A Medicare Conundrum: Observation status – Readmission penalties – Hospitalist handoff to primary care physician.

You may have wondered how Obamacare pays for medical care for the 20 million+ newly insured. If you don’t understand the incentives and disincentives to hospitals and physicians and get caught in the regulatory quagmire, then you will be the payor!

Using Medicare, here’s an example of how three related concepts determine whether or not Medicare will pay for a hospital admission.

Observation Status.

“When you’re put in the hospital, you’re assigned either inpatient status or observation status. You’re assigned inpatient status if you have severe problems that require highly technical, skilled care.

You’re assigned observation status if you’re not sick enough to require inpatient admission, but are too sick to get your care at your doctor’s office. Or, you might be assigned to observation status when the doctors aren’t sure exactly how sick you are. They can observe you in the hospital and make you an inpatient if you become sicker, or let you go home if you get better.

Since observation patients are a type of outpatient, some hospitals have a special observation area or wing of the hospital for their observation patients. But, many hospitals put their observation patients in the same rooms as their inpatients.

If you’re an inpatient, but Medicare or your health insurance company determines that you should have been assigned observation status, it can refuse to pay for the entire inpatient hospital stay. You probably won’t discover this until the hospital has submitted the claim and had it denied by the insurance company weeks or even months after your hospitalization.” (A)

Medicare Readmission Penalties.

“The ACA requires that inpatient prospective payment system hospitals with higher-than-expected readmissions rates will experience decreased Medicare payments for all Medicare discharges.

In fiscal year (FY) 2013, payment penalties were based on hospital readmissions rates within 30 days for heart attack, heart failure and pneumonia. In 2015, CMS will add readmissions for patients undergoing hip or knee replacement, and in 2016, readmissions for patients with chronic obstructive pulmonary disease. CMS is likely to add other measures in the future. (B)

Hospitalists.

“Practically speaking, increasing the number of physicians involved in a patient’s care creates opportunities for miscommunication and discoordination, particularly at admission and discharge. Gaps between community physicians and hospitalists may result in failures to follow up on test results and treatment recommendations. Moreover, the acute care focus of hospital medicine may not match the need of many patients for effective disease prevention and health promotion. Studies are under way to see whether these pitfalls can be mitigated, but I suspect the inherent tensions will remain fundamentally irresolvable.

From the patient’s point of view, it can be highly disconcerting to discover that the physician who knows you best will not even see you at your moment of greatest need — when you are in the hospital, facing serious illness or injury. Who is better equipped to abide by an incapacitated patient’s preferences or offer counseling on end-of-life care: a physician with whom the patient is well acquainted or one the patient has only just met? The patient–physician relationship is built largely on trust, and levels of trust are usually lower among strangers.” (C)

And….

So it’s just not narrow provider networks, out-of-network penalties, restricted drug formularies…

It’s also steps towards inventing health care reimbursement “derivatives” such as:

REFERENCE PRICING. Reference pricing serves as a reverse deductible. Rather than the patient paying up to a defined limit and then the insurer covering the remainder, the insurer pays up to a defined limit and the patient pays the remainder.

VALUE BASED INSURANCE. “The additional cost when patients choose procedures that research shows are unlikely to help their condition is a key element of ….value-based insurance, the premise of which is that a mix of financial carrots and sticks can steer patients toward medical services that will help them and away from ineffective or unnecessary ones.”

Hospitals and their employed physicians, including hospitalists, look to minimize the risk of reimbursement penalties and maximize reimbursement. PATIENT BEWARE!

(A) https://www.verywell.com/an-explanation-of-inpatient-v-observation-status-1738455

(B) http://www.aha.org/content/13/fs-readmissions.pdf

(C) August 10, 2016, at NEJM.org. (Richard Gunderman, M.D., Ph.D.)

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