The Washington Times - November 3, 2011, 06:55PM

George Renshaw, 89, was never actually admitted to the hospital even though he spent four days there.

He is one of seven of Medicare patients on whose behalf a class action lawsuit was filed Wednesday by the Center for Medicare Advocacy (CMA). The organization is suing the government over a practice it says harms thousands of seniors by depriving them of insurance coverage for hospital stays.

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Sometimes when seniors are hospitalized, they are considered outpatients even if they remain in the hospital for days. If a patient is assigned this “observation status,” the services they receive are not covered by Medicare Part A, which covers inpatient hospital stays.

Furthermore, seniors are often not informed of their status until after they leave the hospital, according to CMA.

The result is an unpleasant surprise when they find themselves facing high out-of-pocket costs and don’t quality for Medicare coverage of post-hospitalization skilled nursing—which requires a minimum three-day inpatient stay.

They’re left with little recourse, said CMA Director Judith Stein.

“Beneficiaries without advocates are virtually precluded from challenging observation status,” Mrs. Stein said. “The center simply does not have the resources to handle each of these cases individually without class action.”

Under current Medicare rules, hospitals have incentive to treat seniors as outpatients. If a senior is admitted but it is later found to be improper, the hospital must refund the Part A payment to Medicare and cannot submit a second bill under Part B, which covers outpatient services.

In 2006, the Centers for Medicare and Medicaid Services received about 333,600 claims for services provided to seniors who stayed in the hospital longer than one day but were counted as outpatient.

Last spring, Sen. John Kerry, Massachusetts Democrat, and Rep. Joe Courtney, Connecticut Democrat, introduced legislation that targets part of the issue, requiring Medicare to pay for post-hospital skilled nursing even if a senior was considered outpatient.