Hospitals have found loopholes to avoid penalties linked to Obamacare, but at the expense of patients’ wallets.
The controversial law puts an impetus on improving the quality of care, doling out penalties or incentives for certain measures. Hospitals that have too many Medicare patient readmissions within 30 days of the patient getting discharged, for example, receive reduced Medicare payments.
But hospitals have found a way to game the system, a new study concludes.
Hospitals are increasingly “observing” Medicare patients instead of readmitting them, according to a study in the journal Health Affairs. The practice can increase out-of-pocket costs for patients based on how they are classified by the hospital.
Observation status means the patient doesn’t initially meet the criteria for admission into the hospital but should be observed in the hospital before being sent home, according to the Medicare Payment Advisory Commission, a nonpartisan agency that provides Congress with analysis on Medicare.
Such observation stays get billed as outpatient services rather than another admission. Thus, hospitals can avoid readmitting a patient by putting another label on them.
While the relabeling helps hospitals avoid costly penalties, “it probably signals little real quality gain,” the journal article said.
From 2006 to 2013, observation stays increased by 96 percent, according to 2015 data from the commission. The commission didn’t break out the totals from 2010, when Obamacare was passed.
Meanwhile, in 2012 hospital readmissions for Medicare payments declined by 8 percent compared to 2010.
The problem is that deeming patients as “observation” status rather than admitting them could increase patients’ out-of-pocket expenditures.
People held for observation get classified as outpatients. Under Medicare rules, outpatients could face higher co-pays for in-hospital services and won’t be covered for subsequent care in nursing facilities, according to a 2012 study from Brown University.
A new law signed last month by President Obama aimed to address the issue. The Notice of Observation Treatment and Implication for Care Eligibility Act mandates that hospitals have to inform patients in hospitals for more than 24 hours that they are in observation status, according to the Center for Medicare Advocacy.
The notice must explain the reasons for such a status and the implications both for the hospital, eligibility for services and cost, the advocacy group said.
“To date, Medicare has not required hospitals to notify patients of their outpatient status unless a hospital changes a patient’s status from inpatient to outpatient,” the group said in a release.
The law goes into effect next year.
But observation stays don’t appear to be the only loophole employed by hospitals. The journal article said more of the recently discharged patients are getting treated in emergency rooms without being admitted, but only by a little less than 1 percent.
Steffie Woolhandler, a professor at CUNY School of Public Health at Hunter College; and David Himmelstein, who is a professor at City University of New York, wrote the Health Affairs article.
