Hospital Observation Units Fill Gaps, But Patients May Foot The Bill

KFF Health News | By Michelle Andrews

Published February 12, 2013 at 11:49 AM EST

About a third of U.S. hospitals have an observation unit, and most hospitals will eventually have one, the industry predicts.

If you find yourself in the emergency department and the doctor says he wants to keep you at the hospital for "observation," take heed. Depending on the hospital, observation can mean very different things for both your medical care and your wallet.

At its best, placing patients on observation allows hospital staff to closely monitor and intensively treat patients whose condition is unstable or unclear. They might have chest pain, for example, or need a little time to recover from a migraine or an asthma attack before being sent home.

This type of outpatient care is sometimes provided in a special observation unit with a dedicated team that follows clearly defined treatment protocols. About one third of hospitals have them. Within 24 hours they can generally determine whether a patient needs to be admitted to the hospital or can be sent home.

But other times patients who are kept for observation don't get special care – they are simply sent to a regular hospital bed and treated no differently than someone who's been admitted. In those cases, "observation" may be no more than a billing designation that allows hospitals to move patients out of crowded emergency departments and avoid potential insurance reimbursement problems for inappropriate admissions.

Those patients who are kept for observation sometimes find themselves with hefty bills, according to a recent article in the Annals of Emergency Medicine. That's because observation care is considered outpatient care and many insurance plans charge a la carte for every blood test, X-ray or scan. In contrast, patients may owe just a single copayment if they're admitted to the hospital, regardless of the specific services received.

"If you're not in a dedicated unit, you should be having your hand on your wallet and really pushing back hard if you're there longer than 12 hours," says Arthur Kellermann, a physician and senior researcher at Rand, a public policy research organization.

So if the emergency department doctor says he wants to keep you around for observation, it behooves you — or a family member — to ask a few questions:

Am I going to a separate "observation unit" or will I be placed on "observation status" somewhere else in the hospital?

Am I going to be an inpatient at the hospital or cared for as an outpatient? Even though you can't control how you're cared for by hospital staff or what you're billed, forewarned is forearmed.

"A lot of the patients that are very angry about this are those that are getting bills months later with no communication," says Christopher Baugh, the medical director of the emergency department observation unit at Brigham and Women's hospital in Boston. "These discussions need to happen in real time."