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As CMS makes another policy change, policy makers distinguish between different forms of care.

As observation care continues to draw fire from critics who charge that the designation ends up costing hospitals money while also sticking patients with exorbitant fees, the medical directors of dedicated observation units counter that the kind of care delivered by their specialized units actually saves money and gets patients out of the hospital sooner. They note that the problem is that only about one-third of hospitals actually have dedicated observation units, so patients placed on observation typically wind up in inpatient beds, where they may only be evaluated once a day. CMS has just released a new policy rule on observation that should help patients avoid excessive charges, but many experts would like to see the agency take steps to incentivize the kind of quality care that is delivered in dedicated units. The new CMS rule for 2014 caps observation stays at 48 hours. Patients who remain in the hospital beyond this point become inpatients, as long as they meet inpatient criteria. Proponents of observation care contend that the average length-of-stay in a dedicated observation unit is just 15 hours--typically much shorter than the LOS of patients who are placed on observation in inpatient beds. Care in a dedicated observation unit is generally driven by protocol in an emergency medicine environment where there is continuous rounding. Discharges can occur at any time of the day or night. Experts note that observation patients account for the largest portion of both misdiagnoses and malpractice lawsuits stemming from emergency settings.