SCENARIO 1
You are a hospitalist admitting a Medicare patient with chest pain. Your index of suspicion is high that this patient could be having a cardiac event. Based on your clinical judgment, you initially classify the patient as an inpatient admission. A few minutes later, you are paged by integrated case management who informs you the patient “does not meet criteria” for inpatient admission and must therefore be admitted under observation status. You are busy with other admissions and you have no idea what “criteria” they are talking about, so you meekly nod your head and agree to make the changes as instructed.

How will changing the patient to inpatient status impact your reimbursement?

1. No change.
2. My reimbursement will go up.
3. My reimbursement will go down.

The correct answer is number #3. Most doctors do not realize that starting in 2010, the reimbursement for all levels of care for initial observation care services has decreased significantly compared to the reimbursement for initial inpatient care. Prior to this year, the reimbursement for both types of services was essentially identical across the board. This is no longer the case.

For example, in Sarasota, Florida (the home of E/M University), the Medicare allowable charge for a level three observation admission H&P is now $160.11. On the other hand, the fee for a level three inpatient H&P is $188.63. It is interesting to note that the documentation requirements for these visits are identical. This means that you get paid about 18% less for the same cognitive labor if you assign the patient observation status as opposed to inpatient status.