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More on observation status

June 2017

Published in the June 2017 issue of Today’s Hospitalist 

WHILE I COMMEND Leo Motter, MD, and Dan Langsdale for attempting to bring humor to the problem of observation status (“The Illusion of Observation Status,” April), their cartoon perpetuates two myths. Those myths are that observation status is more expensive for patients than an inpatient stay and that doctors make considerably less treating observation patients than if patients are admitted as inpatients.

First, observation is not more expensive for patients. For patients with traditional Medicare, the out-of-pocket expense associated with an observation stay of one or two days is between $600 and $800. That is far less than the inpatient deductible of $1,316, which is incurred on day No. 1 of an admission. As with all rules, there are caveats based on supplemental insurance and prior admissions, but those don’t change the basic premise: For patients, observation is less expensive than inpatient care.

Second, reimbursement for an observation patient for the attending physician is quite similar to inpatient reimbursement. In fact, “admitting” and discharging an observation patient on the same day is quite lucrative, with 6.16 RVUs. Consultant services are valued at fewer RVUs. But because they use office visit codes, the documentation requirements are also significantly less.

Ronald Hirsch, MD, CHCQM
Elgin, Ill.

Dr. Motter responds:

Thanks to Dr. Hirsch for his comments. His Medicare example illustrates the hair-tearing complexity of the current system. While it appears the patient will pay a lower copay for observation, the reality of “caveats based on supplemental insurance and prior admissions,” as Dr. Hirsch points out, means we can’t really be sure that observation will cost less than an admission for any individual patient.

Add to this the many different sets of rules from private insurers, and it becomes more confusing. I routinely find myself in the emergency room with patients who are trying to make the possibly life-or-death decision of whether to stay in observation or leave against medical advice.

They are afraid they will have to pay a lot more for observation. When they ask me how much an observation stay will cost them, I am forced to say, “Honestly, I have no idea.” These conversations often happen at 9:30 p.m. on a Saturday night, when no case managers are around to help.

If patients do end up paying more out-of-pocket, they typically direct their anger not at Medicare or their insurance company, but at me for not making them a “full admission”—as if this was a personal decision I get to make on my own. Further, I find the whole concept of observation to be a bit ridiculous. Patients in observation status are physically in the hospital, receiving services that are indistinguishable from those of inpatients. But we all have to pretend that they are not actually there and that they are really outpatients. As far as I can tell, the only reason this system exists is to give somebody somewhere an excuse to pay the hospital less.

Like many hospitalists, I am an employee, so I don’t get to keep my own professional charges. But it matters to me what the hospital ends up making. When the hospital makes less, I also lose, no matter who is technically collecting my professional fees. The point of the comic is that both patients and hospitalists feel helpless in the face of a crazy system that has been forced upon us by Medicare and private insurers. We wish we could wave a magic wand and make it all a lot simpler.

Leo Motter, MD
York, Pa.

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