Hospitals Increase Use of Observation Stays, Creating Coverage Issues for Medicare Patients
Hospitals across the country are using observation stay classifications among Medicare patients with greater frequency, in part to reduce the number of inpatient hospitalizations, according to a California Watch report based on a study from Brown University.
According to researchers, changes to Medicare policy in the past decade have fueled the rise in observation status patients. Since 2003, CMS has placed an emphasis on detecting Medicare fraud and curbing costs through hospital audits, including audits of short hospitalizations. Hospitals can avoid audits if a patient is held on an observation stay, which is different from hospitalization.
From a policy perspective, observation stays are intended to reduce the number of improper or fraudulent inpatient admissions, which frequently are medically unnecessary. However, classifying Medicare patients as observation stay patients for several days can leave those patients with large and unexpected expenses. Though Medicare guidelines say observation stays should end within 24 hours and should rarely exceed 48 hours, the number of observation stays lasting three or more days has grown, according to the Brown research. In 2009, 44,843 Medicare patients were held for observation stays for 72 hours or more, an 88 percent jump from 2007.
Hospitals are between a rock and a hard place in this situation. The California Hospital Association pointed out that hospitals face criticism from patients and CMS when they appear to substitute observation status for an inpatient admission, but risk penalties from CMS auditors during audits of short inpatient stays.
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