The Life Transition Blog

Fifty-five year old Charlie was sitting at his desk one afternoon when he began to experience shortness of breath and pain in his left arm, classic signs of a cardiac emergency. He called 911 and was taken by ambulance to the hospital, where he was promptly sent to the cardiac catheterization lab for evaluation and possible intervention. By the end of the day, Charlie was the lucky owner of two stents and bills in excess of $25,000. That’s when Charlie’s real pain began!

Most of us who have health insurance assume that it will cover our expenses if we are become ill or sustain an injury. And even though we probably know that we should take the time to read the booklet that appears at the beginning of each plan year, the reality is that very few of us do. Then, at the time we need the insurance to work for us, it seems that we are seeing our “claim denied” at every turn. Charlie’s situation provides a useful reminder to us all.

In this particular case, the patient has a catastrophic health plan that only pays for inpatient services. That means that the plan doesn’t have an obligation to pay anything unless the covered individual is actually admitted to the hospital as an inpatient. In addition, in this case, the plan has a $5,000 per episode deductible, meaning that only amounts for inpatient care over $5,000 will be covered by the plan. Someone who owns this type of policy needs to be aware of these facts and understand what it might mean.

It turns out that Charlie was admitted to the hospital as an “observation” patient and not as an inpatient. His condition was being monitored, first in the emergency department and then on a cardiac unit, until the decision was made to take him to the cath lab. After his procedure, he was taken to the recovery room, and then back to the cardiac unit before being discharged to home. During this entire episode, Charlie was considered to be on observation status and was never actually admitted as an inpatient. As a result, every single one of the claims submitted for his care were denied by his insurance company with the reason given that “policyholder lacks coverage for outpatient services”. No one did anything wrong here and the categorization of this admission was appropriate.

However, several weeks later, Charlie was again suffering cardiac symptoms and was taken by ambulance to the hospital. Again he was admitted to observation status and tests were performed. Unlike the last visit, this time Charlie’s doctors decided he should undergo bypass surgery. The procedure went well and he was discharged several days later. Again, his claims for over $50,000 were denied because in this case, his admission status was never updated by the hospital from “observation” to “inpatient”. Faced with a very substantial hospital bill on top of the previous bill, Charlie engaged a medical billing advocate to help him. By examining the hospital records and negotiating with the billing department, the advocate was able to have the admission reclassified to the correct category, inpatient. She then appealed to the insurance company to have the inpatient claims reprocessed and paid. Charlie was responsible only for the $5,000 deductible for this admission.

Despite the positive outcome in this situation, this patient was still upset that he owed the $5,000 deductible for the second time in just a few months. He had not understood that his plan required a deductible for each episode of care rather than the more typical annual deductible. Thus, he is required to meet the deductible twice since each of these events, while possibly related, is considered a separate admission.

Beyond the obvious lesson to understand the coverage provided by your health insurance, the second lesson of this case study is to be alert for seemingly minor details that will impact how your claim is processed. In this case, had Charlie been alert to the importance of the “inpatient” designation for his admissions to the hospital, he might have been able to point this out to the hospital’s business office before the claims were submitted, possibly eliminating much of the aggravation by having the admissions correctly classified from the get go.