"It's clear this is a problem for thousands of people – maybe hundreds of thousands – and the few that try to fight it often end up contacting us," Deford says.
A spokeswoman for the Centers for Medicare & Medicaid Services said the agency would not respond to a claim that is under litigation.
The controversial Medicare policy was designed to discourage hospitals from admitting patients who don't meet certain illness criteria, while at the same time provide a billing category for hospitals to monitor the status of patients while deciding whether they are sick enough for admission. The period for observation was supposed to be generally no more than 24 to 48 hours, and longer "only in rare and exceptional cases," according to the claim.
Officials for one hospital interviewed by HealthLeaders Media last year, the hospital bills Medicare for about one-third the amount it would ordinarily bill if the patient were officially admitted.
If hospitals do admit patients who don't meet criteria, they are subject to audits by Medicare's Recovery Audit Contractors, and stand to lose substantial revenue. As a result, in recent years many hospitals have been shifting their admissions practices to err on the side of caution. Sometimes patients are placed in a bed in a special observation unit or in a typical acute care unit. During that time, they may undergo screening tests and procedures to make sure nothing is more seriously wrong, but they are supposed to be discharged within a day.