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Short Inpatient Stays Cost Three Times More than Observation


Despite the fact that short inpatient stays and observation stays at hospitals were mostly for the same reasons, Medicare paid three times more for short inpatient stays in 2012.

A short inpatient stay cost Medicare three times as much than it cost for an observation stay, according to a report from Health and Human Services.

The report is a result of the concerns Centers for Medicare and Medicaid (CMS) raised in regards to short inpatient stays. Among these concerns was that fact that services provided during short inpatient stays (which last less than two nights) should have been provided in the outpatient setting.

Last year, Medicare beneficiaries had 1.1 million short inpatient stays, with the top reason for a stay being chest pain, followed by coronary stent insertion and an irregular heartbeat.

According to the report from the HHS Office of Inspector General to CMS, Medicare paid nearly three times more for short inpatient stays than for an observation stay. And yet, the reasons for both stays were mostly the same.

On average, Medicare paid $5,142 per short inpatient stay compared to an average of $1,741 per observation stay. Beneficiaries also, typically, paid more for short inpatient stays than for observation stays when they were treated for the same reason.

According to the HHS report, while just 28% of stays were short inpatient stays, the use of them varied widely among hospitals. While some hospitals used short inpatients stays for less than 10% of their stays, other actually used them for more than 70% of total stays.

During observation and other outpatient stays, Medicare pays the hospital per service provided during the stay. The Outpatient Prospective Payment System reflects how much it costs to provide care for each individual beneficiary. However, payment for inpatient stays reflects the cost of caring for an average beneficiary. This doesn’t depend on the number of services provided, or even the length of the stay. Beneficiaries were responsible for an inpatient deductible of $1,156 in 2012.

Recently, CMS proposed that any stays lasting less than two nights (short inpatient stays) would be billed as outpatient stays.

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