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Setting a Rigid Time Limit Limits Physicians
CHA response to California Healthline

Observation services are post-stabilization services that include ongoing short-term treatment, assessment and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or are able to be discharged from the hospital.

Two bills introduced in the California Legislature this year (SB 1238, Hernandez and SB 1269, Beall) aim to limit the amount of time a patient could remain under observation. Specifically, these bills would require a patient either to be discharged or admitted as an in-patient after no more than 24 hours. Setting a rigid time limit on how long a patient may remain in observation (as an outpatient) limits a physician’s ability to determine if an inpatient admission is medically necessary.

A state law requiring either discharge or an inpatient admission after only 24 hours of observation would further confuse patients, as it is in conflict with a new federal Medicare policy related to criteria for inpatient admissions. Medicare’s two-midnight rule instructs physicians that a Medicare inpatient admission is generally appropriate if there is a reasonable expectation that the patient will have a stay that crosses two midnights — not 24 hours. The physician decision to admit must be supported by this reasonable expectation of a stay that crosses two midnights, and that may or may not overlap with a 24-hour clock.

Unfortunately, if a Medicare patient is admitted after 24 hours and that stay does not cross two midnights, the admission will be denied and the hospital will not be paid. SB 1238 allows for certain scenarios when a hospital may keep a patient in observation beyond 24 hours. However, implementing two separate admission policies within the hospital would mean that two patients with the same clinical criteria would be treated differently based solely on their insurance coverage. Further, many commercial insurance companies often follow Medicare payment policy, and we are beginning to see this unfold with observation services.

A state law requiring discharge or an inpatient admission after 24 hours of observation care can have unintended consequences. Specifically, a patient may either be discharged prematurely based on the 24 hour window expiring or, if the patient is reclassified from observation to inpatient, it would result in California hospitals forfeiting millions of dollars in Medicare payments for inpatient admissions that Medicare deems inappropriate.

This commentary was in response to an article featured in California Healthline.

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