New Law to Help Pennsylvania Patients Understand their Hospital Status

A new law signed by Gov. Corbett on Oct. 22, 2014, aims to help hospital patients and their families better understand their health insurance options while receiving care in the hospital.

Many older Pennsylvanians are learning that being treated at the hospital does not necessarily mean they were “in” the hospital – and because of that they could face higher-than-expected out-of-pocket hospital expenses. Confusing, right?

This confusion occurs when patients are in the hospital, but placed under “observation status,” and not actually admitted as inpatient. Oftentimes patients in the hospital do not know their status, or how it will affect their share of the cost of medical bills.

Act 169 (formerly House Bill 1907) requires the hospital to provide oral and written notice to the patient about their outpatient status after they have spent a full day in the hospital outside of the emergency department.

Rep. Saylor, who introduced the bill, says this legislation will help patients and their families with critical health care decisions. The Pennsylvania Medical Society (PAMED) agrees and supported this bill.

There are several potential problems with observation status, including that:

  1. Many insurers, including Medicare, treat observation stays as outpatient care, meaning that patients may have out-of-pocket costs for things like tests or X-rays. However, if the same procedures were done while admitted as inpatient to the hospital, the patient might only be responsible for a one-time deductible.
  2. Medicare requires a patient be admitted to the hospital for at least three days before it will pay for subsequent skilled nursing care or rehabilitation in a nursing home. If a patient is in the hospital for three days before going to a nursing home, and one of those days was while they were classified under observation, they have not met Medicare’s the ‘three-day rule’ therefore, Medicare will not cover the nursing home expenses.

Since observation status is a federal designation through the Centers for Medicare and Medicaid Services, this new law reflects the limits of the reforms that could be achieved at the state level on this issue. At the national level, the American Medical Association is fully engaged in this issue and working to improve, if not eliminate, observation status altogether.