Under Observation vs. Admission

There are almost 2 million people each year that are stuck in "under observation".
Last year 617,702 people were in the situation with more than three days in the hospital ("under observation") and needed, but could not get Medicare to fund, rehabilitation.

"t is about the words that appear on hospital forms and small differences in the fine print that could mean thousands of dollars in payments down the line. we get details on this story tonight from our national correspondent, kate snow .

Reporter: 79-year-old m.j. is doing physical therapy after a bad spill in september. she spent three days in the hospital getting the same care as an in-patient but was not classified as one. instead, her chart said she was only under observation.

It was illlogical, i had a broken leg, it didn't make sense at all, what were they going to observe?

Reporter: and here is what she didn't understand, that label, under observation, technically made her an out-patient and that means that medicare won't care for her rehab in a nursing facility which costs $28,000.

The whole thing is outrageous and it is not right.

It is a huge problem, there are almost 2 million people every year who are stuck in this observation status alice in wonderland world.

Reporter: the number of patients in this status increased more than 6,000 since last year, and just this year, many more were like m.j.'s. patients in the hospital three days or more but not eligible for costly rehab coverage.

To the patients, our viewers, frankly it seems the hospitals share at least part of the blame for this.

Sure, they're in had the hospital , they will think all of this is a hospital decision. much of this is out of our hands.

Reporter: the representative for most of the hospitals in the country say they're being squeezed by medicare . in-patients cost more so medicare aggressively audits the classifiations given.

They edit the fact sometimes in years later, they take the payment back, unfortunately, the patient gets in the middle of this.

Reporter: we wanted to talk to medicare , but they denied our request on this, citing litigation on this very issue. the hospital that treated m.j. wouldn't discuss it with us, but said it is part of the rules when defining care. she and her husband who has parkinson's just moved in with their son in dallas to save money.

I worked my whole life. and I'm just appalled.

Reporter: now, any money they can save will go to her rehab. so far legislative proposals to fix this problem have gone nowhere. advocates say patients who end up in the hospital need to make sure they're admitted as patients, not just in-patients.
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