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AHA: Observation Status Fears on the Rise

Cheryl Clark, for HealthLeaders Media, October 29, 2010

Hospitals are putting more patients into observation status for longer than 48 hours instead admitting them, in part out of fear of what happened at one hospital this month, the American Hospital Association says.

Observation status is a Medicare billing category for patients not sick enough to qualify for acute admission but too sick to be sent home.

Fear of Recovery Audit Contractor audits, or "post-payment reviews of inpatient claims" has been partly responsible, said Rick Pollack, AHA executive vice president, in a letter to Centers for Medicare & Medicaid Services chief operating officer Marilyn Tavenner on Wednesday.

"A related enforcement risk—prosecuted under the False Claims Act—also may affect the decision to place patients in outpatient observation rather than admit them as inpatients," he wrote.

"As recently as this month, the Department of Justice announced a hospital's agreement to pay more than $2 million to settle a qui tam suit alleging that, in order to receive additional Medicare reimbursement, the hospital admitted patients for inpatient stays when those patients should have been in observation beds."

Pollack did not name the hospital, but earlier this month DOJ officials announced  that El Centro Regional Medical Center, about 100 miles east of San Diego, paid $2.2 million to settle such federal accusations.

According to a DOJ statement on the case, "The government alleges that the 165-bed acute care hospital fraudulently inflated its charges to Medicare patients to obtain larger reimbursements from the federal health care program. The settlement covers claims submitted by the hospital for short inpatient admissions, usually of one day or less, when the services should have been billed on an outpatient 'observation' basis or as emergency room visits."

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