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AHA: Observation Status Fears on the Rise

Cheryl Clark, for HealthLeaders Media, October 29, 2010

Because of that jump, the federal agency held a listening session to hear hospitals explain why that might be.  Many echoed concerns that fear of RAC audits and confusion about the rules were to blame.

Pollack said in his letter to the agency that "no one single factor is driving the trend." But in a recent survey of 500 hospital leaders indicated that hospitals are essentially stuck.

"Hospitals cannot discharge patients—whether from the inpatient or outpatient setting ? before they are medically ready," he wrote. "With inpatient admission criteria becoming more stringent and with more patients coming to hospital emergency departments, it is not surprising that more patients may require observation services, or that observation services need to be longer."

Additionally, he wrote, confusion about the rules seems to be part of the problem. "The requirement for reporting observation services has changed five times in the 10 years since the OPPS (Outpatient Prospective Payment System) was implemented."

And then there is the question over something called " 'Condition Code 44,' which governs when a hospital may change an inpatient admission to an outpatient encounter for billing purposes, likely affected inpatient/outpatient status determinations" However, it can only be done after a hospitalization utilization review committee decision and agreement with the treating physician, Pollack wrote.

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