Observation Care is a hospital admission designation that is confusing to patients and staff. There are times a patient needs to be admitted to the hospital but for one reason or another doesn’t qualify to be an inpatient in the traditional sense.
Medicare defines an Inpatient as a patient whose condition is such that it will require them to stay in a hospital bed over a time period that spans at least two midnights. If it is known at the time of admission that the patient will require care that spans two midnights the patient can be admitted as an Inpatient. Inpatient care is covered under Medicare Part A and the patient has very little out-of-pocket expense associated with the care provided regardless of the total cost of care.
Observation is a little different. The patient is still admitted to the hospital, in the same type of bed and room as an Inpatient. The difference is, it’s not known that care will span two midnights and the stay is covered by Medicare Part B.
Observation admissions have been hotly debated at the national level for a couple of years now because the care delivered to the patient in an Observation bed and the care delivered to a patient in an Inpatient bed is virtually the same, especially from the patient’s perspective. Defining a stay by the presumption that it will last two midnights doesn’t take into account the illness being treated. The potential out-of-pocket for what’s technically a lower level of care, Observation, is much higher which defies logic. When a patient is in Observation they are responsible for paying for self-administered medications and a 20% co-insurance. A patient in Observation is essentially an outpatient in an Inpatient bed yet it costs the patient more out-of-pocket to be in a lower level of care.
Because of push back by consumers congress will attempt to “fix” Observation beginning in 2016 but I’m concerned the “fix” will lead to more problems. As of January 1, 2016, hospitals will be paid a lump sum of $2,200 for patients admitted to an Observation bed regardless of the amount of care provided. To this point hospitals were reimbursed for testing and procedures performed on the patient while in an Observation bed. The patient is still responsible for a 20% co-insurance but that is now capped because the lump sum payment doesn’t change regardless of services provided.
Medicine is an imperfect science. Patients are sometimes admitted to the hospital because a provider knows something is wrong but they don’t know exactly what it is. Hospitals have diagnostic equipment and provide lab and imaging services for this very reason. Diagnosis is an important part of the care delivery process and an accurate and timely diagnosis facilitates appropriate and timely care.
I’m in favor of controlling the cost of health care and reducing health care spending but I don’t believe rationing is the right way to do it and the Observation cap feels a lot like rationing.