Advocacy Organization Sues Government over Medicare’s Observation Status Policy

August 25, 2017 | Aging Services Risk, Quality, & Safety Guidance

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​A Washington, D.C.-based organization that advocates for the rights of older Americans has brought a class action lawsuit against the federal government regarding Medicare's “observation status" policy, according to an August 12, 2017, article in the Naples (Fla.) Daily News. The lawsuit concerns whether patients should be able to appeal to Medicare when they are placed in observation status rather than being admitted to a hospital. Observation status was intended to give hospitals time to evaluate a patient's condition and determine where he or she needs to be admitted, the article said. However, according to the lawsuit, the practice is increasing for different reasons, including hospitals trying to reduce the number of 30-day readmissions. Medicare Part B covers patients on observation status with a deductible and 20% copayment, the article said. If a patient remains on observation status until a transfer to a nursing home, Medicare does not cover any subsequent nursing home stay. If patients could appeal the observation designation, the advocacy group contends, it could keep their families from “facing the nursing home coverage nightmare."

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