Patient financial responsibility for observation care

BACKGROUND As observation care grows, Medicare beneficiaries are increasingly likely to revisit observation care instead of being readmitted. This trend has potential financial implications for Medicare beneficiaries because observation care—although typically hospital based—is classified as an outpatient service. Beneficiaries who are readmitted pay the inpatient deductible only once per benefit period. In contrast, beneficiaries who have multiple care episodes under observations status are subject to coinsurance at every stay and could accrue higher cumulative costs. OBJECTIVES We were interested in answering the question: Do Medicare beneficiaries who revisit observation care pay more than they would have had they been readmitted? DESIGN We used a 20% sample of the Medicare Outpatient Standard Analytic File (2010–2012) to determine the total cumulative financial liability for Medicare beneficiaries who revisit observation care multiple times within a 60‐day period. PARTICIPANTS Participants were fee‐for‐service Medicare beneficiaries who had Part A and Part B coverage for a full calendar year (or until death) during the study period. MEASUREMENTS Our primary measure was beneficiary financial responsibility for facilities fees. RESULTS On average, beneficiaries with multiple observation stays in a 60‐day period had a cumulative financial liability of $947.40 (803.62), which is significantly lower than the $1100 inpatient deductible ( P < 0.01). However, 26.6% of these beneficiaries had a cumulative financial liability that exceeded the inpatient deductible. CONCLUSIONS More than a quarter of Medicare beneficiaries with multiple observation stays in a 60‐day time period have a higher financial liability than they would have had under Part A benefits. Journal of Hospital Medicine 2015;10:718–723. © 2015 Society of Hospital Medicine