DOJ forces observation stay showdown

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Hospitals have been cast in a harsh light by long-term care advocates recently for allegedly over-using “observation stay” status. The practice can ultimately deny some patients subsequent Medicare coverage for nursing home admission.

But that's not the only direction from which hospitals are receiving pressure regarding observation stays.

Tennessee-based Community Health Systems Inc., the nation's largest hospital organization, recently agreed to a $98 million settlement to resolve charges that it overbilled by admitting individuals as inpatients rather than keeping them under observation status, the Department of Justice announced Aug. 4.

CHS allegedly engaged in a systematic scheme from 2005 to 2010 to unnecessarily admit Medicare, Medicaid and TRICARE beneficiaries as inpatients to juice profits. 

CHS also will retain independent organizations to review its decisions to admit government health plan beneficiaries as inpatients, federal authorities stated. 

Industry observers said they would be closely watching to see whether the settlement spurs acute-care providers to employ observation stays more often in the future.