Faced with financial penalties from Medicare if they run patients in and out too frequently, many hospitals around the country are holding off admitting many of them in the first place.
Instead, they're holding more patients for "observation" -- several hundred thousand more in 2009 than two years before. Many patients are kept in the limbo ward for 72 hours or longer without being formally admitted to the hospital.
Since they're still physically in a hospital bed, many patients and their families don't realize that they're considered "outpatients" and as a result are likely to face higher costs for care they get - and often no coverage for follow-up care in a nursing home.
The tactic has outraged many patients and resulted in a lawsuit by advocacy groups.
The change has come as Medicare implements tougher policies aimed at preventing frequent, repeat hospitalizations for the same medical problems, a pattern that costs the federal health system for the elderly and disabled more than $15 billion a year.
Medicare is already auditing hospitals to see how many revolving-door patients there are for certain conditions like heart failure, heart attack and pneumonia.. It will soon start imposing penalties amounting to 1 to 3 percent of the facility's total Medicare payment for the year if numbers aren't held down.
Medicare policymakers intended the stick to induce hospital officials to insist on better diagnosis and care by medical staff, better coordination of care when patients go home and making sure they see outpatient doctors quickly after discharge.
But around the country, and particularly in the Midwest and South, the number of patients held for observation rose by more than 25 percent as hospitals tried to hold down first-time admissions that might lead to readmissions, according to data reviewed by the Centers for Medicare and Medicaid Services last year and last month by researchers at Brown University.
At Brown, Zhanalian Feng, an assistant professor of health services, policy and practice and colleagues analyzed records of 29 million patients with traditional Medicare coverage between 2007 and 2009.
They found that observation stays rose to more than 1 million in 2009 (2.9 per 1000 beneficiaries), up from 815,000 (2.3 per 1000) in 2007. At the same time, inpatient admissions fell to 22.5 per 1000 patients in 2009, down from 23.9 per 1000 in 2007. The results were published in the journal Health Affairs in early June.
There was a similar surge of observation stays in the 1990s, with many hospitals stacking patients in emergency-department halls, often for days, to get around what administrators felt were overly tight reimbursement rates for inpatient care. A new bundling system for hospital care and new rules for emergency rooms largely stopped that practice.
The more recent trend has been for hospitals to convert floors of unneeded inpatient beds to observation wards, where many tests and even treatments can move ahead without patients officially being "in" the hospital.
The practice may not be physically harming patients -- observation rooms don't look or function much differently than acute-care rooms -- but collectively it's costing Medicare patients millions of dollars in extra hospital expenses.
That's because Medicare requires patients to have a "qualifying hospital stay" -- admitted as an inpatient --- before hospitalization insurance kicks in. Many patients are finding themselves short a day or more of having visits covered, something they don't know until they get a bill. They also find themselves facing higher co-pays for services in the hospital as outpatients and without coverage for any follow-up care in skilled nursing facilities if they haven't been in the hospital first.
The trend has outraged seniors and advocacy groups around the country, who claimed the outpatient stays were increasing and filed a class-action lawsuit to against the government last fall to stop to stop the shifts.
Officials at the non-profit Center for Medicare Advocacy, which helped prepare the suit with the National Senior Citizens Law Center, say hospitals have been able to maneuver around vague rules for observation and typically don't give patients written notice of their status or that they're obligated to pay out-of-pocket for services that would be covered if they were inpatients.