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Study: Hospital Observation Stays Increase 25 Percent In 3 Years

By Susan Jaffe

June 4th, 2012, 4:00 PM

The number of Medicare patients who enter the hospital for observation rose dramatically even though Medicare enrollment and hospital admissions declined slightly, according to a study by gerontologists at Brown University in Providence, R.I.

The researchers analyzed medical records and hospital claims for 29 million people in traditional Medicare from 2007 to 2009. They found that observation stays increased 25 percent to about one million in 2009.  They also found that observation patients remained in the hospital longer, with 45,000 patients in 2009 staying at least 72 hours– an 88 percent hike since 2007—and well past Medicare’s recommended 24 to 48 hours.

Because overall admissions have declined, the effect of the observation-care increase is even larger. For every 1,000 Medicare admissions in 2009, there were another 116 observation care visits, 34 percent more than in 2007.

“It would be difficult to imagine that over this three year period that the overall health status of older Medicare beneficiaries would change this much,” said Zhanlian Feng, an assistant professor at Brown’s Center for Gerontology and Health Care Research, and the lead researcher for the study, which was published Monday in the journal Health Affairs.

“Decisions about a patient’s care are best left between the patient and the doctor,” said Brian Cook, a Medicare spokesman. “We continue to closely monitor these trends to ensure that services are being properly coded, and that patients are receiving the care that they need.”

Feng said the trend is troubling because observation patients are not eligible for full Medicare benefits. They can have higher out-of-pocket costs while in the hospital because Medicare doesn’t cover routine medications and has no limits on what hospitals can charge for these drugs.  And since observation patients are not considered admitted to the hospital, they lose Medicare coverage for follow-up nursing home care.

Medicare also does not require hospitals to tell patients when they are in observation status or that they will be responsible for paying any non-covered Medicare services, a Medicare spokeswoman has said.

The Brown researchers provided additional state data to Kaiser Health News that showed the use of observation services varies widely across the country (see this chart for information about your state).  For example:

  • For every 1,000 Medicare hospital admissions, Maryland had a nearly four-fold increase in the yearly number of Medicare observation stays, the highest rise from 2007 to 2009, while North Dakota saw only 1 percent rise.
  • The average length of an observation visit increased the most in Delaware, by 24 percent to 35 hours, while the average time dropped 4 percent in Nebraska to an average of 24 hours.

Although the researchers said more study is needed to identify causes for the increased use of observation care, they suggest that it could be a response to Medicare policy changes aimed at controlling costs.

Among those changes is Medicare’s expanded auditing program, which scrutinizes claims for care that was not medically necessary. If a hospital incorrectly admits a patient who should have received only observation services, Medicare demands that most hospitals refund  the inpatient payment and they receive no payment at all for that patient, said Don May, vice president for policy at the American Hospital Association.

The researchers also suggested that hospitals may be motivated to put patients in observation care since they would not be counted as a readmission if they returned to the hospital.  New Medicare rules that take effect later this year will   penalize hospitals for patients who are readmitted within 30 days.

Feng said hospitals may be holding more patients for observation to avoid auditors’ scrutiny and financial penalties.

“You want to make sure people have access to good care,” he said.  “On the other hand, I understand cost is a big issue for policymakers, but there should be a balance somewhere in the middle to minimize the impact on patients.”

Observation Care In The States

The number of Medicare patients who enter the hospital for observation care rose dramatically from 2007 to 2009 but the rates varied around the country.

STATE2007 Observation stays per 1,000 Medicare inpatient admissions2009 Observation stays per 1,000 Medicare inpatient admissionsPercent change 2007-20092007 Observation stay average length (hours)2009 Observation stay average length (hours)Percent change 2007-2009
AK971141827297
AL8612545303310
AR1261481728294
AZ1031393526274
CA759932242713
CO1221683824254
CT36637526288
DC33453623230
DE437574283525
FL1101412830327
GA1251532227270
HI61965724254
IA691379925278
ID1151472825250
IL8612849242817
IN12614213262912
KS6310770242713
KY143148328280
LA58936026288
MA9312130242713
MD83128823244
ME731064525264
MI961101525264
MN64141120232822
MO1021181626274
MS1051413428294
MT7615410317186
NC9412028232613
ND190192132320
NE88152732524-4
NH1351803326274
NJ42665725278
NM82951625250
NV1141311530300
NY22293226274
OH10314238252812
OK51999423244
OR1301753529303
PA477968273011
RI11018669283111
SC8212755273011
SD115145262827-4
TN1081352525264
TX1311602228307
UT6392462221-5
VA8010835232717
VT1561861923259
WA121130728280
WI6411580222723
WV1682042131336
WY8613658202315
Note: Only about two-thirds of traditional Medicare beneficiary records were analyzed.
Source: Analysis of U.S. Centers for Medicare and Medicaid Services patient data by Zhanlian Feng, assistant professor of health services, policy and practice at Brown University.

Jaffe.KHN@gmail.com

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