Pa. House panel advances bill on 'observation stays'

Posted: March 14, 2014

A Pennsylvania House committee passed a bill Wednesday that would require hospitals to warn patients that a stay of up to 48 hours could be deemed an outpatient visit by Medicare or other insurers - sticking the patient with a higher co-pay.

While patients pay more, the reimbursement that hospitals are paid for these stays - known as "observation stays" - is about one-third of what they get for regular inpatient stays.

"There were patients dealing with unexpected bills long after they thought that the admission had been covered," State Rep. Tim Hennessey (R., Chester), chairman of the House Aging and Older Adult Services Committee, said Wednesday.

The measure, passed unanimously, "directs the hospitals to tell you as the patient, or me as your father, if you're a minor, that this could be an issue in the future regardless of how we classify" the hospital stay, Hennessey said.

Speaking from the hospital's perspective, he said: "We might classify you as an admission, and they might come back 10 months from now and say we overclassified you and you were there under observation."

A representative of the hospital industry said the bill was a good step toward greater transparency in patient billing.

"Our concern is that it doesn't quite address the complexities of observation and the differences between observation and inpatient services," said Pamela Clarke, vice president, health care finance and managed care, at the Delaware Valley Healthcare Council.

Since January 2010, the number of observation stays at Philadelphia-area hospitals has increased 38 percent, but the growth rate has slowed in recent quarters, Clarke said.

Observation status is a gray area, she said, because from a reimbursement perspective, it is treated like an outpatient visit, "but the services delivered for observation are more like inpatient and, in fact, sometimes more intensive than inpatient."

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