Déjà Voodoo: Readmission or Observation after the Affordable Care Act

Published - Written by Rena Xu

58The hospital where I work has one of the busiest emergency departments in Boston. Patients come in with everything you might imagine, from heart attacks to rabbit bites. A number of these patients, after being evaluated and treated, can be discharged home from the emergency department; others need to be admitted for further management. For still others, the plan isn’t immediately clear. Let’s say a patient has pain from a kidney stone. Can he try to pass the stone, or does he need intravenous medications and surgery? Such a patient might benefit from a short period of observation, in a so-called observation unit. If his pain improves, he could potentially return home, avoiding an admission.

While there are many appropriate uses for an observation unit, critics have raised the possibility that hospitals may be preferentially observing patients, rather than admitting them, to make their readmission rates appear more favorable. The Affordable Care Act, which was passed in 2010, introduced an initiative to reduce costly readmissions for patients recently discharged from the hospital. The Hospital Readmissions Reduction Program targeted a handful of “high-yield” conditions — heart failure, acute myocardial infarction, pneumonia, chronic obstructive pulmonary disease, and knee and hip replacements. Readmission rates, which had begun to decline before the legislation went into effect, declined at an even greater pace afterward. Was this because hospitals were using observation units to “game” the system?

To test this theory, researchers from the Department of Health and Human Services and Brigham and Women’s Hospital in Boston looked at how readmission rates and the use of observation units changed after the passage of the ACA, both for targeted and non-targeted conditions. They analyzed data from more than 3,000 hospitals across the country, over three different time intervals: 2007 to April 2010, when the ACA was passed; 2010 to 2012, as the Hospital Readmissions Reduction Program was being implemented; and 2012 to 2015.

The data, published recently in NEJM, offered several notable insights. Readmission rates fell most dramatically in the spring of 2010, shortly after the ACA was passed. They declined further over the longer term (2012-15), but at a slower rate. And while readmissions decreased for both targeted and non-targeted conditions after the ACA, the slope of decline was greater for the conditions that were targeted.

Meanwhile, the use of observation units increased steadily over the entire study period, from 2007 to 2015. This was true for both targeted and non-targeted conditions. There was not a noticeable uptick in use, for either group of conditions, associated with the passage of the ACA. Nor was there a correlation between changes in the use of observation units and changes in readmission rates (P=0.07).

“It seems likely that the upward trend in observation-service use may be attributable to factors that are largely unrelated to the Hospital Readmissions Reduction Program, such as confusion over whether an inpatient stay would be deemed inappropriate by Medicare recovery audit contractors,” the authors remarked.

They concluded, “Our analysis does not support the hypothesis that increases in observation stays can account in any important way for the reduction in readmissions.”

Trends of association, of course, cannot establish causality. Changes in practice may reflect concurrent changes in insurance policies, coverage patterns, and hospital workflow. Furthermore, readmission rates are only one metric by which to measure quality of care and cost effectiveness. While they fall outside the scope of this paper, trends in hospital length-of-stay, overall spending, and long-term patient outcomes are also important to consider when interpreting these findings and assessing the influence of policy on practice.

And while the growing use of observation units remains incompletely understood, to a physician, their value is apparent. When I am reluctant to send a patient home, observation units offer a middle ground between discharge and admission. Their rising popularity may simply reflect the need for more nuanced disposition options as medicine becomes increasingly complex.

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Dr. Xu is a resident physician in urologic surgery at Massachusetts General Hospital. She received her MD and MBA degrees from Harvard. She has written for The New Yorker, The Atlantic, and NEJM. She is on Twitter @xrayunicorn. 

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