Medicare ‘Observation stays’ Shift Hospitalization Cost To Patients

Medicare 'Observation stays' Shifts Hospitalization Cost To PatientsAs a way to decrease the cost of Medicare, the government has increased scrutiny of hospital stays and pressured hospitals to classify those stays in a way that makes the patients responsible, instead of Medicare, for the cost of rehabilitation at skilled nursing homes after the hospital stays.

This government practice makes it especially difficult for the elderly, who often need the additional recovery and rehab benefit of going to a nursing home before finally returning to their own home with caregivers.  In San Diego County and elsewhere, families and caregivers are noticing that hospitals are increasingly classifying hospital stays as “observation status” instead of “inpatient status”.

By pressuring hospitals into classifying hospital stays as being for observation status, rather than as inpatient status, Medicare is able to deny coverage for the cost of stays at skilled nursing facilities that frequently follow hospitalizations, especially for the elderly.

Hospitals Increasingly Classifying Stays In Ways That Keep The Government Off Their Backs And Shift Costs To Patients

We have written about this problem before.  Recently, it again received coverage in California Watch.   That article reported:

According to research released today by Brown University, hospitals across the country are using observation stay classifications among Medicare patients with greater frequency.

The researchers theorized that changes to Medicare policy in the past decade have contributed to the rise in observation-status patients. For example, since 2003, there has been a federal focus on detecting Medicare fraud and curbing costs through audits of hospital practices, including short hospitalizations. Hospitals can avoid some of this scrutiny, however, if a patient is held on an observation stay, which is not counted as an inpatient hospitalization.

…researchers analyzed Medicare claims data between 2007 and 2009 and found a 34 percent increase in the ratio of observation stays to inpatient hospitalizations.

Medicare policy guidelines state that observation stays ideally are concluded within 24 hours and should rarely go beyond 48 hours. But the number of observation stays of three or more days also has grown, researchers found. In 2009, 44,843 Medicare patients were held for observation stays for 72 hours or longer, an 88 percent increase from 2007.

National Healthcare Takeover Politics Causing The Problem

There are two reasons for this problem:

  1. The politics behind the national healthcare takeover act, in which the government promised to save lots of money by “scrutinizing” providers’ charges and “eliminating waste and fraud”:  The administration and others supporting the idea of the Federal government taking over our healthcare particularly need to provide “evidence” that they were correct in alleging that there was significant waste and fraud in the Medicare system, especially in this presidential election year.
  2. The effect that results from the hospitals knowing that federal auditors and prosecutors will second-guess the hospitals’ decisions about the patients’ hospital status:  In order to avoid prosecution by over-zealous Federal officials, hospitals have a strong incentive to classify patients in a way that favors the government and makes it the patient’s problem to dispute those classifications.

The combined effect of these two forces is to make it the patients’ problem to:

  • Know about this issue and ask about their hospitalization status
  • Pay the cost in time and money to fight the hospital and the government when the hospital is bullied into mis-classifications

Many years ago, a keen observer of the role of government in our society warned, “The government that is big enough to give you everything you want is big enough to take away everything you have. ”  This situation serves as an example of one way that this is happening today.

What do you think?

Tim Colling
Tim Colling

Tim Colling is the founder and President of A Servant's Heart In-Home Care, which provided in-home caregiving services in San Diego County, and also of A Servant's Heart Geriatric Care Management, which provided
professional geriatric care management services and long term care placement services in San Diego County. Tim has more than 30 years of experience in management in a variety of industries. He held a Certified Care Manager credential from the National Academy of Certified Care Managers. Tim is also a Certified Public Accountant (retired), and received his Bachelor’s Degree in Accounting from California State University at San Diego. In addition to writing blog posts here for the Servant’s Heart blog, Tim also is a regular contributor to and to as well as blogs of other eldercare services provider companies. Finally, Tim is also the president of A Servant's Heart Web Design and Marketing, which provides home care marketing as well as website design and online marketing for those who serve the elderly and their families.

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