Observation units offer hospital savings, patient confusion

Observation units help improve emergency department flow and generate savings for the hospitals, but they also can lead to higher bills for patients, The Washington Post and Kaiser Health News reported.

More than a third of hospitals use observation units, double than in 2003. The observation unit targets patients who might otherwise fall through the cracks. Those patients require more care than an emergency visit but not as much care as a full admission, such as a heart attack patient who comes in through the ED but still must undergo blood tests and stress tests in the observation unit, The Washington Post noted.

According to a November 2012 study in the Journal of Stroke & Cerebrovascular Diseases, patients referred to an observation unit were discharged 38 hours sooner than inpatients, costing the hospital a median $2,092 per patient, compared with $4,922.

Other research has pointed to similar savings for hospitals. According to a September 2012 Health Affairs study, a hospital with sufficient ED volume could save $4.6 million each year. And if implemented nationwide, observation units could save $3.1 billion a year.

Although observation units offer benefits to hospitals, patients may be confused that they are not admitted and stuck with the outpatient bills, as well as any subsequent charges in a skilled nursing facility.

"We're going to see an explosion in observation status," Arthur Kellermann, a physician and senior researcher at public policy research organization Rand, told Kaiser Health News. Kellermann pointed to the uneasy trend of hospitals placing patients on observation instead of admitting, thereby avoiding an initial admission and the readmission penalty if they come back. 

The issue of observation status will likely continue to be a sore spot for hospitals, especially with no settlement in sight for the AHA v. Sebelius case. The hospital group is suing the Centers for Medicare & Medicaid Services over what they say are millions of dollars of denied Medicare payments based on setting.

For more information:
- here's the Washington Post article  and the Kaiser Health News article

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