MedPAC Data Book singles out observation services

The Medicare Payment Advisory Commission (MedPAC) released its June 2009 Data Book this morning. It's no surprise that you'll find the volume of outpatient services per patient up (19% from 2002-2007) along with the number of patients enrolled in a Medicare Advantage plans (increasing to 10.5 million in 2009 from 9.4 million in 2008).

Initially, what's caught my eye is MedPAC devoting a section to observation services. Here's an excerpt of what they say (see pg. 113 of the book): 

• Hospitals use observation care to determine whether a patient should be hospitalized for inpatient care or sent home.
• Medicare began providing separate payments to hospitals for observation services on April 1, 2002. Previously, the observation services were packaged into the payments for the emergency room or clinic visits that occur with the observation care.
• The number of separately paid observation days has increased substantially from 65,000 in 2003 to 262,000 in 2007.