An 83-year-old woman presents to the emergency department after a syncopal episode. After a normal ED evaluation, emergency department clinicians consider her to be at intermediate risk given her age and comorbidities. She spends the night in an ED observation unit and is discharged the next day after an uneventful night of telemetry. Ten weeks later, she is surprised to see the hospital bill, which includes a $215 charge for her chronic, routine home medications. There is no insurance coverage for this expense.
Use of observation, both as a billing status and a model of care, has been increasing steadily in recent years.1,2 Currently, about 2.1 percent of all ED visits result in observation care.3 Most hospitals with more than 50,000 annual visits have a dedicated unit to manage these patients, with ED staff managing their care.4 Observation patients stay an average of 15.4 hours,5 and most are on long-term home medications (eg, nearly half of patients aged 65 or older take five or more prescription medications).6 As a result, it is common for observation patients to receive doses of their home medications while in observation status.
In recent years, national conversations about health care reform have drawn attention from the lay press and, in turn, from patients to trends of high and unanticipated out-of-pocket costs (eg, the $18 baby aspirin).7 Observation is considered outpatient care. Hence, an observation stay invokes an outpatient insurance benefit. Medications considered by payers to be “self-administered medications,” typically patients’ home medications, may not be covered depending on many factors, such as primary and secondary insurance coverage. The most financially vulnerable patients (ie, those without insurance or with traditional Medicare only) are also the most likely to be responsible for medications at the chargemaster (ie, highest) rate at hospitals without a specific policy to address this issue. In 2013, the expense to Medicare patients for medications given during an average observation visit was $127, about a quarter of the total patient expense.8
This loophole in coverage has been previously identified as a policy failure, and advocacy groups and politicians are leading ongoing efforts to fix this.9-11 In the meantime, clinicians are faced with valid concerns from their patients about the risk of medication costs. This summer, we surveyed members of the ACEP Observation Section and Association of Academic Chairs of Emergency Medicine to better understand how our colleagues are approaching this challenging issue. We received completed surveys from members representing 28 institutions, and their responses highlight the pervasive nature of the problem and various strategies to address it (see Table 1).
Until a policy solution is implemented, providers are left to identify local solutions. Four main strategies are being utilized: do nothing; allow patients to take their home medications (if they happen to bring them in); bill at a reduced rate; or not bill at all. The second option introduces significant logistical barriers because the Joint Commission and the Centers for Medicare & Medicaid Services both require medication verification, a time-consuming activity. After verification, medications typically still require specific orders, nursing involvement in their administration and documentation, and secure storage. Billing at the lowest contract rate or at hospital cost is another option that could mitigate patient fears but still leaves some potential exposure for those patients on many or particularly costly medications, and it does not account for the fact that patients already paid for the medication when they filled the prescription. Providing medications at no charge shields patients while shifting responsibility entirely to the hospital.
Reducing the exposure to this problem is a challenge to which no obvious solution exists. Advocating for our patients to find a workable solution and building a consensus across emergency physicians and nurses, pharmacists, and hospital administrators is no simple task. You should know how this issue is addressed at your hospital, and if a policy isn’t in place, now is the time to start working on one. If patients have not yet asked you how an observation stay will affect their out-of-pocket costs, just wait—one will soon.
Dr. Natsui is a Harvard-affiliated emergency medicine resident at Brigham and Women’s Hospital/Massachusetts General Hospital, in Boston.
Dr. Baugh is director of observation medicine in the department of emergency medicine at Brigham and Women’s Hospital.
- Feng Z, Wright B, Mor V. Sharp rise in Medicare enrollees being held in hospitals for observation raises concerns about causes and consequences. Health Aff. 2012;31(6):1251-59.
- Ross MA, Hockenberry JM, Mutter R, et al. Protocol-driven emergency department observation units offer savings, shorter stays, and reduced admissions. Health Aff. 2013;32(12):2149-56.
- Wiler JL, Ross MA, Ginde AA. National study of emergency department observation services. Acad Emerg Med. 2011;18(9):959-65.
- Centers for Disease Control and Prevention. National hospital ambulatory medical care survey: 2008 emergency department summary tables. Table 26: Visit volume and metropolitan status of emergency department visits, by selected characteristics: United States 2008.
- Mace SE, Graff L, Mikhail M, et al. A national survey of observation units in the United States. Am J Emerg Med. 2003;21(7):529-33.
- National Center for Health Statistics, U.S. Department of Health and Human Services, Centers for Disease Control and Prevention. Health, United States, 2013: in brief.
- Jaffe S. $18 for a baby aspirin? Hospitals hike costs for everyday drugs for some patients. Kaiser Health News. April 30, 2012.
- Wright S. Memorandum report: hospitals’ use of observation stays and short inpatient stays for Medicare beneficiaries, OEI-02-12-00040. Department of Health and Human Services, Office of Inspector General. July 29, 2013.
- Baugh CW, Schuur JD. Observation care: high-value care or a cost-shifting loophole? N Engl J Med. 2013;369(4):302-5.
- United States Cong. HR 1179 and S 569. Improving access to Medicare coverage act of 2013. 113th Cong, 1st Sess.
- Center for Medicare Advocacy. Observation status & Bagnall v. Sebelius. Available at: http://www.medicareadvocacy.org/medicare-info/observation-status. Accessed October 23, 2014.