Background
Increasing use of hospital observation care continues unabated despite growing concerns from Medicare beneficiaries, patient advocacy groups, providers and policy makers. Unlike inpatient stays, outpatient observation stays are subject to 20% coinsurance and do not count towards the 3-day stay required for Medicare coverage of skilled nursing facility (SNF) care. In spite of the policy relevance, we know little about where patients originate or their discharge disposition following observation stays, making it difficult to understand the scope of unintended consequences for beneficiaries, particularly those needing post-acute care in a SNF.
Objective
To determine Medicare beneficiaries’ location immediately preceding and following an observation stay.
Research Design
We linked 100% Medicare Inpatient and Outpatient claims data with the Minimum Data Set for nursing home resident assessments. We then flagged observation stays and conducted a descriptive claims-based analysis of where beneficiaries were immediately before and after their observation stay.
Results
Most patients came from (92%) and were discharged to (90%) the community. Of more than 1 million total observation stays in 2009, just 7,537 (0.75%) were at-risk for high out-of-pocket expenses related to post-observation SNF care. Beneficiaries with longer observation stays were more likely to be discharged to SNF.
Conclusion
With few at risk for being denied Medicare SNF coverage due to observation care, high out-of-pocket costs resulting from Medicare outpatient co-insurance requirements for observation stays appear of greater concern than limitations on Medicare coverage of post-acute care. However, future research should explore how observation stay policy might decrease appropriate SNF use.