & Medicaid Services (CMS), which is called the Medicare Outpatient Observation Notice (MOON).

New York law also requires a hospital, when a patient is placed on observation status, to give the patient oral and written notice within 24 hours of such placement that the patient is not admitted to the hospital and is under observation status. It must be signed and acknowledged by the patient or the patient’s representative and include a statement that observation status may affect the patient’s Medicare, Medicaid, and/or private insurance coverage for the current hospital services, as well as coverage for any subsequent discharge to a skilled nursing facility or home and community based care; and that the patient should contact his or her insurance plan to better understand the implications of being placed in observation status.