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analyzing claims, doing audits, and modifying the
program, Medicare expects to improve payment
accuracy.
1–4
The Comprehensive Error Rate
Testing (CERT) program and HPMP were established by CMS to randomly sample and review
claims submitted to Medicare.
1
CMS contracts with various Medicare QIOs.
The 53 QIOs have a dual function: to analyze and
then report data back to CMS, and to provide
educational outreach for Medicare providers. In
the past when ICD-9 was used, the Clinical Data
Abstraction Center checked for the accuracy of
documentation and ICD coding, and for the medical necessity of admissions by looking at 62 hospital discharges on a monthly basis for every state
and Puerto Rico, and forwards any errors to the
state QIOs for review. After perform ing a focused
audit on high-risk areas using Medicare’s own
inpatient hospital discharge data, HPMP sends
the results to the hospital as the PEPPER report.
Targeted areas detailed in the PEPPER report
include 1-day inpatient hospital stays, 7-day readmissions, 3-day nursing home qualifying stays, the
coding of complications and of comorbidities, and
certain primary diagnoses/DRGs that have been
historically associated with high Medicare payment
error rates. The 1-day inpatient hospital stays gives
details on the hospital’s top-10 1-day stays. The
coding of complications and comorbidities has been
utilized to achieve a higher-paying DRG. Primary
diagnoses or DRGs that have been associated with a
high error rate and with a focus by CMS include
1-day stays for chest pain, 1-day stays for gastroenteritis and other digestive disorders, 1-day stays for
nutritional and metabolic disorders, back problems,
simple pneumonia, complex pneumonia, septicemia, heart failure and shock, and intracranial
hemorrhage and stroke with infarct. Perhaps, many
of these 1-day inpatient stays could be managed as
observation status.
References: Medicare’s Hospital Payment
Monitoring Program (HPMP)
1. www.cms.gov/apps/er_report/preview_er_report
.asp?from=public&which=long&reportid=7&
tab=3/ (Accessed March 2016)
2. www.pepperresources.org (Accessed March 2016)
3. www.primaris.org/sites/default/files/resources/
HPMP/hpmp%20info%20sheet.pdf (Accessed
March 2016)
4. www.acep.org/Clinical–Practice-Management/
Utilization-Review-FAQ (Accessed March 2016)
OBSERVATION MEDICINE BILLING:
THE CONTROVERSY
Observation services may be viewed by the patient
and his or her family, and sometimes by the
health care provider, “as admission.”
1
Observation is considered an outpatient service by Medicare.
2–4
(Table 2.2)
Table 2.2 CMS Manual on Outpatient Observation
Services*
A. Outpatient Observation Services Defined
“Observation care is a well-defined set of
specific, clinically appropriate services, which
include ongoing short term treatment,
assessment, and reassessment before a decision
can be made regarding whether patients will
require further treatment as hospital inpatients
or if they are able to be discharged from the
hospital. Observation status is commonly
assigned to patients who present to the
emergency department and who then require a
significant period of treatment or monitoring
before a decision is made concerning their
admission or discharge.”
“Observation services are covered only when
provided by the order of a physician ... In the
majority of cases, the decision whether to
discharge ... or to admit the patient as an
inpatient can be made in less than 48 hours,
usually in less than 24 hours. In only rare and
exceptional cases do reasonable and necessary
outpatient services span more than 48 hours.”
B. Coverage of Outpatient Observation Services
“The purpose of observation is to determine the
need for further treatment or for inpatient
admission. Thus, a patient in observation may
improve and be released, or be admitted as an
inpatient.”
C. Notification of Beneficiary
“All hospital observation services ... that are
medically reasonable and necessary are covered by
Medicare, ... If a hospital intends to place or retain
a beneficiary in observation for a noncovered
service, it must give the beneficiary proper written
advance notice of noncoverage ... ”
* from reference 4: Medicare Benefit Policy Manual ,
Chapter 6: Hospital Services Covered Under Part B. 20.5 –
Outpatient Observation Services. www.cms.gov/
Regulations-and-Guidance/Guidance/Manuals/Downloads/
bp102c15.pdf (Accessed March 2016)
Observation Medicine – Key Concepts: Administrative Issues
005
20:20:18
However, when a patient is placed in a hos-
pital bed even if it is “observation status,” this
“hospitalization without admission” may create
confusion and financial issues.
1
Since observa-
tion care is deemed an “outpatient service,”
Medicare Part A (the hospital billing part) will
not cover care rendered in the OU. However,
Medicare Part B (outpatient services billing part)
and some private insurers will cover observation
hospital services, but Medicare Part B does not
cover inpatient pharmacy charges and has an
additional 20% co-pay for each individual charge
incurred.
So when patients are given their usual daily
medications while in observation status, these
self-administered medications are charged to the
patient. It is unrealistic to ask patients who are
acutely ill or injured and are undergoing a medical or surgical emergency to be required to have
all their medications with them so they can give
themselves their own medications for many
reasons, including but not limited to: the y may
not be at home when stricken by the acute injury
or illness or they may not have the capacity at the
time of the acute presentation to be able to gather
all their medications to bring with them. It also
poses a safety risk for the patient and the health
care givers to ascertain that these are the correct
and current medications for the given patient who
is now acutely ill or injured and in a different
clinical situation than when at home.
5
If a patient will be discharged to a skillednursing facility from observation status, then
observation days do not count toward the 3-day
prequalifying inpatient stay that Medicare
requires for patients needing skilled-nursing facility care on discharge.
5
Importantly, inpatient admission falling under
Medicare Part A is associated with a fairly high
deductible ($1,288 in 2016), which must be funded
by the patient before additional insurance coverage
for the visit takes place. The co-pays for an OU
visit that is not excessively long (e.g., 15 hours) are
likely to be less costly than a short-stay inpatient
admission. Indeed for certain diagnoses, “a recent
Office of the Inspector General (OIG) report suggested that observation patients may pay less out of
pocket than inpatients.”
6
However, the 20% copays coupled with medication charges associated
with observation can add up for very long observation stays and in some scenarios eventually exceed
the Part A deductible.
This “loophole” has been criticized by mul-
tiple individuals and institutions including a
recent New England Journal of Medicine article
that recommended the following reforms in the
Medicare payment policies in order “to encourage
high-value observation care and minimize costshifting”: “CMS should reform observation payment policies” by 1. “capping the total out-ofpocket expense at the inpatient deductible amount
(which would) keep observation stays from costing patients more than inpatient admissions,
which are generally more resource intensive”,
2. “covering self-administered medications,” and
3. in cluding time in observation “toward the
3 days of hospitalization that qualify a patient
for skilled-nursing-facility benefits.”
5
Importantly, in 2016 observation was added to
the growing list of Me dicare comprehensive
APCs. The reimbursement for the observation
Medicare comprehensive APC for 2016 is
$2,174. The structure of the comprehensive APC
includes payment for most typical ancillary services such as diagnostic studies, infused medications, and many small procedures. As such, the
patient is now more protected because their 20%
co-pay for this large basket of service s is $435.
There has been litigation challenging the
Medicare rules. There are bills recently filed in
Congress that would support this Medicare
reform.
5
CMS has also authorized some pilot
programs that would allow time in observation
to be included toward the 3 days of hospitalization that qualify for skilled-nursing benefits.
Some institutions have an information sheet
regarding observation status that they distribute
to patients who are being placed in observation
that explains the Medicare payment policies
regarding observation, and have patients sign
acknowledging receipt of this information with
the appropriate personnel to contact (such as case
management, utilization review, financial counselors) if they have any questions.
4
Acknowledg-
ment of the information does not waive the
patient’s right to request a review of the decision
to assign the patient to observation.
References: Observation Medicine Billing:
The Controversy
1. Sheely AM, Graf B, Gangireddy S, et al.
Characteristics of patients with “observation
status” at an academic medical center. JAMA
Intern Med 2013; 173(21): 1991–1998.
Sharon E. Mace
005
20:20:18
2. Centers for Medicare and Medicaid Services. Are
you a hospital inpatient or outpatient?
www.medicare.gov/publications/pubs/pdf/
11435.pdf (Accessed March 2016)
3. Centers for Medicare Advocacy Inc. Observation
status. www.medicareadvocacy.org/medicare-info/
observation-status#definition (Accessed March
2016)
4. Medicare Benefit Policy Manual. Chapter 6:
Hospital Services Covered Under Part B. 20.5 –
Outpatient Observation Services. www.cms.gov/
Regulations-and-Guidance/Guidance/Manuals/
Downloads/bp102c15.pdf (Accessed March 2016)
5. Baugh CW, Schuur JD. Observation care –
high-value care or a cost-shifting loophole?
N Engl J Med 2013; 369(4): 302–305.
6. Society of Hospital Medicine Public Policy
Committee. The Observation Status Problem.
Impact and Recommendations for Change.
Society of Hospital Medicine Whitepaper, July
2014. Available at www.hospital medicine.org/
advocacy (Accessed March 2016)
Summary
In the past, CMS has been somewhat of a “passive”
payer of claims. More recently, they have shifted
to being an active participant in value-based purchasing. This has led to an increased incidence of
audits and greater accountability. There has been a
proliferation of various Medicare and Medicaid
integrity contractors. There is every indication
that this shift in perspective and focus will continue in the future.
Glossary of Terms
ACA = Affordable Care Act
CC = Comorbidities or Complications
CERT = Comprehensive Error Rate Testing
CFR = Code of Federal Regulation
CMS = Centers for Medicare and Medicaid
Services
CPT = Current Procedural Terminology
DHHS = Department of Health and Human
Services
DRG = Diagnosis-Related Group
DSH = Disproportionate Share Hospital
ED = Emergency Department
FI = Fiscal Intermediary
FISS = Fiscal Intermediary Standard System
HCPCS = Healthcare Common Procedure
Coding System
HICN = Healthcare Insurance Claim Number
HIPPA = Healthcare Insurance Portability and
Accountability Act
HPMP = Hospital Payment Monitoring
Program
ICD-9-CM = International Classification of
Diseases 9th revision, Clinical
Modification
ICD-10-CM = International Classification of
Diseases 10th revision, Clinical
Modification
IME = Indirect Medical Education
IPPS = Inpatient Prospective Payment System
IS = Intensity of Service
LCD = Local Coverage Determination
LOS = Length of Stay
MAC = Medicare Administrative Contractor
MCC = Major Comorbidities or
Complications
MIC = Medicare Integrity Contractor
MS-DRG = Medicare Severity Adjusted - DRG
NCD = National Coverage Determination
NPP = Non-physician Practitioner
OIG = Office of Inspector General
OU = Observation Unit
PEPP = Payment Error Prevention Program
PEPPER = Program for Evaluating Payment
Patterns Electronic Report
PHI = Protected Health Information
QIO = Quality Improvement Organization
RAC = Recovery Audit Contractor
RUG = Resource Utilization Group
SI = Severity of Illness
ZPIC = Zone Program Integrity Contractors
* This chapter is intended to give a synopsis of
key administrative issues. Changes are occurring
and updates should be done on a regular basis by
providers and institutions.
Observation Medicine – Key Concepts: Administrative Issues
005
20:20:18
Part I
Chapter
3
Administration
Observation Medicine Development
Over Time
Louis Graff IV, MD, FACEP, FACP
Observation Medicine Concept:
Improved Delineation of Appropriate
Level of Care
Recognition of the major failings of the traditional
approach to the evaluation and management of
patients with acute illnesses and conditions led to
the development of Observation Medicine (OM).
In the traditional approach, patients were brought
to emergency departments (EDs) for evaluation
and management by a physician over a 3–4hour
time period. During that time a history, physical,
and some rapid tests were performed and the
physician would either release the patient home
or admit the patient to the hospital. Prompt decision on disposition was needed and even required
since agencies such as the Joint Commission and
the United States Federal Government prohibited
prolonged ED stays. Over time leaders in emergency medicine (EM) recognized there were many
patients who needed more evaluation and management than co uld be provided in 3–4 hours in
the ED, but inpatient admission for days was
not needed.
From a quality viewpoint the traditional
approach was failing because many patients were
being discharged home from the ED without diagnosing their serious, dangerous disease. Acute
myocardial infarction (MI) was being missed in
2–5% of patients who presented atypically with the
physician inadvertently missing the diagnosis and
sending them home.
1
This resulted in a doubling
of the patient’s risk of death and risk to the physician’s career comprising 30% of malpractice payments to families who lost their loved ones.
2
Other
conditions similarly were not being diagnosed
because of the limitations of the 3–4 hours ED
evaluation but could have been diagnosed and
treated if they had more than 3–4 hours evaluation.
From a utilization viewpoint the traditional
approach was failing because many patients were
being admitted to inpatient hospital services who
were found to have no serious dangerous disease
and/or needed < 24 hours of acute therapy. The
majority of patients admitted for chest pain were
found to not have any serious, dangerous disease
during inpatient hospitalization.
3
Four out of five
patients with acute asthma attacks not completely
treated in the ED could be treated successfully if
the therapy continued for another 8–24 hours.
4
OM provided a “third pathway” for dispos-
ition of patients from the ED. In the 1980s and
1990s leaders in this field had operationalized the
observation concept in their observation units
(OUs) and validated its worth with their research.
They recognized that observation service could be
provided to many patients who needed more than
the 3–4 hours of ED service but did not need
inpatient services provided for days. It improved
quality by providing a pathway that selected
patients with a low probability of serious, dangerous disease who could receive an additional 8–24
hours of evaluation. For low-probability chest pain
patients this resulted in reduction of the missed MI
rate (with its concomitant doubled mortality)
from 2–5% to < 0.5%.
5
It improved utilization by
providing a pathway that selected patients with an
emergent condition who could receive an additional 8–24 hours of short-term therapy without
having to be hospitalized. The observation
approach for these patients as an alternative to
acute inpatient hospitalization reduced costs by
> 50%.
6,7
Development of Leadership
Empowerment of excellent leadership has been
crucial in the development of OM. This has been
necessary at each individual hospital and necessary on a national level.
The American College of Emergency Physicians
(ACEP) has taken a leadership role in supporting
observation services including policy statements,
006
20:24:08
guidelines, offering courses on observation services,
forming a section on Short Term Observation Services, and online references on ACEP’swebsite.
8–12
The Society for Academic Emergency Medicine (SAEM) also recognized the importance of
ED observation services and formed an OM Committee, which created an OM bibliography and
curriculum.
13–15
An edition of Emergency Medi-
cine Clinics of North America on Observation
Medicine and the first textbooks of OM were
written by ACEP/SAEM leaders in OM.
16–18
Evolution of Observation Unit Staff
ED OUs developed in the 1960s and 1970s were
staffed with physicians available 24 hours a day,
7 days a week. These emergency physicians (EPs)
were available not just during morning rounds as
for inpatient services with private physicians, but at
all times. Thus, they were always able to respond
rapidly to changes in a patient's condition, and to
respond whenever the patient’sevaluationand
treatment plan ended with discharge home or
inpatient admission. The nurses were working side
by side with the physicians throughout the day and
night as a collaborative team in these ED OUs,
which facilitated efficiency of communication and
action whenever appropriate and not just at a
selected time of the day such as morning rounds.
In contrast, the nurses on the inpatient units spent
most of their time following the orders written by
physicians when they admit the patient or during
their once-a-day rounds. The rest of the time the
physicians are in their offices during the day and at
their homes during the evening and night. They
would be called by a nurse to come back to the
hospital only in special dire circumstances.
Creation of Functional
Physical Plants
This development of EDs with full time EPs
created the opportunity for ED observation services. Many EDs were designed in the 1960s and
1970s with observation units. They designated an
area of the ED or an area adjacent or near the ED
for providing observation services.
Development of Best Practice
Operations
By the 1990s there was a robust literature on the
safety and effectiveness of ED observation services
as an alternative to acute care hospital admission
and this has continued into the next millennium.
There are now randomized clinical trials (RCTs)
on patients with chest pain
7,9-21
, asthma
6,22
, atrial
fibrillation
23
, syncope24, TIA25, and many others.
(See Chapters 22 Chest Pain, 27 Asthma, 24 Atrial
Fibrillation, 25 Syncope, and evidence-based
Chapters 80 Diagnosis/Clinical Condition and
81 Age-Related.) All these RCTs have validated
what prior, less sophisticated research trials have
shown in the past. That is, for selected patients,
observation provides equivalent or superior clinical
patient care compared with traditional acute care
hospital inpatient services and it does that at half
the cost.
Development of Financial Viability
Reimbursement and rational cost-effective structuring is needed for the success of an observation
program. The origins and development of OM
have been in the ED for the last three decades
with EPs negotiating most of the issues for the
present reimbursement structure.
Physician reimbursement (Part B reimbursement) for observation services was not available
for those who originally developed these services.
The patient observed in an ED OU received more
than double the physician services compared to
patients admitted or discharged home at the end
of their ED evaluation and management.
26
ACEP
leaders went to the American Medical Association’s (AMA’s) Current Procedural Terminology
(CPT) committee and their RVS Update Committee (RUC) where RVS = Relative Value Scale and
successfully negotiated new CPT codes for physician reimbursement of observation services.
Either CPT 99218, 99219, or 99220 are used
for evaluation and management of observation
patients during their initial stay and CPT
99217 for dispositi on services the next day. ACEP
leaders in 1998 returned to the AMA’s committees and successfully negotiated new CPT codes
for physician reimbursement of observation services for patients whose observation stay and discharge does not extend over to a second day
(either CPT 99234, 99235, 99236). These are still
the CPT codes used by any physician who provides observation services.
Facility reimbursement (Part A reimbursement) for observation services was simple at the
start of the creation of observation services, but
Observation Medicine Development Over Time
006
20:24:08
has become increasingly complex over time. In
the original model, observation service charges
for a room rate are similar to that for an inpatient
room rate. In 2000 Medicare implemented prospective payment for outpatient services with
APCs (ambulatory payment categories). Hospitals
were paid for each outpatient service that had an
assigned APC.
Unfortunately, Medicare refused to assign an
APC for observation so they stopped Part
A payment for observation. They had identified
many hospitals were double charging Medicare
for surg ical procedures by charging for observation inappropriately, in addition to the appropriate charge for the surgical procedure, which
included recovery after the procedure.
Advocates from Emergency Medicine, the
Society of Chest Pain Centers, the American
Heart Association, the American College of Cardiology, and the American College of Nuclear
Cardiology met with CMS on this issue and
clarified the value and cost-effectiveness of the
rational use of observation (extended diagnostic
or therapeutic use and not post procedure). In
2003 CMS did again agree to make Part
A payments for observation with the creation of
an APC for observation (APC #0339). But they
only agreed to pay for observation for selected
conditions: chest pain, congestive heart failure,
and asthma.
In 2007, ACEP leaders were successful in
advocating for CMS to remove this list and pay
for any condition that was appropriate for observation. This negotiation entailed the discontinuation of APC #0339 and the creation of two new
composite APCs (#8002 and #8003) that are Part
A payment to the hospitals for both the ED visit
(or the clinic visit if they came from a clinic) and
the observation services. With this success nearly
all payers recognized and agreed to pay for observation services and in many cases became aggressive advocates for the use of observation services.
References
1 Lee TH, Cook EF, Rouan GW,
Weisberg MC, Goldman L.
Ruling out myocardial
infarction: prospective
multicenter validation of a
12 hour strategy for low risk
patients. Clinical Research
1989; 37:524A.
2 Karcz A, et al. Massachusetts
emergency medicine closed
malpractice claims: 1988–1990.
Ann Emerg Med 1993; 22:553.
3 Pope JH, Aufderheide TP,
Ruthazer R, et al. Missed
diagnoses of acute cardiac
ischemia in the emergency
department. N Engl J Med
2000; 342:1163–70.
4 Murphy DG, Zalenskio RJ,
Raucci JC et al. The utility of
extended emergency department
treatment of asthma. Ann Emerg
Med 1989; 8:467.
5 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.
6 Rydman RJ, Isola ML, Roberts
RR, et al. Emergency
Department Observation Unit
versus hospital inpatient care
for a chronic asthmatic
population: a randomized trial
of health status outcome and
cost. Med Care. 1998; 36:
599–609.
7 Roberts R, et al. A randomized
clinical trial of inpatient versus
observation care in the
evaluation and management of
chest pain patients. JAMA
1997; 278:1670–1676.
8 American College Emergency
Physicians. Emergency
Department Observation
Units. Ann Emerg Med 1988;
17:95–96.
9 American College Emergency
Physicians Practice
Management Committee.
American College Emergency
Physicians. Management of
Observation Units. Ann Emerg
Med 1988; 17:1348–1352.
10 Brillman J, Dunbar L, Graff L,
et al. American College of
Emergency Physicians Section
of Observation Services:
management of observation
units. Ann Emerg Med 1995;
25:823–830.
11 Ross MA, Aorora T, Graff LG,
Suri P, Ojo A, Bohan S, Clark
C, O’Malley R. State of Art:
Emergency Department
Observation Unit. Critical
Pathways in Cardiology 2012;
11(3):128–138.
12 Graff LG (Editor in Chief).
Observation Medicine: The
Healthcare System’sTinctureof
Time. Online Textbook of the
American College of Emergency
Physicians Observation
Medicine Section at www
.acep.org/acepmembership
.aspx?id=30260
13 Graff LG, Dunbar L, Gibler B,
Goldfrank L, Leikin J,
Severance H, Schultz C, Yealy
D, Watkins R, Zun L.
Observation Medicine: an
annotated bibliography. Amer
J Emerg Med 1992; 10:84–93.
14 Graff LG, Dunbar L, Gibler
WB, et al. Observation
Committee of the Society of
Academic Emergency
Medicine. Observation
medicine curriculum. Ann
Emerg Med 1992; 21:963–966.
Louis Graff IV
006
20:24:08
15 Graff LG, Zun L, Leiken J, Gibler
WB, et al. Observation
Committee of the Society for
Academic Emergency Medicine.
Emergency department
observation beds improve
patient care: Society for
Academic Emergency Medicine
debate. Ann Emerg Med 1992;
21:967–975.
16 Ross M, Graff L (eds.).
Principles of observation
medicine. Emerg Med Clin
North Am 2001; 19.
17 Graff LG (ed.). Observation
Medicine. ButterworthHeinemann, Stoneham, MA,
1993.
18 Graff LG (ed.). Observation
Units: Implementation and
Management Strategies.
American College of
Emergency Physicians, Dallas,
TX, 1998.
19 Gomez M. An emergency
department based protocol for
rapidly ruling out myocardial
ischemia reduces hospital time
and expense: Results of a
randomized study (ROMIO).
J Am Coll Cardiol 1996; 28:25–33.
20 Farkouh ME, Smars PA, Reeder
GS, et al. A clinical trial of a chestpain observation unit for patients
with unstable angina. NEngl
JMed1998; 339:1882–1888.
21 Goodacre S, et al. Randomised
controlled trial and economic
evaluation of a chest pain
observation unit compared
with routine care. Br Med J
2004; 328:254–264.
22 McDermott, et al. Treatment of
acute asthma patients as
outpatients in an observation
unit versus as an inpatient in
the hospital. Arch Int Med
1997; 157:2055–2062.
23 Decker WW, et al.
A prospective, randomized
clinical trial of an emergency
department observation unit
for acute atrial fibrillation. Ann
Emerg Med 2008; 52:322–328.
24 Shen, W, Beinborn, D. Random
clinical trial of observation unit
versus in patient services in
evaluation and management of
patients with syncope. EP Lab
Digest May 2005.
25 Ross M, et al. An emergency
department management
protocol for patients with
Transient Ischemic Attacks: a
randomized clinical trial. Ann
Emerg Med 2007.
26 Graff LG, Clark S. Emergency
physician critical care services:
a time study at an American
and an English Emergency
Department. Arch Emerg Med
1993; 10:145–154.
Observation Medicine Development Over Time
006
20:24:08
Part I
Chapter
4
Administration
Observation Medicine Principles
Louis Graff IV, MD, FACEP, FACP
Most patients after a 2-to-4-hour emergency department (ED) evaluation are identified as being
safe for outpatient treatment or severely ill requiring acute care inpatient hospitalization, but for
some it is unclear what their severity of illness is
and/or their intensity of service needs. These
patients need a “tincture of time” of 8–24 hours
of outpatient observation level of care. The physician needs to “pause” their disposition decision
(outpatient vs. inpatient) and place the patient in
outpatient observation level of care for limitedintensity and limited-time services. With observation 80% of patients will be found to be safe for
outpatient treatment and 20% found as severely ill
requiring inpatient hospitalization.
1,2
Principles of observation medicine need to be
followed to ensure optimal outcomes for these
patients.
1–4
Physicians need to make a correct
level-of-care determination by identifying patients
with a focused patient care goal and limited duration and intensity of service need. Since these
patients are judged as potentially seriously ill, they
need a hospital site of service. Such services can
only be provided with acute care staffing and
require structure and patient care protocols for
continuing care in an outpatient setting. Superior
leadership providing intensive managerial review is
needed to ensure adequate structure, adequate
resources, continuous performance improvement,
and expertise of personnel. With compliance with
all these principles, the outcome will be highquality economical service that is unique to observation services.
Observation Is the Correct Level
of Care
The most difficult and most crucial task to ensure
optimal observation service s is for the physician
to reliably identify patients for whom observation
is the correct level of care. These patients must
have focused patient goal needs of diagnostic
evaluation and/or short-term therapy and/or management of psychosocial needs. Their therapeutic
needs must have limited duration and limited
intensity of service. Details on the approach to
evaluate patients with respect to the threshold for
observation and the threshold for inpatient admission are discussed in Chapter 19 Medical Necessity
Risk Stratification.
Threshold for observation is determined by
the missed diagnosis rate. For a syndrome (e.g.,
chest pain chief complaint) it is the rate of missed
diagnosis and the rate of testing (e.g., for chest
pain it is rule out myocardial infarction [MI]
testing rate). There is average performance in
missed diagnosis rate (e.g. 2%–5% of patients with
acute MI) have their diagnosis missed at the initial
ED evaluat ion and the rate of rule-out-MI
testing.
2, 5–6
The ideal is zero missed diagnosis
rate with the goal being best practice performance
always on the journey toward zero. With feedbac k
to individual physicians of their cases with a
missed diagnosis and feedback to the group of
lessons learned, individuals and the entire group
of physicians can lower their threshold for observation (extended evaluations) rather than discharge home after the initial ED evaluation. In
this example (Figure 4.1) the group diagnostic
performance from 2% to < 0.5% missed MI rate
as the thresh old for observation decreased as the
percentage of ED chest pain patients with a ruleout-MI rate increased from 35% to 50%.
Threshold for inpatient admission is determined by the observation usage rate. If patients
who have moderate to high probability of disease/
risk of adverse event are placed in inpatient
admission and patients who have low probability
of disease/risk are placed in observation, then a
portion of patients with negative evaluations
(final diagnosis is their presenting chief complaint) will have been in observation level of care
and a portion in inpatient level of care. In the
earlier example of chest pain patients and rule-out
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MI, the observation rate is the number of observation patients with final diagnosis of chest pain
divided by the sum of the number of observation
patients with final diagnosis of chest pain and the
number of admitted inpatients with final diagnosis
of chest pain. If the observation usage rate is very
high, it indicates there is too much observation
and moderate probability/risk patients are not
being admitted, since if moderate probability/risk
patients were being admitted, some admitted inpatients would have the final diagnosis of chest pain
and not all acute MI and other serious diseases. If
the observation rate is very low, it indicates there is
too little observation since if moderate probability/
risk patients are being admitted, many admitted
inpatients would have a final diagnosis of chest
pain. Ideal is a moderate observation usage rate
correlating with the ideal observation rate as identified by the missed diagnosis rate.
The OU rate has the largest n so it is the
primary rate for the OU leadership to use. The
observation usage rate is calculated from the
many patients observed and admitted each month
and can be calculated by physician each month,
while the missed diagnosis rate is calculated from
the few missed diagnosis cases and can only be
calculated infrequently for most institutions for
the whole group only once a year.
Hospital Site of Service
Hospital site of service is mandatory for observation services. The patients who are appropriate for
observation level of care are those ED patients who
are determined during the ED evaluation to possibly require inpatient hospitalization level of care.
They are by definition patients who are possibly
moderate to high risk of an adverse event and the
most appropriate setting for observation services is
adjacent to or inside an acute care hospital where
their acute, dangerous, serious condition could be
promptly and effectively treated.
Acute Care Staffing
Acute care hospital personnel are required for an
OU. Observation services are a higher level of care
service than the ED and personnel need to be able
to respond and stabilize complications suffered by
patients who are determined to have acute, dangerous, and serious conditions. These patients are
then transferred to the inpatient admission level
of care. Thus, staff need to be equivalent to those
that provide services in the acute care hospital.
Continuing Care in Outpatient
Setting
Rather than an episode of care as provided in the
usual outpatient clinic or ED setting, the OU needs
to provide continuing care similar to that provided
to inpatient admissions. This requires order sets,
protocols, rounds, and all the components of care
necessary for high-quality, efficient services.
Intensive Managerial Review
The complexity of care provided in OUs requires
intensive managerial review. The services are
20% 25% 30% 35% 40% 45% 55%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
1997
1998
50%
Figure 4.1 ACS Evaluation Rate vs.
ACS Miss Dx Rate
National Average is 2% Miss Dx Rate
Observation Medicine Principles
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20:20:18
outpatient and need to be coordinated with the
complexity of the acute care hospital. Physician
and nursing lead ership need to be empowered
and responsible for continuous performance
improvement, developing and implementing
protocols, and ensuring the highest quality of care
and utilization of resources. Operational issues
such as budget, recruitment of staff, adequacy of
staffing, development and education of staff need
active, effective observation services leadership.
Economical Service
The nature of observation services properly structured and operated results in costs of services half
of those provided as traditional acute care inpatient hospital services.
7–8
Rather than once-a-day
rounds by physicians, the ideal OU has rounds
every 8 hours by physicians, which results in
decisions and actions taken in a much more rapid
cycle than possible in a traditional acute care
hospital. OU staff are trained to function with
this rapid cycle (8–24 hours) care plan rather than
a4–5 day care plan. Randomized clinical trials of
diagnostic evaluation of chest pain
9
and emergent
therapy of acute asthma attacks
10
are two
examples of many studies that have shown properly structured and operated OUs provide economical service.
References
1. Graff LG (ed.). Observation
Medicine. Butterworth-
Heinemann, Stoneham, MA,
1993.
2. Graff LG (Editor in Chief).
Observation Medicine: the
Healthcare System’s Tincture of
Time. Online Textbook of the
American College of
Emergency Physicians
Observation Medicine Section
at www.acep.org/acepmember
ship.aspx?id=30260
3. Brillman J, Dunbar L, Graff L,
et al. American College of
Emergency Physicians Section
of Observation Services:
management of observation
units. Ann Emerg Med 1995;
25:823–830.
4. Ross MA, Aorora T, Graff LG,
et al. State of art: emergency
department observation
unit. Critical Pathways in
Cardiology 2012; 11(3):
128–138.
5. 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.
6. Goodacre S, Nicholl J, Dixon
S, et al. Randomised controlled
trial and economic evaluation
of a chest pain observation
unit compared with routine
care. Br Med J 2004;
328:254.
7. Roberts RR, Zalenski RJ,
Mensah EK, et al. Costs of an
emergency department-based
accelerated diagnostic protocol
vs hospitalization in patients
with chest pain: a randomized
controlled trial. JAMA 1997;
278:1670–1676.
8. Rydman RJ, Isola ML, Roberts
RR, et al. Emergency
department observation unit
versus hospital inpatient care for
a chronic asthmatic population:
arandomizedtrialofhealth
status outcome and cost. Med
Care 1998; 36:599–609.
9. Roberts RR, Zalenski RJ,
Mensah EK, et al. Cost of an
emergency department-based
accelerated diagnostic protocol
vs. hospitalization in patients
with chest pain: a randomized
controlled trial. JAMA 1997;
278:1670–1676.
10. McDermott M, Murphy D,
Zalenski R, et al. A comparison
between emergency
department diagnostic and
treatment unit and inpatient
care in the management of
acute asthma. Arch Intern Med
1997; 157:2055–
2062.
Louis Graff IV
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