Medicare's hospital readmissions reduction program and the rise in observation stays

To evaluate whether Medicare's Hospital Readmissions Reduction Program (HRRP) is associated with increased observation stay use.

A nationally representative sample of fee-for-service Medicare claims, January 2009-September 2016.

Using a difference-in-difference (DID) design, we modeled changes in observation stays as a proportion of total hospitalizations, separately comparing the initial (acute myocardial infarction, pneumonia, heart failure) and subsequent (chronic obstructive pulmonary disease) target conditions with a control group of nontarget conditions. Each model used 3 time periods: baseline (15 months before program announcement), an intervening period between announcement and implementation, and a 2-year post-implementation period, with specific dates defined by HRRP policies.

We derived a 20% random sample of all hospitalizations for beneficiaries continuously enrolled for 12 months before hospitalization (N = 7,162,189).

Observation stays increased similarly for the initial HRRP target and nontarget conditions in the intervening period (0.01% points per month [95% CI -0.01, 0.3]). Post-implementation, observation stays increased significantly more for target versus nontarget conditions, but the difference is quite small (0.02% points per month [95% CI 0.002, 0.04]). Results for the COPD analysis were statistically insignificant in both policy periods.

The increase in observation stays is likely due to other factors, including audit activity and clinical advances.