For Medicare patients, being ‘under observation’ can be costly

Medicare patients can incur unexpected out-of-pocket medical bills if they are classified as “under observation” rather than “inpatient” at a hospital, according to Ashish Jha, professor of health policy at Harvard School of Public Health (HSPH). This is particularly true for those who end up needing rehabilitation services. Medicare covers rehabilitation services in a nursing facility only for those admitted to hospitals as inpatients for three or more days but not for those technically considered outpatients and “under observation,” even if they are in the hospital for several days.

Jha discussed the issue on NBC Nightly News on February 25, 2014, as part of an NBC series on hidden costs in everyday American life. Jha called it “deeply unfair to patients to have to sort this all out.”

Jha also was interviewed February 25 on NPR’s Marketplace about improving how hospitals and doctors are paid. As hospitals and physicians consider alternatives to traditional fee-for-service payment methods—focusing more on outcomes—Jha said it’s important that the right quality of care measures are considered. These benchmarks may go well beyond low hospital readmission rates and high patient satisfaction scores. “I don’t think we’ve invested in developing meaningful measures,” Jha said. “If you have a patient who comes in with pneumonia, yes, you want to make sure that patient doesn’t die, but one of the most important things is that patient can go back to work, play with their families and lead a meaningful life. Well, how do you measure all of that? That takes work.”

Listen to the NPR Marketplace interview

NBC Nightly News coverage