Hospitals Report Negative Financial Ramifications from Using Observation Status
As featured in the Daily Briefing, Medicare and private insurers are increasingly labeling patients as "observation cases," or outpatients, despite days-long hospital stays, a practice that is boosting costs for facilities and patients, the Pittsburgh Tribune-Review reports.
Although the observation label is not new--CMS applies the designation to patients admitted through the ED with symptoms that can be stabilized within 24 hours, such as asthma and chest pain--hospital leaders in Pennsylvania say the practice of classifying cases as outpatient despite longer hospital stays has grown and is burdening facilities with lower reimbursement. Federal law does not specify that a patient must be considered an inpatient admission after 24 hours in a hospital, according to a Medicare spokesperson. Payment for an observation case is 33% of payment for an inpatient admission, according to the CMO at Forbes Regional Hospital. The trend can also be particularly harmful to Medicare patients because it may lead to denied coverage for nursing home care, the Tribune-Review reports.
Hospitals Turning to Observation Care
According to an analysis in the March 25th issue of NEJM, hospitals with greater case volumes for AMI, HF and pneumonia demonstrate improved one-month survival rates in patients admitted for such conditions; however, there is an upper volume threshold beyond which point hospital volumes are no longer significantly correlated with reduced mortality rates.
Dr. Joseph Ross and researchers from the Mount Sinai School of Medicine analyzed 2004 to 2006 Medicare data, estimating, per each 100-patient increase in annual volumes, the change in 30-day mortality rates. All three conditions demonstrated significance in the inverse relationship of hospital volumes to 30-day mortality, but researchers identified the point at which the marginal benefit of increased cases became increasingly small, determined by the threshold at which a 100-patient volume increased did not significantly reduce 30-day mortality. These thresholds were found to be higher for AMI and HF than for pneumonia.
According to Ross, "a policy aimed at universally increasing hospital volume in order to reduce death rates would not have uniform benefits" since more than 60% of patients in the study were treated at hospitals in the highest case volume quartiles with 15% in the first two quartiles. Rather, it is essential to determine strategies used by large and small hospitals alike that lead to improved outcomes.
To access the full study, please follow this link [subscription required] (theheart.org, 3/24); Ross JS et al. N Engl J Med 2010; 362:1110-1118.
The New York Times examines how physicians are increasingly choosing not to pursue--and even abandon--private practice to integrate with hospitals and health systems and how this "quiet revolution" of care delivery may impact patient care and health care costs.
Physician-owned practices are fading from the medical landscape, the Times reports, noting that as of 2005, more than 66% of medical practices were physician owned; however, across the last three years, that figure has dipped to below 50%, according to data from the Medical Group Management Association. According to the Times, economic, political and personal factors are driving physicians away from the private-practice model to hospitals, which provide regular hours, a steady salary and are often free of the financial worries that come with running a business.
Times: Most Physician Practices Now Owned by Hospitals