Increase in Observation Stays May Cause Problems for Medicare Beneficiaries

The ratio of observation stays to inpatient admissions in Original Medicare increased 34 percent from 2007 to 2009, according to a study published in Health Affairs this week. Additionally, Medicare beneficiaries were held in observation for longer periods of time—some for at least 72 hours, well past Medicare’s recommended 24 to 48 hours. Observation services allow physicians to evaluate a hospital patient when it is unclear whether or not that patient should be formally admitted. According to the article, the extended use of observation versus inpatient services can limit beneficiaries’ access to skilled nursing care and subject them to higher out-of-pocket costs.

The study, which utilizes Medicare claims data for beneficiaries over the age of 65, found that between 2007 and 2009, the number of beneficiaries held under observation status increased 24 percent. In addition, the number of beneficiaries held for observation stays for longer than 72 hours more than doubled. The study also finds that observation stays were more prevalent among certain population groups, including older Medicare beneficiaries and women.

According to the study, nearly one million Medicare beneficiaries aged 65 and older received observation services each year from 2007 to 2009, and each additional episode resulted in a longer observation stay. The study’s authors suggest that this trend may be a result of recent Medicare payment policies intended to reduce avoidable hospital readmissions and contain costs. The study suggests that this shift from inpatient admissions to observation stays may create barriers to skilled nursing facility care for those who need it, as Medicare requires that beneficiaries spend three days in an inpatient setting to qualify for skilled nursing care under the Part A benefit. Patients under observation status are considered outpatients.

http://www.medicare.gov/publications/pubs/pdf/11435.pdf