Is this the Best Way to Keep Patients Out of the Hospital?

Dec 6, 2013, 11:33 AM

An elderly patient lying in a hospital bed.

The Alliance for Health Reform will hold a briefing today in Washington, D.C. on an increasing trend at hospitals of "observing"—instead of admitting—Medicare beneficiaries to hospitals. The briefing follows an AARP report issued earlier this month, Rapid Growth in Medicare Hospital Observation Services: What’s Going On?. The report found that a key reason for the rise in hospital observations among Medicare beneficiaries is that under the Affordable Care Act hospitals can face penalties of 2 percent of hospital charges for patients readmitted to the hospital before thirty days after discharge—which don’t apply if the patient is observed rather than admitted.

Observation status is a long-standing one. For decades it has allowed emergency room staff to determine whether it’s safe for the patient to be sent home. But patients may face higher charges in the emergency room than they would as an inpatient, and may not qualify for Medicare-covered nursing home care after their hospital stay if they were observed and not admitted.

The AARP report analyzed the frequency and duration of the use of observation status for Medicare beneficiaries between 2001 and 2009. It found more than 100 percent growth over nine years, and an even greater percentage increase in the length of time spent in observation, with visits longer than 48 hours increasing the most.

“The dramatic increase in the use of observation status for Medicare patients deserves a closer look,” said Debra Whitman, AARP Executive Vice President for Policy, Strategy and International Affairs. “The clinical benefit of long-term observation remains questionable. And for Medicare patients who remain in the hospital under observation, they may not realize the high out-of-pocket costs they'll have to pay.”

Bipartisan legislation has been introduced in both the House and Senate to count the time spent in observation toward the three-day stay requirement.

This commentary originally appeared on the RWJF New Public Health blog.