Hospital observation stays increased more than 100%, AARP study finds

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Dramatic drop in hospital inpatient readmissions cannot be explained by a shift to observation stays
Dramatic drop in hospital inpatient readmissions cannot be explained by a shift to observation stays

The frequency of hospital observation stays skyrocketed and long stays became much more common between 2001 and 2009, according to a new report from the AARP Public Policy Institute.

A team from the Center for Health Research Policy Social & Scientific Systems based its findings on an analysis of Medicare claims data. The number of observation stays increased by more than 100% during the time period studied, the researchers discovered. This is a “far greater” increase than found in previous studies that looked at shorter time periods, according to a brief that accompanied the report.

Throughout the same 2001 to 2009 period, observation stays that lasted longer than 48 hours also increased at an astonishing rate, according to the researchers. Observation stays that lasted more than two days and did not end with inpatient admission increased about 250%.

The report identified many underlying causes, including increased payer and regulator scrutiny of short inpatient stays, and reimbursement changes. However, the AARP authors noted that one significant potential driver of observation stays had not even taken effect during the period they studied: Hospital readmissions penalties only kicked in last year. Because observation stay patients have outpatient status, holding someone in this category could help a hospital keep its official readmission rate down.

Long-term care providers and senior advocates have protested the rise in observation stays, which can keep patients from qualifying for Medicare coverage of subsequent skilled nursing services. However, the issue has proven difficult to resolve. An observation stay lawsuit was dismissed, and a recent regulatory change has met with pushback from doctors and hospitals — and is considered by many stakeholders to be a partial measure, at best.

Some are hopeful that legislation will provide relief: A bill that has been proposed in both the House and Senate would allow observation stays to count toward Medicare's three-midnight requirement for the skilled nursing benefit. AARP has endorsed the legislation.

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