Case Management

Sneak peek: Observation stays may hurt some patients

Case Management Weekly, September 12, 2012

A recent study indicates that more Medicare patients are being assigned to observation services than in the past, and this decision may be costing these patients money, according to the July issue of Health Affairs. 

Increasing Medicare audits and authorization of condition code 44 may be causing more physicians to assign Medicare patients observation rather than inpatient status, according to the study, "Sharp Rise in Medicare Enrollees Being Held in Hospitals for Observation Raises Concerns About Causes and Consequences." 

Medicare authorized condition code 44 in 2004. This allows hospitals to retroactively change patient status from inpatient to outpatient with observation services if the utilization review committee and attending physician agree before discharge that the inpatient admission wasn't medically necessary. In these cases, patients are treated and billed as outpatients. 

Between 2007 and 2009, the number of Medicare patients assigned to observation services increased, while the number of inpatient admissions simultaneously dropped, according to study authors. The ratio of observation to inpatient stays increased 34% in that time period. 

However, patients in observation still spend multiple days in the hospital. Observation stays during this time period grew longer, with 10% of patients remaining in the hospital as observation patients for two or more days. 

"Unfortunately many hospitals are reacting to the increasing number of inpatient payment denials by RAC, MAC, CERT [Medicare Comprehensive Error Rate Testing], and other auditors," says Deborah Hale, CCS, CCDS, president and CEO of Administrative Consultant Service, LLC, in Shawnee, Okla. Organizations should have a physician advisor review patients for appropriate placement at the time they come into the hospital, instead of simply shifting patients to outpatient observation when an inpatient admission is more appropriate. 

Editor’s note: This article is adapted from an article in the September Case Management Monthly published by HCPro, Inc.

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