'Observation' Classifications For Patients Rising As Medicare, Private Insurers Enforce Stricter Criteria For Hospital Admissions

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Health Insurance / Medical Insurance;  Public Health
Article Date: 10 Mar 2009 - 4:00 PDT

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The number of patients treated at hospitals that are classified as "observation" patients is increasing as Medicare and private insurers establish stricter criteria for hospital admissions each year in an effort to ensure that "only the sickest people are treated in costly, resource-intensive medical centers," the Chicago Tribune reports. As a result, some Medicare patients are surprised by charges that are not covered because they were not classified as inpatients and therefore did not qualify for coverage.

According to the Tribune, hospitals are cautious about who is classified as an inpatient because they are at risk of being charged with fraud if they bill Medicare for an inpatient stay that does not meet the agency's standards. Medicare is beginning audits of medical centers nationwide.

According to the Tribune, observation care is "a step up from the emergency room but a step down from a formal hospital stay," in which doctors can "test, diagnose, stabilize and treat ... rapidly" patients who are "neither clearly sick enough to be hospitalized nor well enough to go home" (Graham, Chicago Tribune, 3/9). Gail Larsen, divisional vice president for provider relations at Blue Cross and Blue Shield of Illinois, said the purpose of observation care is to reveal whether a patient should to be admitted to the hospital or should be sent home (Graham, "Triage," Chicago Tribune, 3/9). Patients with chest pain, asthma attacks, kidney stones, dehydration, dizziness, mild trauma and other conditions often are ideal candidates to be observation patients, Sam Ho, chief medical officer for United Healthcare, said. The process "ideally" takes place within 24 hours, according to the Tribune.

However, certain observation cases are causing concern in the medical community because patients sometimes stay longer than 24 hours. In some of those cases, treatments are not covered by Medicare because they are not classified as inpatient care. The problem is amplified for Medicare patients because hospitals are not required to inform them that they are in observational care, delaying their knowledge of increasing medical bills. Toby Edelman, an attorney with the Center for Medicare Advocacy, said the process is "terribly confusing for people."

Although no national data on the financial consequences of the trend exist, anecdotal evidence suggests that some Medicare patients are "encountering difficulties." According to the Tribune, in Illinois last year, 320,000 people received observation care, up from 32,000 people in 1998, according to the state's hospital association (Chicago Tribune, 3/9). Larsen said the aging of the U.S. population, medical advances that allow medical professionals to treat patients in outpatient settings and heightened awareness of patient safety issues in hospitals, such as the risk of infection, are contributing factors to the growing trend.

Medicare officials said patients can appeal the hospital's classification of their care to a regional medical contractor if they feel they are unjustly charged. In addition, United Healthcare is developing a one-page summary of medical conditions that can be treated in observation care in order to educate physicians and patients ("Triage," Chicago Tribune, 3/9).

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