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4. American College of
Emergency Physicians. Clinical
and Practice Management.
FAQ. www.acep.org/
content.aspx?id=30486
(Accessed February 4, 2016).
5. American College of
Emergency Physicians. Clinical
and Practice Management.
FAQ. www.acep.org/
content.aspx?id=30486
(Accessed February 4, 2016).
6. Highlights of the 2012 OPPS
Final Rule. www.acep.org/
content.aspx?id=35402
(Accessed February 4, 2016).
7. Highlights of the 2012 OPPS
Final Rule. www.acep.org/
content.aspx?id=35402
(Accessed February 4, 2016).
8. American College of
Emergency Physicians. Clinical
and Practice Management.
FAQ. www.acep.org/
content.aspx?id=30486
(Accessed February 4, 2016).
9. Centers for Medicare and
Medicaid Services. Answers.
https://questions.cms.hhs.gov/
app/answers/detail/a_id/9973/
kw/9973 (Accessed February 4,
2016).
10. American College of
Emergency Physicians. Clinical
and Practice Management.
FAQ. www.acep.org/
content.aspx?id=30486
(Accessed February 4, 2016).
11. Department of Health and
Human Services, Centers for
Medicare and Medicaid
Services, 42 CFR Parts 422 and
480, Medicare Program:
Hospital Inpatient Value-Based
Purchasing Program. Federal
Register/Vol.76, No. 88/Friday,
May 6, 2001/ Rules and
Regulations.
Observation Services in the Eyes of the Payers
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21:32:19
Subpart VD
Chapter
70
Financial – The Business Of Observation Medicine
The Business of Observation Medicine
Sandra Sieck, RN, MBA
Introduction
In an era in which health care costs appear to be
unmanageable and quality of care has not been
consistently attained, the delivery of health care
services is in need of a total redesign.
1
The practice models of the last century are no longer
adequate to ensure quality care at an affordable
price. On a smaller scale, the observation unit
(OU) represents a piece of the transformation of
the delivery model to more efficiently and costeffectively bridge the outpatient and inpatient
care for serious medical co nditions. But as with
many advances in medicine, the OU has taken on
different forms in its evolution and now finds
itself requiring refinement in how best to design
its structure and operation into an optimal business model to meet quality and financial performance measures.
The Need for a Business Model
Traditionally, patients who required more than a
short course of treatment in the emergency department (ED) were admitted to the acute hospital
setting. In an era when reimbursements favored
quantity of service, this posed no adverse financial
impact to the hospital. In fact, the opposite was true.
In a cost constrained, diagnosis-related group
(DRG)-based or capitated environment, utilization
of high-cost inpatient services for every patient no
longer is associated with favorable financial payments. This result is a mismatch between services
required for optimal outcomes and intensity of
effort provided – in other words wasteful overutilization. The mantra of medicine in the current
environment is to have the “right patient” in the
“right place” at the “right time.”
While medicine has often been averse to
thinking in terms of operating under a business
model, it is imperative to do so these days.
A business model for health care services must
combine financial viability with delivery of a quality product. Early studies showed that use of an
OU can result in fewer unnecessary hospital
admissions with roughly only 20–25% of patients
needing to be admitted following OU status care.
2
The OU has been associated with reduced hospital
readmission rates, increased ED discharges,
shorter length of stay (LOS), better clinical outcomes, and increased patient satisfaction.
3,4,5,6,7
Cost savings have also been demonstrated for
certain medical conditions, particularly chest
pain.
8
An OU can contribute to profit margins
by increasing revenues for select patient conditions while reducing costs through more efficient
use of resources.
9
Revenues may be increased by
avoiding an inpatient admission, particularly in
conditions for which reimbursement may not
fully cover costs of care, such as in certain DRGbased or capitat ed situations. For instance, Medicare will reimburse for the OU stay and separately
cover most performed tests in addition. An OU
stay can thus turn what would otherwise be a loss
for the hospital into a profitable stay.
First Steps
A successful OU is defined as one that provides
efficient, quality, and cost-effective care for those
conditions requiring short-term but focused
treatment. The facility must strategically determine what steps are required to create such a unit.
The design of the unit operationally requires collaboration between the medical staff and administrative departments in order to be successful. It
requires fully committed leadershi p, both administrative and medical.
A facility must provide a sound argument
justifying creation of an OU. While studies show
clinical and financial benefits of an OU in selected
settings and conditions, each facility must analyze
its own data to determine how best to operationalize an OU to ensure maxima l benefit.
075
21:32:35
The first critical step to creating a successful
OU is to determine if an OU is a viable and
feasible option based on the current patient mix
and volume. Forecasting involves performing an
analysis of the facility’s current ED and acute care
utilization and estimating the volume and diagnostic types of cases that would be routed to the
OU. Anticipation of future trends in usage and
patient mix is part of the strategic development
process. An OU in a high-volume facility may
evolve quickly to a fully operational OU, whereas
a small low-volume facility may not find that an
OU is an economically sound approach.
The majority of costs associated with patients
admitted to acute care are related to admission
time.
10
If roughly half of patients admitted with
chest pain do not have acute coronary syndrome
(ACS) and could have been safely evaluated in an
OU, substantial savings would result. However,
such savings might not be realized for all facilities.
For instance, in some countries where hospital
costs are not as high as in the United States,
savings from preventing an unnecessary admission could be substantially less.
11
This is why each
facility contemplating establishing or expanding
an OU must analyze its own data.
Financial projections of revenue and cost can
be made based on current estimates of patient
mix, reimbursements speci fic to the OU, and
costs of running the unit. Fixed unit cost estimates are related to space, dedicated equipment,
and staffing needs. Nursing needs are generally
less for the OU than the acute level as a nurse can
care for more patients in the OU. (See Chapters 1 –
Clinical, 6 – Staffing and 7 – Nursing.) Variable
cost estimates for supplies related to care, medications, and testing also impact overall cost
projections.
Merging Quality and Finances
Most acute care admissions follow a zigzag
approach of delivering care/services from the
point of entry to discharge. (See Figure 70.1.)
A patient’s ‘flow’ through the hospital care system
is not linear but often quite disconnected through
various diagnostic or therapeutic care units, each
of which functions more as an independent unit
than as an integrated part of a cohesive strategy.
Although the zigzag model can eventually result
in appropriate care, it is generally an inefficient
and resource wasteful process.
FIGURE 70.1 The Zig-Zag Model
of Care
2008 Update: Sieck S. Cost
effectiveness of chest pain units. Cardiol Clin
2005; 23(4):598.
The Business of Observation Medicine
075
21:32:35
Facilities must design a methodology to merge
quality of care and finance to ensure long-term
viability. The Y-Model approach affords a blueprint for this merger.
12
The Y-Model sets up the
overall design of OU operations by focusing on
the desired end points of quality and costs. (See
Figure 70.2.) In the business environment, the
optimal route to attaining a quality end product
at the maximal contribution margin is to streamline the overall process and reduce variances in
FIGURE 70.2 Quality and Cost Focus of the Y-Model2008 Update: Sieck S. Cost effectivenss of chest pain units. Cardiol Clin 2005;23(4):597.
*POE = Point of Entry
Sandra Sieck
075
21:32:35
the route of production. Similarly in medicine,
focusing on the methods to ensure a quality end
result for a patient requires adherence to
evidence-based evaluations and treatments performed expeditiously and efficiently through a
streamlined process.
The Y-Model involves placing proper sequen-
cing of services ‘up front’ at the point of entry into
the medical care track. Seamless integration
between operating care units is the essential core
of the Y-Model. The successfully designed OU
focuses on front-end compliance toward a subsequent tailored treatment pathway. Randomness of
care, and therefore, unnecessary resource consumption, is essentially eliminated from the path.
The basic concept of an OU meets the methodology espoused in the Y-Model. Indeed, the OU
may represent the initial redesign in acute health
care delivery that will ultimately transform the
entire system into a more efficient process.
Operational Elements to Maximize
Efficiencies in the OU
Once a strategic plan is in place, the next phase in
setting up an OU is to obtain solid support from
the hospital to provide the infrastructure,
resources, and strong leadership. Each implementation step requires a strategy focused on tailored
treatment and efficient resource utilization.
Regardless of where in the facility the OU is
housed, the facility must be fully committed to
the operation of the unit on par with other
units within the organization. The OU cannot
be deemed perfunctory or expendable.
Additionally, a clear-cut path to and through
the OU must be developed and adhered to.
While an OU can be located anywhere within
the facility and even be virtual in nature, the
OU is bes t located in a known and defined
physical place to experience optimal financial
efficiencies. The physical layout, design, flow,
and equipment (or proximity to ancillary
services) should also foster expedient flow.
(See Chapter 5 Observation Unit Design.)
Time/flow studies may be an integral part of
the planning process.
The ideal OU requires a dedicated staff that
has been trained in OU require ments and
policy. Physicians could be emergency
physicians, internists, hospitalists, or critical
care specialists. Mid-level practitioners such as
nurse practitioner (NP) or physician assistant
(PA) are often included on staff. Their use
may help financial integrity of the unit while
supporting the mandates of the CMS new
outpatient (OP) quality and structural
measures. Nursing ratios should allow for
frequent monitoring of patient status and
treatment interventions. The OU lends an
opportune time to integrat e patient education
into a teachable moment. (See Chapters 6
Staffing and 7 Nursing.)
Ancillary testing can be either dedicated to the
OU or shared with other departments, such as
the ED. The most efficient is a dedicated set of
laboratory and imaging departments.
However, this may not always be financially
feasible. If such services are shared, the OU
should at least have dedicated time slots
throughout a 24-hour period based on the
forecasted data analysis.
Patients can be referred to OU from the ED or
directly from a physician’s office. Efficient ED
assessment to route to the OU requires
education in the ED for such transfer to
higher level of service.
Medical Necessity Review and
Disease Specific Issues
Acceptable OU criteria should be created and
implemented. (See Chapter 82 Clinical
Protocols.)
Assessment should be made by the OU
physician to verify criteria are met. Either
internal criteria can be developed or external
criteria such as InterQual or Milliman &
Robertson guidelines can be used.
Case managers placed in the ED 24/7 can lend
assistance to the physician to ensure
appropriate patient status. In the initial stages
of establishing a new OU, the unit can focus
on standard medical conditions that have been
deemed appropriate for OU such as chest
pain, heart failure, asthma, GI bleed, syncope,
dehydration, some infections, etc.
As the unit establishes itself and maintains
efficiencies and improved clinical outcomes,
more complex conditions should be considered.
Clear placement (inclusion/exclusion) criteria,
protocols, and clinical pathways are an
The Business of Observation Medicine
075
21:32:35
important piece of an efficient OU. Criteria
can be based on national guidelines or
developed locally per diagnostic condition.
Pre-printed orders assist with facilitating
timely assessments and interventions. (See
Chapters 89–96.) Because the OU focuses on
patients needing 24–48 hours of care, all
actions in the OU mu st be considere d time-
sensitive.
Maximal reimbursement, especially for
Medicare patients, requires pristine
documentation of care, often on an hourly
basis. A physician order necessitates
documentation of the continuation of care.
The OU should have a relatively
straightforward, but sufficiently detailed
documentation protocol. An electronic health
record (EHR) is ideal but not required.
Documentation provisions for outpatient
(OP) measures, coding and billing, and unit
validation requires staff education to ensure
that optimal outcomes will be attained.
Upfront Case Management (CM) and
Discharge Planning techniques should be
instituted upon first patient contact rather
than midstream or at the back end. Significant
time is lost if waiting until the patient’s care
course is hours into the process to only
discover the patient status is incorrect
according to criteria. This back-end CM
process can be costly for the patient,
physician, and the hospital. A well-defined
coordinated care model will reduce risk.
Operational Oversight
Once a functional and efficient structural design
has been developed and implemented, continued
operational oversight of the processes is necessary
to align strategic goals with outcomes. Ongoing
data analysis of outcomes and costs of operation,
near real time measures if possible, is important
to identify trends and make any adjustments to
the OU operation.
Monitor clinical outcomes related to the
diagnostic mix of the OU. Include measures
involved in any pay for performance activities
or accreditation parameters.
Patient satisfaction is one component of
outcomes that is being measured by Medicare
and health plans. Although not directly related
to quality of care, it is a key measure in many
pay-for-performance programs and also
impacts public relations for the facility.
Financial outcomes and fixed and variable
costs of operation, patient volume, and trends
in utilization should be assessed periodically.
Coding oversight is essential for maximal
reimbursements. Adherence to payer
requirements and correction of any missteps
must be implemented expeditiously.
Quality Improvement initiatives should be
aligned within the OU. (See Chapter 9 Me trics
and Performance.)
The financial analysis should be used to
optimize contractual reimbursements for
capitated and noncapitated clients based on
actuarial forecasting when possible.
Future Trends
Two major emerging trends occurring in the
United States will alter reimbursements for providers. The first is value-based purchasing (VBP).
Medicare reimbursement has previously rewarded
the quantity of health care services provided but is
quickly moving toward a patient-centric value
proposition that will reward providers for delivering high quality efficient care.
13
As of October
2012 (FY2013), the VBP payment methodology
focuses on hospitals through the Medicare Inpatient Prospective Payment System. Facilities can
“earn back” the payment reductions through
meeting targets for selected conditions and predetermined performance measures. If this program
shows promise, it is likely that other payers will
begin to pay for value. A well-designed OU
should be integrated into the process improvement objectives to assist in meeting these goals.
The second shift is the development of
Accountable Care Organizat ions (ACO).
14
An
ACO integrates physicians, facilities, and other
health care providers with the intent of providing
high quality collaboratively efficient care. ACO
participants will share in any resultant cost
savings. The positive impact of an OU in an
ACO is the reduction in unnecessary admissions,
reduced LOS, decreased readmission rate, and
reduced subsequent ED visits.
15
Thus, an OU is
poised to play an important role within the evolving ACO concept. A dedicated outpatient OU by
design is meeting the needs of placing patients in
a low-rent district. (See Chapter 20 Accountability
Care Organizations.)
Sandra Sieck
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21:32:35
Conclusion
While the future of the health care reimbursement system may be difficult to predict, the OU
appears to be here to stay. The OU alig ns with the
ever-increasing need to develop more efficient
strategies to deliver the best individualized care
in the right care setting to attain optimal outcomes. As the shift to outpatient care and services
marches on, the use of the OU will continue to
increase. A facility that fails to adjust its treatment
design to meet these needs will be competitively
disadvantaged in the health care marketplace.
References
1. Committee on Quality of
Health Care in America,
Institute of Medicine, Crossing
the Quality Chasm: A New
Health System for the 21st
Century. Consensus Report,
March 1, 2001.
2. Graff LG, Dallara J, Ross MA,
et al. Impact on the care of
the emergency department
chest pain patient from the
chest pain evaluation
registry (CHEPER) study.
Am J Cardiol 1997;80:
563–568.
3. Graff L, Zun LS, Leikin J, et al.
Emergency department
observation beds improve
patient care: Society for
Academic Emergency
Medicine debate.
Ann Emerg Med
1992;21:967–975.
4. Graff L, Prete M, Werdmann
M, et al. Improved outcomes
with implementation of
emergency department
observation units within a
multihospital network.
J Qual Improv
2000;26:421–427.
5. Mace SE. Asthma therapy in
the observation unit. Emerg
Med Clin North Am
2001;19:169–185.
6. Ng CW, Lim GH, McMaster F,
et al. Patient satisfaction in an
observation unit: the
Consumer Assessment of
Health Providers and Systems
Hospital Survey Emerg Med J
2009 Aug;26(8):586–589.
7. Peacock WF. Management of
acute decompensated heart
failure in the emergency
department. J Am Coll Cardiol
2003;3:336A.
8. Baugh CW, Venkatesh AK,
Bohan JS. Emergency
department observation units:
A clinical and financial benefit
for hospitals. Health Care
Management Review 2011;
Jan–Mar;36:26–37.
9. Venkatesh A. ED Observation
units lower health care costs.
Emergency Medicine
Residents’ Association.
www.emra.org/emra_
articles.aspx?id=42328
(Accessed March 7, 2010).
10. Forberg JL, Henriksen LS,
Edenbrandt L, et al. Direct
hospital costs of chest pain
patients attending the
emergency department: a
retrospective study. BMC
Emerg Med 2006;6:6.
11. Goodacre S, Morris F,
Arnold J, et al. Is a chest
pain observation unit likely
to be cost saving in a
British hospital?
Emerg Med J 2001 Jan;
18(1):11–4.
12. Sieck S. Cost-effectiveness
of chest pain units. Cardiol Clin
2005; 23(4): 589–599, ix.
13. Department of Health and
Human Services, Centers for
Medicare and Medicaid
Services, 42 CFR Parts 422 and
480, Medicare Program:
Hospital Inpatient Value-Based
Purchasing Program. Federal
Register/Vol.76, No. 88/Friday,
May 6, 2001/ Rules and
Regulations.
14. www.cms.gov/ACO/ (Accessed
February 4, 2016).
15. Suri P. The role of observation
units in Accountable Care
Organizations. Emergency
Physicians Monthly July 27,
2011.
The Business of Observation Medicine
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21:32:35
Subpart VIA
Chapter
71
International – Africa
South Africa
Heather Tuffin, MD, MBChB (UCT), DipPEC (CMSA)
LAWallis, MBChB (Edin), MD (Edin), FRCS (A&E) (Edin),
DIMCRCS (Edin), Dip Sport Med (Glasgow), FCEM (London),
FCEM (SA), FIFEM
Emergency Medicine in South Africa
Emergency medicine is still in its infancy in South
Africa. The specialty having been first recognized
in 2003, there are now 108 registered specialists:
just more than 1 for each million of the approximately 55 million people living in South Africa.
There are four emergency medicine training programs in the country, the oldest a mere 13 years old
at the time of this writing (2016). At the National
Department of Health, hospital emergency medicine has yet to find a champion and accordingly is
underprioritized.
There are about 150 private hospitals in South
Africa that have emergency centers (ECs), very
few of which have dedicated observation wards.
In the public sector, there are approximately 300
hospitals, only about 100 of which justify having a
dedicated observation ward. The remainder are
small, district-level hospitals in which the ECs
are manned by family practitioners who also run
the inpatient areas, and where EC load would not
justify the ring-fencing of space and resources for
a separate stream of patients.
At the time of this writing it is for the most
part only the ECs in regional and central hospitals
(larger hospitals attracting more complex patients
from larger regions) that have their own observation wards under the jurisdiction of emergency
medicine specialists. This is a small pool of hospitals. However, there is room for expansion.
As emergency medicine becomes better accepted
as a specialty in its own right, more specialists
are registered, and emergency patient loads continue to rise, there will be both need and opportunity for each EC to be manned by emergency
medicine specialists who will also run their own
observation units.
While it is understood that observation medicine is not the exclusive realm of emergency
medicine, with the exception of some isolated
cases, emergency medicine is the only group in
South Africa who are currently making forays
into this aspect of medicine.
Emergency Center
Observation Wards
Following what seems to be a worldwide trend,
South African hospitals have been experiencing
ever-increasing EC presentation and hospital
admission rates over the past few years. With no
concomitant rise in inpatient bed numbers, emergency center observation wards (ECOW s) have
come under the spotlight, both as a potential
answer to the increasing admission rates and
because those in existence have quickly lost their
core functionality secondary to housing patients
waiting for admission to inpatient beds. As part of
a strategy to decrease EC and hospital overcrowding, ECOWs, properly utilized, house subgroups
of patients fitting specific clinical criteria who
need treatment for longer periods than normal
for the EC, but who are dee med likely to stay for
less than 24 hours. This frees up an EC space for
receiving an inco ming emergency or an inpatient
ward bed for accepting a patient with more complex pathology, and thus an anticipated longer
length of stay. At the same time the patient
remains under the care of the people best
equipped to give that care, who routinely review
patients on a far more frequent basis than the
traditional daily inpatient ward review, thus
allowing for the high turnover that is necessary
to maintain this stream.
In 2010 the Provincial Department of Health in
the Western Cape published a standard operating
procedure (SOP) covering the functions of
ECOWs in Western Cape public hospitals (Appendix 1).
1
The Emergency Medicine Society of South
Africa (EMSSA) has endorsed this document as a
best practice for all EC observation wards.
2
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As delineated by the SOP, appropriate admissions to the ECOW include patients requiring
evaluation of high-risk chief complaints or
short-term therapy of an emergency condition
with:
limited need for intense medical services
pathology involving only one system
clinical conditions appropriate for observation
limited severity of illness, anticipation of
discharge home within time limits (24 hours
or less)
Categories of appropriate patients for admission
include:
Patients requiring diagnostic evaluation, for
example, patients with chest pain, but a low
probability of myocardial infarction
Patients requiring short-term therapy, for
example, asthmatic patients, patients with
dehydration
Patients requiring psychosocial needs to be
met, for example, patients with acute alcohol
withdrawal. These needs are met in
conjunction with appropriate support
services.
All patients admitted to the ECOW remain the
responsibility of the EC staff. Clear, focused,
patient care goals must be set upon admission
and reviewed at least q 12 hours. A time limit
should be monitored and strictly enforced in
order to ensure that patients are either discharged
or admitt ed to the appropriate inpatient team
within a maximum of 48 hours.
As well as delineating who should be admitted
to the ECOW, the SOP equally importantly delineates who should not be accommodated:
Patients referred to, or admitted to, an inpatient speciality
Psychiatric patients at any point of their
admission
Patients for planned surgery
Postoperative patients
Patients admitted from out-patient clinics,
awaiting an in-patient bed
Unfortunately, the reality is that ECOWs rarely
reflect the stipulated delineations, with anecdotal
evidence highlighting up to 70% of staffed spaces
taken up by psychiatric patients or patients
waiting for admission, and ECOWs running at
well over 100% capacity. We have no information
about the use of ECOWs in other provinces, but it
is reasonable to infer that a similar picture is likely
elsewhere in the country.
The Way Ahead
While the situation is presently less than ideal,
with an increased focus on improving the flow
of patients, as well as the rise of emergency medicine as a specialty, the future of ECOWs looks
reasonably optimistic. With good guiding documents available and a growing cadre of specialists
to implement positive changes and maintain control of the governing parameters, observational
medicine promises to move into its own in South
Africa in the foreseeable future.
References
1. Emergency Centre Observation Wards. Cape
Town: Western Cape Department of Health; 2010.
2. Emergency Centre Observation Wards. Pretoria:
EMSSA; 2010.
Heather Tuffin and LA Wallis
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Appendix 1: Emergency Center Observation Wards
Introduction
Every Western Cape Department of Health hospital with an EC is to have a dedicated observation
ward adjacent to the EC. The aim of the observation ward is to improve the quality of care for
patients through extended evaluation and treatment, while reducing inappropriate admissions.
The ward should have:
dedicated observation beds (number to be
determined by annual patient census in EC, at
a rate of 2.5–5 beds per 10,000 attendees)
dedicated nursing staffing (on rotation
through the ward from the EC)
dedicated ablution facilities
dedicated support staff
This SOP DOES NOT apply to rural District level
hospitals: the guidance in here may be something
for these facilities to work towards, but is
not currently achievable. A similar service, however, should be provided within existing bed
configurations.
The aim of the SOP is to define the process for
the observation ward.
Management Procedures
The EC Clinical Lead is to institute clearly defined
written policies and procedures for the management of the observation ward and patients admitted therein. The absolute criteria for admission to
the Observation Ward will vary according to local
need, but the contents of this SOP should guide
these decisions. All decisions are to be in line with
the Western Cape Package of Care for Emergency
Medicine. The following are key management
principles:
patients are the responsibility of the EC
medical staff
only EC doctors are allow ed to admit to
Observation Ward beds
clearly identified patient care goals must be
in place
patients may require:
: evaluation of high-risk chief complaints
: short-term therapy of an emergency
condition
: psychosocial needs meeting (in
conjunction with appropriate support
services)
patients should have:
: limited need for intense medical services
: clinical conditions appropriate for
observation
: limited severity of illness, anticipation of
discharge home within time limits
the period of observation should be for a
maximum of 48 hours (unless in exceptional
circumstances): at that time, discharge or
admission to the appropriate in-patient team
is required
the period of observation should have a
focused goal
In deciding on admission criteria, consider that:
Some patients require evaluation of specific
chief complaints that may be indicative of
conditions with high mortality or morbidity
(e.g., the patient with chest pain and a low
probability of myocardial infarction; the
patient with right lower quadrant abdominal
pain and low probability of appendicitis). It
may not be necessary to admit such a patient
to a formal ward bed, but discharge after
initial examination places the patient at risk of
an adverse event. Such patients are best served
by an overnight Observation Ward bed
admission.
Many patients with emergency conditions
such as asthma or dehydra tion have not
improved enough after the first few hours to
be discharged, but are very likely to improve
enough for discharge after a few hours of
therapy.
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