Am I in the Hospital or Not? Why Hospitals are ‘Observing’–Not Admitting–Patients

December 6, 2013

Increasingly, hospitals are “observing,” instead of admitting, Medicare beneficiaries, even when they are there for more than 48 hours.

Health care experts say the situation is far from ideal for both hospitals and patients. Hospitals are feeling increased pressure from Medicare to classify patients the “right” way or risk losing reimbursements. In turn, patients face higher bills for services they receive in the hospital, and also the possibility of not qualifying for Medicare-covered nursing home care after their hospital stay.

One reason for hospitals to use “observation status” is to lower their chances of getting no payment at all from Medicare for what an auditing contractor may later find was an unnecessary admission. In addition, starting in 2012, the Patient Protection and Affordable Care Act imposed penalties for hospitals with high rates of readmission. Hospitals can avoid the penalty if the patient was not officially admitted during his first visit.

How prevalent is observation status and how rapidly is it increasing? What challenges are hospitals facing to comply with state law and federal rules regarding hospital admissions? What administrative solutions are being tried by Medicare? What is the “two-midnight” rule and how does it work? What does it all mean for out-of-pocket costs to beneficiaries and reimbursements for hospitals?

A distinguished panel of experts addressed these and related questions.

Keith Lind, senior policy advisor, AARP Public Policy Institute, reported findings from a recent analysis of observation services and discuss changes that AARP is recommending.

Marc Hartstein, director, Medicare Hospital and Ambulatory Policy Group, Centers for Medicare and Medicaid Services, explained observation status and provide an overview of a recently released Medicare rule.

Carol Levine, director, Families and Health Care Project, United Hospital Fund, discussed the impact on Medicare beneficiaries.

Linda Fishman, senior vice president for public policy analysis and development, American Hospital Association, highlighted the challenges to hospitals in conforming to the recent Medicare rule and state laws. She will also comment on proposed changes to the rule.

Ed Howard of the Alliance and Susan Reinhard, director of the AARP Public Policy Institute co-moderated.

Contact: Marilyn Serafini (202)789-2300

Follow the briefing on Twitter: #ObservationStatus

The event was sponsored by the nonpartisan Alliance for Health Reform and the AARP Public Policy Institute.


Full Transcript (Adobe Acrobat PDF)

Speaker Presentations

Linda Fishman Presentation (Adobe Acrobat PDF)
Marc Hartstein Presentation (Adobe Acrobat PDF)
Carol Levine Presentation (Adobe Acrobat PDF)
Keith Lind Presentation (Adobe Acrobat PDF)

Event Details

Agenda (Adobe Acrobat PDF)
Speaker Biographies (Adobe Acrobat PDF)

Event Resources