Study: Hospital Observation Stays Increase 25 Percent In 3 Years

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.

STATE 2007 Observation stays per 1,000 Medicare inpatient admissions 2009 Observation stays per 1,000 Medicare inpatient admissions Percent change 2007-2009 2007 Observation stay average length (hours) 2009 Observation stay average length (hours) Percent change 2007-2009
AK 97 114 18 27 29 7
AL 86 125 45 30 33 10
AR 126 148 17 28 29 4
AZ 103 139 35 26 27 4
CA 75 99 32 24 27 13
CO 122 168 38 24 25 4
CT 36 63 75 26 28 8
DC 33 45 36 23 23 0
DE 43 75 74 28 35 25
FL 110 141 28 30 32 7
GA 125 153 22 27 27 0
HI 61 96 57 24 25 4
IA 69 137 99 25 27 8
ID 115 147 28 25 25 0
IL 86 128 49 24 28 17
IN 126 142 13 26 29 12
KS 63 107 70 24 27 13
KY 143 148 3 28 28 0
LA 58 93 60 26 28 8
MA 93 121 30 24 27 13
MD 8 31 288 23 24 4
ME 73 106 45 25 26 4
MI 96 110 15 25 26 4
MN 64 141 120 23 28 22
MO 102 118 16 26 27 4
MS 105 141 34 28 29 4
MT 76 154 103 17 18 6
NC 94 120 28 23 26 13
ND 190 192 1 32 32 0
NE 88 152 73 25 24 -4
NH 135 180 33 26 27 4
NJ 42 66 57 25 27 8
NM 82 95 16 25 25 0
NV 114 131 15 30 30 0
NY 22 29 32 26 27 4
OH 103 142 38 25 28 12
OK 51 99 94 23 24 4
OR 130 175 35 29 30 3
PA 47 79 68 27 30 11
RI 110 186 69 28 31 11
SC 82 127 55 27 30 11
SD 115 145 26 28 27 -4
TN 108 135 25 25 26 4
TX 131 160 22 28 30 7
UT 63 92 46 22 21 -5
VA 80 108 35 23 27 17
VT 156 186 19 23 25 9
WA 121 130 7 28 28 0
WI 64 115 80 22 27 23
WV 168 204 21 31 33 6
WY 86 136 58 20 23 15
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.


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