For commercially insured patients, observation status may improve cost savings

Kelly Gooch - Print  | 

Providers are increasingly putting patients under observation before deciding to admit them for inpatient stays, resulting in substantial cost savings for commercially insured patients and their insurers, according to a study published in Health Affairs.

For the study, researchers examined Health Care Cost Institute commercial health insurance claims data for 2009 to 2013 among adults ages 18 to 64. Specifically, they looked at claims data from Aetna, UnitedHealthcare and Humana, focusing on the following six conditions commonly managed by observation care or short-stay hospitalizations: nonspecific chest pain; abdominal pain; syncope (fainting); headache, including migraine; cardiac dysrhythmias; and infections of the skin and subcutaneous tissue. Ultimately, the study included 815,798 observation care stays and 291,668 short-stay hospitalizations.

Researchers said they found observation care use increased relative to short-stay inpatient hospitalizations for each of the six conditions. For instance, observation care was 3.7 times more common than short-stay inpatient hospitalizations for nonspecific chest pain in 2009. Four years later, observation care for the same condition was 8.4 times more common than short-stay inpatient hospitalizations, according to the study.

Researchers said they also found total and out-of-pocket spending were "substantially lower" for observation care than for short-stay inpatient hospitalizations for all six conditions for 2009 to 2013.

"This finding indicates that there may be substantial financial benefit to observation care for commercial insurers and patients alike," the study authors wrote.

They did note, though, that total spending and out-of-pocket spending for observation care "grew rapidly — with total spending growing by as much as 17 percent per year, and out-of-pocket spending growing by as much as 20 percent per year—for certain conditions over the study period. By contrast, total and out-of-pocket spending for short-stay hospitalizations remained relatively stable."

The study authors concluded policymakers should take note that Medicare policies disincentivizing observation care "may have unintended financial impacts on nonMedicare populations, where observation care may be cost saving."


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