AHA: Observation Status Fears on the Rise

Said Laura Duffy, U.S. Attorney for the Southern District of California: "Our office will aggressively work with investigative partners to protect healthcare funds from fraud and abuse. Today's settlement demonstrates our commitment to holding health care providers who receive federal funds and knowingly defraud or overcharge federal health care programs accountable."

The allegations arose from a whistleblower lawsuit filed by former El Centro Regional employee, Pietro Ingrande, who is set to receive $375,000 as his share of the money recovered.

Additionally, the hospital had to agree to enter into a corporate integrity agreement with the Office of Inspector General.

"The costs of such suits in financial and human terms, as well as the damage that they do to a hospital's reputation, likely makes hospitals more wary about admitting patients for short inpatient stays," Pollack wrote.

Last month, many hospital officials voiced complaints that they are taking financial hits by placing patients in observation status. In observation, a patient gets the exact same level of care they would have received had they been admitted.  "Observation" status claims, however, are generally billed at one-third the rate of bills for patients who were officially admitted as inpatients.

According to a CMS chart, in the four calendar years from 2006 to 2009, "observation" status claims climbed from 828,353 to 1.131 million.  Especially noteworthy was the increase in claims for observation stays for patients kept for more than 48 hours, which more than tripled from 26,176 to 83,183.