New Law Requires Hospitals to Notify Patients Under Observation Care

A new law will require hospitals to disclose when a patient
is under observation care. Photo: Shutterstock

Observation care is an option hospitals use to give doctors time to figure out what is wrong with a patient when it’s not clear from the outset. Generally, this happens when a patient is “too sick to go home but not sick enough to be admitted,” meaning that they don’t go through normal admittance procedures.

Because the patient isn’t actually admitted to the hospital, observation care is considered outpatient. This may not sound like a terribly important difference, but it can result in increased costs for people who end up in observation care instead of admitted care, especially when they rely on Medicare to cover bills.

As observation care is outpatient care, it falls under a different copay structure. Furthermore, when older patients are sent to nursing homes to recover following hospital stays, if that stay consisted of observation care, it doesn’t count toward the three consecutive days of hospital care required for Medicare to cover nursing home stays.

The problem with this is that patients often don’t learn that they’re in observation care right away—sometimes not even until the bill arrives. While some states already require hospitals to notify patients about the fact that they’re under observation care and not inpatient care, a new federal law requires that all hospitals tell patients that they’re receiving observation care and why they haven’t been admitted.

The new law requires that patients be notified after the patient has received observation care for 24 hours and no later than 36 hours. There is a space on the new form for patients to sign, but that’s not required yet.

“The observation care notice is a step in the right direction, but it doesn’t fix the conundrum some people find themselves in when they need nursing home care following an observation stay,” said Stacy Sanders, Federal Policy Director at the Medicare Rights Center, a consumer advocacy group.

Observation care, in and of itself, isn’t necessarily bad or wrong. The problem lies instead with its treatment as outpatient care by Medicare. Changing regulations to address that issue would likely be needed in order to ensure that elderly patients don’t suddenly get hospital bills they can’t afford, whether they were told about their observation care or not.