Research

If physicians are unsure whether to discharge or admit emergency department patients, they can use “observation status” to perform additional assessments. For hospital patients, observation status may be indistinguishable from inpatient admission. Insurers like Medicare, however, charge observation patients a relatively higher share of hospital care costs and deny them coverage of post-acute care. This means observation patients that are never admitted can receive unexpected medical bills. In this paper, I study the implementation of state policies that require hospitals to notify patients of their observation status. I exploit staggered adoption in an event study framework to estimate the causal effect on the use, cost, and quality of observation care. I conclude that notice policies have little effect on observation status outcomes or decisions. Discharge patterns from observation are largely unchanged, and observation patients are no more likely to be admitted to the hospital after the information interventions. Though patients spend more time in observation as a result of the policy, there is no change in treatment intensity or financial liability. These findings suggest that low-touch, informational interventions provide insufficient protection against the risk of excessive out-of-pocket costs following observation.

Download a PDF of all US states with observation notice policies.

Direct care workers play a critical role in the long-term care industry. This is especially true in nursing home settings, where the number and type of direct care workers is predictive of care quality. Staffing information used to be self-reported by nursing home administrators, but beginning in 2016, facilities were required to submit this information electronically using payroll and other auditable sources. When the data in the two systems were compared, the majority of nursing homes showed higher self-reported than verifiable staffing levels, and media outlets decried these discrepancies as overreporting. In this paper, I leverage facility-level variation in this staffing ‘gap’ to explore the causal effect of reputational shocks on nursing home outcomes. I find that facilities with larger gaps for direct care workers exhibit greater increases in staffing levels after the initial shock. This staffing response does not vary along facility or market dimensions or influence residents’ quality of care.