Observation Versus Inpatient Stay for Heart Failure: Is It Semantics?

M ore than 6 million Americans have heart failure (HF), and the prevalence continues to increase. In 2010, there were 1 million hospitalizations for acute decompensated HF, with most in patients aged ≥65 years. Accordingly, the healthcare costs associated with HF hospitalizations have been increasing exponentially. Total medical expenditure for HF was $20.9 billion in 2012 and is expected to exceed $50 billion by 2030. Intuitively, HF hospitalizations account for a significant majority of this expenditure. In an attempt to decrease the soaring medical costs, much attention has been focused on decreasing HF admissions and readmissions, including by the US Centers for Medicare and Medicaid Services. In this context, debate continues about the implications of observation stays versus inpatient stays for HF. Medicare’s original definition of observation status entailed activities necessary to evaluate the outpatient’s condition or determine the need for hospitalization as an inpatient. Furthermore, they were to represent a well-defined set of specific clinically appropriate services, which, in most cases, were to last <24 hours and only in rare and exceptional cases >48 hours. The ultimate decision to hospitalize a patient as inpatient or observe a patient was left to the physician’s judgement. In practice, there has been great variability in the use of observation status versus inpatient status across hospitals and physicians, and variability in the duration of stay. There was also variability among hospitals as to where the patients were observed or the level of services provided. For example, in some hospitals, there were separate observation units, whereas in other hospitals, observation patient beds were located on routine inpatient units. In August 2013, the US Centers for Medicare and Medicaid Services announced the fiscal year 2014 hospital Inpatient Prospective Payment System Final Rule. A 2midnight benchmark was to be used to determine the status of outpatient (observation) or inpatient stay. This meant that patients who were expected by a clinical practitioner with knowledge of the case to need hospitalization spanning ≥2 midnights should be hospitalized as inpatients, whereas those expected to span <2 midnights were to be under observation status, with few exceptions. More important, although the quality of care a patient receives may or may not differ much between inpatient and observation stays, the status designation significantly affects the flow of medical revenue and reimbursement. In general, services under inpatient status fall under Medicare Part A, whereas those under observation status fall under Medicare Part B, as outpatient services. For hospitals, inpatient status yields higher reimbursement compared with observation; however, inappropriate labeling of any observation status as hospitalization, determined by audit (often by US Centers for Medicare and Medicaid Services contractors), may result in loss of hospital reimbursement and has been a major issue of contention. Moreover, there are significant differences in the beneficiary (patient) liability between the 2 scenarios. Beneficiaries under the inpatient status usually need to pay a deductible under Medicare Part A ($1340 in 2018) for services during the inpatient hospitalization and readmission within 60 days. On the other hand, beneficiaries under observation status are subject toMedicare Part B deductible ($183 in 2018) in addition to a 20% copay on every service provided during the observation stay, with no cumulative limit. In addition, hospital pharmacy charges for Medicare patients hospitalized as inpatients are covered under Medicare Part A; however, for patients hospitalized as outpatients (observation), many medications are not covered by Medicare Part B. In many cases, out-of-pocket costs for patients may be much higher for observation compared with inpatient status. Furthermore, in response to high cost and poor outcomes related to the high rate of hospital readmissions for certain conditions, including HF, the Affordable Care Act proposed The opinions expressed in this article are not necessarily those of the editors or of the American Heart Association. From the Section of Cardiology, Department of Medicine, Baylor College of Medicine, Houston, TX (U.K., A.D.); and Section of Cardiology, Michael E. DeBakey Veteran’s Affairs Medical Center, Houston, TX (A.D.). Correspondence to: Anita Deswal, MD, MPH, Section of Cardiology, Michael E. DeBakey Veteran’s Affairs Medical Center (111B), 2002 Holcombe Blvd, Houston, TX 77030. E-mail: [email protected] J Am Heart Assoc. 2018;7:e008263. DOI: 10.1161/JAHA.117.008263. a 2018 The Authors. Published on behalf of the American Heart Association, Inc., by Wiley. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.