The Importance of Proper Status Assignment on Medicare Observation Patients

Observation Units are ultimately intended to give hospitals greater time to more accurately diagnose patients admitted through the Emergency Department (ED), both freeing up ED beds and avoiding unnecessary admissions. However, the changes in the way Medicare reimburses hospitals for observation versus inpatient status has created a growing number of observation cases that yield a lower reimbursement rate for many hospital systems. By assessing the length of stay and net income from Medicare patients and interviews from those working with patient status, it has been shown that Observation Units are not being run optimally as a result of misplaced status. Improving physician education and Utilization Review will increase the revenue received by the hospital.