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Hospital 'Observation' Status Prompts Federal Class Action Suit

Cheryl Clark, for HealthLeaders Media, November 9, 2011

According to the lawsuit, however, the practice has gotten out of hand. A Medicare Payment Advisory Commission report 14 months ago says that between 2006 and 2008, the number of observation status claims increased by 22.4% "and the claims for periods of 48 hours or longer increased by 70.3%, which accounted for 8% of all claims in 2006 and 12% of all claims in 2008," according to the lawsuit.

The lawsuit does not make any claims that the patients were harmed, but in an interview, Deford said that because this practice is now so commonplace, many patients who should be receiving skilled nursing facility care are not getting it. "And as a consequence, some of them will suffer health consequences."

The advocacy groups' petition to the court also notes that the practice of placing patients in observation often violates the Medicare statute because whether a patient's hospital admission is appropriate is frequently determined by "commercially available screening tools, such as those from the McKesson Corporation (Interqual) and Milliman," the lawsuit says.

"These are proprietary systems that are not publicly available," the lawsuit says. Additionally, Medicare allows its utilization review committees "to reverse the decision of a beneficiary's physician to formally admit the beneficiary as an inpatient, and to retroactively place that beneficiary on observation status," a practice the lawsuit claims interferes with the practice of medicine in violation of the Medicare statute.

Retired physician Richard Bagnall, 91, who had a history of myocardial infarction, congestive heart failure, tremors, atrial fibrillation, and chronic kidney disease, is one plaintiff named in the lawsuit. He was taken to the emergency room of John Dempsey University of Connecticut Health Center after an episode of lightheadedness.

"He received IV infusion, EKG and X-ray and was started on an atrial fibrillation monitor," and was treated for hypertension.

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3 comments on "'Observation' Status Prompts Federal Class Action Suit"


Janis Jimmie (11/26/2011 at 11:19 PM)
It seems the agency that ensures oversight of care provided to elders continue to complicate the payment system that further complicates the provision of care. What seems to be created is more layers of bureaucracy that ultimately increases cost during the assurance of cost appropriate care!

Janice Noller, RHIA, CCS (11/9/2011 at 2:58 PM)
I agree with Dr. Hirsch - physicians and case managers try to work together to ensure fairness on behalf of the patient and the facility, but the regulations for Observation status are so convoluted and complex, no wonder this happens. The lawsuit may not go anywhere as the article states, but maybe (or not)CMS will open its eyes and simplify the regulations. There is a place for Observation in facilities - just make it easier to use and understand!

Ronald Hirsch, MD (11/9/2011 at 9:32 AM)
It was heartening to see that they chose to file the suit against HHS and not the hospitals. The rules for Observation are ambiguous at best and every day hard working case managers struggle to figure out the "correct" status for patients such as those represented in the lawsuit.