Hospital financing affects admission and discharge decisions
Financial incentives may be behind a decline in the average hospital stay in the United States — now down to around 4.5 days from 7.3 days in 1980 — according to a January 4, 2016 New York Times ” Upshot” story. Beginning in the 1980s, Medicare began paying hospitals a predetermined rate based on a patient’s diagnosis rather than reimbursing all costs, which shifted costs from Medicare to hospitals. That provided an incentive for hospitals to keep costs down by discharging patients earlier.
But it can be a financial gamble for hospitals. Patients released too soon may quickly wind up back in the emergency room, and Medicare financially penalizes hospitals with too-high readmissions rates. One way hospitals are getting around this is by keeping returning patients under “observation status,” which is not included in readmissions statistics.
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