Observation Care Services for Medicare Beneficiaries in Rural Hospitals: Policy Issues and Stakeholder Perspectives

Publication Date: October 20th, 2014
Publication Type(s): Policy Brief
Topic(s): , ,
Author(s): Gregg, W., Mills, S., Jonk, Y.

Publication Date: October 2014

This policy brief describes the findings of a qualitative study aimed to gain a greater understanding of the rural policy context surrounding the use of observation care services by Medicare beneficiaries from 2010 to 2013. This work is part of a larger study on rural observation care services; a companion policy brief describes the use of observation care services across levels of rurality by Medicare beneficiaries in Critical Access Hospitals, the demographics and health status of patients receiving these services, and the characteristics of their observation stays.

Key Findings:

  • Although Medicare rules for hospital outpatient observation care services are, by law, uniformly applied in urban and rural communities, differences in rural demography and service capacity can create greater hardships for rural beneficiaries.
  • Respondents reported that hospitals in their states experienced greater operating costs than Medicare allows for observation care services.
  • Respondents reported that hospitals in their states were experiencing significant costs resulting from denied claims and the preparation for and response to federal audit requests.
  • Hospitals, nursing homes, and patients need education on the status criteria, financial issues, and continuity-of-care issues related to the receipt of care while under observation.


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