As readmissions fall, observation status rises--even at hospitals outside readmissions program

Many hospitals are substituting observation care for readmissions, even those that do not stand to lose money if they don't reduce their rates, according to a Health Affairs blog post.

Readmission rates have been declining for years, particularly in the wake of the Centers for Medicare & Medicaid Services fining hospitals for failing to stem their rates, but research published by Health Affairs in August found the decline was accompanied by an increase in the use of observation status for patients. While the initial research incorporated Medicare data, further research into privately insured patient data found that the top third of hospitals with the steepest drop in readmissions between 2009 and 2014 (an average of 26 percent) also saw 45 percent more returning observation patients covered under private plans, with a large portion of the increase beginning in 2012, when CMS began levying readmission penalties.

Researchers also found similar trends in observation care at veterans' hospitals, despite the fact that such facilities operate under significantly different incentive arrangements from private plans and Medicare patients. Indeed, a recent Health Affairs study found observation stays more than doubled within the Veteran's Health Administration between 2005 and 2013.

Why has a spike in observation stays emerged even among providers who have no incentive to conceal readmissions? For veterans' hospitals, patients owe substantially lower copays under observation compared to inpatient admissions; the same holds true for 9 out of 10 Medicare beneficiaries, and research has found that physicians can cut hospital costs while delivering higher-quality care through the use of observation status.

Further study is needed, the authors write, to determine whether readmission rates are a reliable measure of how well hospitals reduce complications and coordinate care, and emphasizing readmission rates so heavily may allow hospitals to simply relabel patients rather than actively deliver better care.

"These trends raise a number of questions," the authors write. "For instance, do observation patients get the same quality of care as inpatients? Further, do drops in readmission rates truly mean that hospitals are providing better quality care?"

To learn more:
- read the blog post
- here's the study