Hospital Observation Units: What's Undermining "One of the Best Ideas in Healthcare?"

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Hospital observation units are more common today than 10 years ago, but many hospitals and insurers still haven't established billing systems or insurance contracts to acknowledge these units — an oversight that may be undermining their very purpose, according to a Washington Post report.

The number of hospitals reporting having observation units has doubled since 2003 to more than a third. Hospitals may relocate patients from the emergency department into an observation unit to deliver more monitoring or testing before physicians determine whether patients should be released or admitted, according to the report. Patients typically stay in these units for less than a day.

Experts say there will likely be a sharp increase in clinicians' use of observation status as hospitals strive to reduce avoidable readmissions targeted by the Value-Based Purchasing program, according to the report. But loopholes in the billing and payment system are making observation stays confusing to patients and physicians and may "'undermine what is one of the best ideas in healthcare,'" according to an expert cited in the report.

A significant part of this confusion is that many hospitals do not have designated areas or care teams for observation services. In many hospitals, a patient from the ED who is placed under observation status is relocated to a bed on a regular inpatient hospital floor, according to the report.

This can be an attractive arrangement to hospitals, helping reduce ED crowding and scrutiny over unnecessary admissions, but many patients believe they are being admitted when they are in an observation unit. This results in questions when they unexpectedly receive bills for outpatient rather than inpatient care, according to the report.

Insurers treat observation stays as outpatient care, so patients may pay individual prices for each X-ray, blood test or scan. On the other hand, they might pay a single co-pay if admitted as an inpatient.

More Articles on Observation Status:

Achieving Reimbursement for Observation in the Emergency Department
15 Biggest Hospital False Claims and Anti-Kickback Stories of 2011
6 Points on Avoiding RAC Take-Backs for Incorrect Patient Status

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