The number of hospitals that “observe” rather than admit is growing, research shows

Although the numbers vary by state and hospital, data collected by Brown University researchers indicated that between 2007 and 2009, there was a 34 percent increase in the number of Medicare beneficiaries admitted for observation rather than inpatient hospitalization.

To transfer to a skilled nursing facility from the hospital, the Medicare beneficiary must be discharged as an inpatient. However, if the beneficiary was admitted to the hospital for observation, Medicare may deny access to skilled nursing care upon discharge.

Data suggest that physicians and hospitals are using this “loophole” to avoid unfavorable Medicare audits.

This research is available in the June issue of Health Affairs.