Review of the observation patient status and it’s impact to the patient expereince

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Preston Kayde Allred

BSHS, University of Arizona, 2013

Submitted to the Graduate Faculty of

the Graduate School of Public Health in partial fulfillment

of the requirements for the degree of

Master of Health Administration

University of Pittsburgh



Graduate School of Public Health

This essay is submitted


Preston Allred


April 16, 2015

and approved by
Essay Advisor:

Nicholas Castle, PhD _______________________________________


Department of Health Policy and Management

Graduate School of Public Health

University of Pittsburgh

Essay Reader:

Ann Samler, PhD _______________________________________


Department of Industrial Engineering

Swanson School of Engineering

University of Pittsburgh

Essay Reader:

Laura Gailey Moul, MHA _______________________________________

Vice President



Copyright © by Preston Kayde Allred


Nicholas Castle, PhD

Preston K. Allred, MHA

University of Pittsburgh, 2015


United States healthcare is at a turning point, high cost for low value is no longer satisfactory. As a result, new methods of care are being sought. One such method is the idea of placing a patient in observation status, a place where the patient is still an outpatient but may spend nights in the hospital. The use of this new method is known to have significant and possibly unexpected financial impact on the patient while the provider is simultaneously reacting to reduce costs associated with having this outpatient occupy space for days. At a time when issues such as this are complicated enough, value based payments debut to couple reimbursements for hospitals to patient satisfaction.

This essay looks at the observation patient status as a new vehicle for the provision of healthcare while seeking to build understanding for the relevance of the patient experience surrounding the observation patient service line. A pilot which highlights the very real problems hospitals are facing is presented in the essay. This pilot, in addition to a literature review, discuss the need for payers and providers to establish a desire for constant improvement while not underestimating the impacts associated, including the danger of upsetting patients during the renovation. Providers and payers are key determinants of public health; as such patient satisfaction and the mode of the provision of healthcare are essential considerations when seeking to achieve the healthy state.



List of tables vi

1.0 introduction 1

2.0 observation status in pracice – A PIlot 11

3.0 disussion 20

4.0 Conclusion 22

bibliography 24

List of tables

Table 1. Demographics 17

Table 2. Patients Converted with Care Management Consult 17

Table 3. Time to Conversion by Care Management 18

Table 4. Time to Discharge for Pilot Patients Who Stayed in Observation Status 18

Table 5. Reason for Observation Patient D/C Post 48 Hours During Pilot 18

Table 6. Top Diagnosis for All Patients Seen by Pilot Physicians 18

  1. introduction

Considering the evolving environment of healthcare one can recognize the ongoing development of new meanings to healthcare, as well as the fading away of some of the traditional concepts. As this environment changes one of the newly emerging ideas is that healthcare is a service industry, not simply a medicine provider (Ziqi Wu, 2013). The focus of care is moving from a reactionary approach to a proactive and preventative approach, giving rise to new ways of thinking, new ways of providing care, and new ways of regulating that same care.

One such newer approach is the increased utilization of the observation patient status (Feng, Wright, & Mor, 2012), or the confounding concept of admitting a patient to a bed within the hospital (which appears to be an inpatient situation), yet maintaining the patient’s outpatient status (Wachter, 2013). Another rising concept is a refocused approach to healthcare which now includes what the patient thinks about their care. A clear example of this is the increased prevalence for research, articles, and discussions on the topic.

Each of these new ideals has implications that reach far beyond the medical chart of a third party payer’s ledger. Each ideal means new policy, new workflows, and a need for continued support and education for and in behalf of patients, physicians, and all others who are integral to the provision of modern healthcare. Looking specifically at the observation patient service line, it is clear there are many opportunities for improvement. Through literature and practical application it is possible to improve and even thrive in today’s “ideal” provision of healthcare while preparing for the healthcare of tomorrow.

This essay looks into one section of this ever evolving field. Specifically, it will review the theoretical purpose and actuality of the observation patient service with the inclusion of patient satisfaction within this service line. One section of this review is a brief outline of a pilot done at University of Pittsburgh Medical Center East (UPMC East), a community hospital. As will be discussed, the pilot sought to improve the observation patient service line, an effort which appears (at least anecdotally) to be a front line issue for many hospitals. At the end of the essay the discussion and conclusion act as a summary which is given with the intent of providing fundamental points which may support hospital leadership as they seek to improve their observation patient service line.

    1. a Different era of healthcare

Healthcare is an evolving field of practice. What once used to be a vehicle for one way communication and a reactive type of care delivery is now a vehicle for a proactive, patient centric type of care delivery. This is evident through the “many hospital designs [which] have taken inspiration from hotels, spurred by factors such as increased patient and family expectations and regulatory or financial incentives.” Furthermore, works such as Fred Lee’s If Disney Ran Your Hospital provide further insight into the many creative ways to deliver this pioneer type of care.

One source of this evolving care is the politically charged introduction of the Affordable Care Act (ACA) by the United States Government in 2009. This new law pushed for a reform that has brought about several changes; however, the major focus of the law is in the area of finance. It is well known that the ACA expanded healthcare insurance coverage for the purpose of reducing the number of uninsured people, ergo increasing patient access and theoretically reducing the cost burden of uncompensated care provided by hospitals. Furthermore, with the anticipated increase in patients due to the ageing “baby boomer” generation, cost containment is essential (Schoonveld, Coyle, & Markham). As a result, most healthcare organizations are seeking ways to reduced costs. There are alternative methods to reduce this cost and it varies by the type of organization and what the provision of their services entails. For example, the payers now look for ways to reduce the amount they pay per patient while providers, such as hospitals, are looking to reduce spending required for the provision of care.

An approach used by payers such as Medicare and Medicaid is the adjustment, reduction, and even denial of hospital reimbursements, forcing providers to find alternative routes thereby reducing this spending, known as the cost of care. One of those routes is the increased use of the observation status for patients (Feng et al., 2012). This provides a way for physicians to care for a patient who may or may not be ill enough to need inpatient care while avoiding inpatient costs which the payer may not pay for should the payer deem the admission unnecessary. This is possible because of the lower cost to the hospital to provide observation care; this lower cost is possible due to adjusted nursing ratios and the like. All of these issues discussed combine into a new era of healthcare, one where new models of care are being developed, some by choice and some by force, including transition to the less expensive outpatient provision of care.

This transition is not entirely new yet it is new enough that large amounts of academic work are being done to better understand the optimal provision of healthcare in the new environment.

    1. liturature review

Even with the vast amount of academic work surrounding healthcare, it has been surprisingly challenging to find work done in the area of observation patients and the impact of observation status to patients and hospitals. It seems that only recently has any effort been placed on this topic. As previously mentioned (and as will be discussed in discussion Section 3.0), this is likely due, at least in part, to the changing financial system associated with the provision of United States healthcare. Part of this change is brought about through the ACA and the push for a shift from volume based care to value based care (Schoonveld et al.). This means providers are paid based upon the value of care they are able to provide as opposed to the previous payment scheme which was based on the sheer number of patients or tests done in a day.

The concept of placing patients in observation status is one of the developed ways to attempt to control costs. As mentioned earlier, the idea of using the observation status is to provide a lower level of care to a patient who is being “observed” for the purpose of determining whether inpatient hospitalization is needed or not. It is prudent to note that observation versus in-patient status is a decision which directly impacts a patient. Due to this nature of impact, a large focus to ensure a positive patient experience is crucial. If a patient is to truly agree with the type of treatment they are receiving they must first understand the purpose or intent of the care to be provided; as is indicated by the positive HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) survey responses associated with the questions “During this hospital stay, how often did nurses explain things in a way you could understand” and “During this hospital stay, how often did doctors explain things in a way you could understand?” The positive scores given when a patient understands their care are indicative of the need for understanding by the patients (Centers for Medicare & Medicaid Services CMS, Sep 2014).

Now that the ACA has succeeded in expanding financial coverage through mandating healthcare insurance to all United States citizens, the executive branch of the government, specifically the Department of Health and Human Services (HHS), has a new toolbox to work with. In this toolbox there are three overarching goals for the immediate future. Using this new set of tools, HHS now seeks to “focus its energies on augmenting reform in three important and interdependent ways: using incentives to motivate higher-value care, by increasingly tying payment to value through alternative payment models; changing the way care is delivered through greater teamwork and integration, more effective coordination of providers across settings, and greater attention by provider’s to population health; and harnessing the power of information to improve care for patients” (Burwell, 2015). These three goals appear to be at the root of most modern healthcare changes.

Each of the three is interdependent, meaning that each does rely on the other for success. The relevance of both, observation patient status utilization and the overall patient experience, are supported by one or all of these three ways. Sections 1.2.1 and 1.2.2 further break down observation patient status utilization and the use of patient experience.

      1. Observation patient status

The observation patient status is typically viewed as a mid-way point between the Emergency Department or a doctor’s office in the community and full hospital (inpatient) admission (Feng et al., 2012). The CMS definition of the observation patient status is first and foremost that a patient in observation status is not different from an outpatient as far as services and payment are concerned. The 2005 heavy definition of an observation status patient is as follows:

“…[The observation status is] a well-defined set of specific, clinically appropriate services, which include…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…(and) in the majority of cases, the decision…can be made in less than 48 hours, usually in less than 24 hours. In only rare and exceptional cases do…outpatient observation services span more than 48 hours.”

This definition was later revised in 2009 to the working definition of 2015. Some notable changes in definition are as indicated below:

Hospitals may bill for patients who are “direct admissions” to observation directly referred to the hospital for outpatient observation services. A direct admission referral occurs when a physician in the community refers a patient to the hospital for outpatient observation, bypassing the clinic or emergency department (ED) visit (Centers for Medicare Medicaid Services CMS, 2014 Version).

These definition charges appear to be intended to clarify the true status of the observation patients, noting the definition changes only reference direct referrals and not those patients who enter the hospital via the Emergency Department, though patients who experience observation status can come through Emergency Department physicians. Often, when a physician is unsure if a patient is in need of full hospital admission they will hold the patient to watch them, or to “observe” them. This can happen in either the Emergency Department (Note: Patients who come to the Emergency Department are considered “outpatients” until discharge or until a decision is made that a continuous high level of care in an inpatient setting is needed) or on a unit within the hospital (Feng et al., 2012). This is the point in time when much confusion can occur. As a patient is laying in a hospital bed in hospital wing it would appear that the patient is admitted to the hospital, when in reality, they are “hospitalized but not admitted.” (al., 2013)

The proof of this confusion is further supported by a number of articles such as: “Under increased scrutiny, hospitals do more “observing” at cost to patients” from the CT Mirror in September 2010; “In the hospital, but not really a patient” from the New York Times in June 2012; and “Medicare rules give full hospital benefits only to those with “inpatient” status” from the Washington Post in September 2010. Confusion seems to be prevalent; in fact, some suggest that the Centers for Medicare/Medicaid Services (CMS), the authorizer of the observation status, is, itself, confused about what is or is not observation status. Their definition is confusing or confounding even for those who are considered professionals in the field (al., 2013; Gesensway, 2012; "Notice of Observation Treatment and Implication for Care Eligibility Act," 2015; Wachter, 2013).

Looking at other points in the CMS Handbook section 20.6 A, CMS seeks to make it very clear that an observation patient is an outpatient. This is important to note because hospitals provide only two distinct types of care/service to outpatients: services that are diagnostic and “other services that aid the physician in the treatment of the patient” (Centers for Medicare Medicaid Services CMS, 2014 Version). Clearly, “other services that aid the physician in the treatment of the patient” can be a major source of confusion as there is little that a physician does that is not “in treatment of the patient,” this then leads to the question, what is an inpatient, which sends the discussion into a clinical, jargon filled discussion beyond the scope of this essay. It will suffice to say there is disagreement in this area.

Another side of the observation patient status is the hospital length of stay. Since the steady incline in patients who stay in a hospital under observation status, there has been an increase in the average length of stay for those patients. Much of this hinges on what is known as the “2 Midnight Rule” which is essentially an attempt by CMS to suggest that any patient who is in the hospital for two midnights or less should be under observation but not admitted as an inpatient and any patient who is in the hospital for three or more midnights should be considered admitted as an inpatient. CMS forecasted that the 2 Midnight Rule would result in increased inpatient admissions; however, Sheehy et al. determined the opposite. Sheehy found that the 2 Midnight Rule lead to confusion and uncertainty. Often a physician is unsure whether their patient will be in the hospital for two days, three days, or four so the logical practice would be to start off with admitting at the lower acuity which is observation. The observation patient may then stay in the hospital greater than “2 midnights” yet the hospital operates under that assumption that the patient is observation and thereby outpatient, when in reality a charting error is the only barrier to inpatient status for the patient. Sheehy’s finding was also found to be consistent with a recent report done by the Office of the Inspector General (OIG) for 2012 (Sheehy et al., 2014). Overall, literature clearly supports the idea that the observation patient status is challenging to understand and it the source of provider and patient confusion.

While there are many confusing parts of the observation patient care model, one thing that seems to be clear is the financial burden. In a publication printed for Hospitalist physicians it states: “The trend, after all, is being driven by payers looking for a less expensive way to evaluate patients who show up at the hospital but are not necessarily sick enough to warrant an admission.” When this is then added to the fact that an increased patient copay is associated with the outpatient observation status, the financial responsibility of the payer (insurer) is reduced. Dr. James Rooks of St. John Health System in Tulsa, Oklahoma is stated as viewing the situation as though “Medicare is reinterpreting the rules to try to save money,” and is quoted saying, "What we are doing for the patient hasn't changed. It's just that they are calling it observation instead of inpatient now” (Gesensway, 2012).

      1. Observation patient experience

One of the largest developments during this transformational period in healthcare is the weighted or the higher value placed on the inclusion of the patient’s experience and satisfaction (Baird & Kirby, 2014; Lee, 2004). In October of 2006 CMS implemented the national use of HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) surveys. This opened a door for national provider comparisons and improved quality benchmarks. The use of HCAPHS evaluations became even more critical to hospitals in 2012 when the “Patient Protection and Affordable Care Act of 2010 (P.L. 111-148) [included] HCAHPS among the measures to be used to calculate value-based incentive payments in the Hospital Value-Based Purchasing program, beginning with discharges in October 2012” (Centers for Medicare & Medicaid Services CMS, Sep 2014).

The HCAHPS measurement is approved by the Hospital Quality Alliance and is the first time a national approach was used to farm patient experience information (Centers for Medicare & Medicaid Services CMS, Sep 2014). As the surveys can possibly be given to any patient who spends an inpatient night in a hospital (Ganey, 2015) the satisfaction of observation patients is not included in the results as observation patients considered by CMS as outpatients. This may be a factor as to why there is little data on the observation patient experience.

However, while there is not a significant history of research in this area one can conclude, based upon media, that many patients who experience an observation status hospital stay are unhappy with their experience. During recent years there have been a flood of media articles highlighting this very issue. Works such as Reuters’s “Medicare patients: Beware of ‘observation’ status in hospitals,” the New York Times’s “Fighting ‘Observation’ Status,” and AARP’s “Medicare: Inpatient or Outpatient? Staying in the hospital without being formally admitted can cost you thousands of dollars” all show dissatisfaction surrounds the idea of being a patient in observation status. It is important to note that patient satisfaction is a multi-level measurement. As such, simply being in a certain type of status is not the only factor influencing opinions of patients. Rather, it is combination of the staff, the culture, emotions, and an array of other factors which influence care (Hekkert, Cihangir, Kleefstra, van den Berg, & Kool, 2009; Hooten & Zavadsky, 2014).

This issue becomes even more real when one considers the fact that a hospital is paid less for providing for an observation patient. Currently, the observation patient experience does not impact potential reimbursement payments, but with the evolving environment coupled to a flood of dissatisfaction it is not unreasonable to forecast an eventual inclusion of observation patient satisfaction scores with regard to value based payment. With that said, the inclusion of this patient demographic in surveys may result in less than ideal scores which may lower payments to hospitals even further. As such, it is prudent that hospitals seek to understand and improve the observation patient service line now rather than later. This will allow providers to be prepared in the likely event that observation patient surveys are coupled to payments.

  1. observation status in pracice – A PIlot

    1. justification

As has been previously described, despite the fact the observation patient is a confusing service line for both providers and patients it is prudent that hospitals determine how to reduce misplacement and even learn to benefit from observation status utilization. As mentioned at the beginning of this essay, UPMC East undertook a pilot seeking to improve the observation patient service line, an effort which appears (at least anecdotally) that many hospitals are seeking understand.

While the pilot was able to provide significant qualitative data is was crippled in the provision of quantitative data due to data collection methods, which is discussed in Section 2.2.5. The following section (2.2 PILOT) is an overview of the pilot project, deemed successful at UPMC East.

    1. uPMC East pilot

      1. Abstract

Due to multiple factors, including efforts to improve the patient experience, UPMC East undertook a pilot program to improve common metrics surrounding observation patients. A team of three physicians and the director of care management worked together for four weeks to reduce the number of inpatients who were placed in observation status erroneously and to better understand reasons why some observation patients have a length of stay greater than 48 hours. At the end of the four week pilot the metrics were compared with the four weeks preceding the pilot. UPMC East saw a reduction from 49% of patients discharged as observation status to 37%, and an increase in length of stay from 1.5 to 1.7 days for all observation patients, including patients who were not necessarily a part of the pilot program but where under the care of one of the pilot physicians (See Table 1. and Table 2.). While the overall length of stay increased, the number of patients who were discharged post 48 hours decreased to 28%, down from 40%.
      1. Introduction

UPMC East is a two year old community hospital within the University of Pittsburgh Medical Center (UPMC) System. UPMC East (East) sees approximately 41,000 emergency department patients annually (East, 2014) with an average daily census of 123 patients, and a 49% observation rate in the four weeks preceding the pilot. Due to the current healthcare reimbursement climate, an increase in patient volume, and to ensure high quality care is provided to our patients, East undertook a pilot to both, decrease the number of patients admitted under observation status but who truly met the standards of an inpatient, and to reduce the overall length of stay for observation patients. East has seen an increase in volume making it critical that patients are correctly placed within the hospital and length of stay for both observation patients and inpatients is carefully monitored to ensure quality and timely care is provided.

The pilot was put into place with the eventual goal of implementing pilot-learned techniques and methods to other East providers, leading to an eventual overall improvement in the observation patient service.

      1. Methods

In preparation for the pilot the Vice President of Medical Affairs and Chief Nursing Officer selected three physicians from the Hospitalist service line at East to participate in the pilot. One of the three physicians was to be at East each day of the pilot to allow for a continuous data stream. The pilot required that the physician call the director of care management each time a new patient was to be admitted to observation status under their care. During the phone call the physician and director of care management would review the patient information and determine an admission status (observation or inpatient); based on CMS defined admission criteria as well as presenting symptoms and co-morbidities. The physician then admitted the patient under the agreed upon status.

Once admitted, the pilot tracked the patients admitted as observation status to find if a conversion to inpatient status occurred later during the patient’s stay, this conversion could be initiated by either the physician or care manager. Furthermore, the pilot tracked the length of stay for those patients admitted under observation status with the goal of maintaining an observation patient length of stay of 48 hours, or 2.0 days or less (Sheehy et al., 2014; Silver, 2014). If the observation patient had a length of stay longer than 2.0 days the care manager assigned a reason for the delay in discharge. The four potential reasons for the delay were “consults” (waiting for consulted physicians), “testing” (waiting for imaging, pathology, stress testing, etc.), “symptoms” (the physician believed that a longer length of stay was prudent), and “other delay” which included miscellaneous reasons such as patient choice.

Once all data had been collected over the period of the pilot, it was compared to four weeks of the same type of data, for the same physicians, preceding the pilot. The total number of patients tracked through both pilot collected data and financial data during the pilot was 104 (including observation patients and inpatients) while the total number of patients from the four weeks preceding the pilot was 133 (also including observation patients and inpatients). To calculate the observation patient (OBS) to inpatient ratio the number of OBS patients was divided by the total number of patients (sum of OBS and inpatients) within the same time period.

All outcomes are based on discharge information with the exception of a log maintained by the care manager for the purposes of comparing original admission status to the discharge status and discharge time.

      1. Results

The pilot was in place from November 13 to December 9 of 2014 and the “4 weeks prior” data was collected from October 16 to November 12 of 2014. The ratio of observation patients to inpatients decreased from 49% to 37% during the pilot.

Of the 44 patients originally placed in observation status and who were tracked, 25 patients remained as observation patients while 19 patients were moved from observation status to inpatient status. Of those 19 patients whose status was converted, 17 were converted within 24 hours, at the recommendation of the director of care management (See Table 3). Of the 25 patients who remained in observation status, 2 were driven by insurance and the remaining 23 were due to CMS specifications and symptoms. (Centers for Medicare Medicaid Services CMS, 2014 Version)

When considering the observation patient Length of Stay (LOS), 18 of the 25 patients were discharged within 48 hours leaving 7 patients who were discharged ranging from 49 to 96 hours later. (See Table 4). Of those 7 patients, 3 were delayed due to symptoms, 1 due to testing, and 3 due to “other” reasons (See Table 5). Those patients who were delayed due to symptoms included: continued chest pain following a normal stress test eventually resulting in a cardiac catheter, abdominal pain with a series of GI related procedures, and COPD exacerbation with new abdominal/flank pain. Those patients who were delayed due to “other” included: back pain due to a fall with pain control cited as reason, fibromyalgia with pain and cellulitis leading to rheumatology consult, and right leg pain/neuropathy with new abdominal pain and patient refusal to leave without a podiatry consult for toenail care. The patient who was delayed due to testing included: a gastrointestinal patient who was NPO for testing but diet was ordered resulting in testing delay. Further detail regarding the seven delayed discharge patients can be found in the “Care Manager Explanation of Late Observation Discharges” section of the Pilot Appendix, 2.2.6.

      1. Limitations/Assumptions

The inclusion of major holidays during the measured timeframes may have an impact in data trends. It is also prudent to note that the 44 patients discussed in the pilot do not represent all observation patients admitted under the three followed physicians during the time frame as the pilot only followed one physician’s patients per day which limits data to the extent that results can only be determined based upon overall trends of the three physicians during the time period. Not all data used was produced in the vacuum of the pilot.

Due to this data collection method, all data is not independent to the pilot. To calculate the observation patient admission rate, data from the UPMC East financial department was used to calculate the ratio. There are patients included in the 38 total OBS discharge number which were under the care for one of the pilot physicians but not necessarily on a day when that specific pilot physician was being tracked, as a result, not all observation patients present at UPMC during the time period of the pilot were tracked. While it is possible that those non-tracked patients impacted the overall reduction in the observation to inpatient ratio, that possibility does not impact the findings of the pilot that improvement is possible and reasonable in the observation patient service line.

Other assumptions include: 1) The 4 Weeks Prior to the Pilot refers to the 28 days from October 16, 2014 - November 12, 2014; and 2) The Pilot ran from November 13, 2014 - December 9, 2014, a period of 27 days.
      1. Pilot Appendix

        1. Tables

Table 1. Demographics

Patient Statistics

4 Weeks Prior

During Pilot

Total Patients

138 (100%)

104 (100%)


71 (51%)*

66 (63%)*


67 (49%)*

38 (37%)*







Female Patients



Male Patients



Age Median



Age Range



Caucasian Patients



African-American Patients



Race Not Specified



*Based on discharge, See 2.2.5 for data disclaimer

*P Value = 0.068

Table 2. Patients Converted with Care Management Consult

Hospital Overall

Prior 4 Weeks

4 Weeks during Pilot

Total Patients (Pts)

138 (100%)

104 (100%)

Pts discharged as IP

71 (51%)

66 (63%)

Pts discharged as OBS

67 (49%)

38 (37%)

Pts originally IP


47 (45%)

Pts originally OBS


57 (55%)

Pts converted


19/44 (43.2 %)

Table 3. Time to Conversion by Care Management

Pilot Overall

Converted in less than 24hrs

Converted in more than 25hrs

No Conversion – Remained as OBS

Grand Total

Number of Pts

17 (39%)

2 (5%)

25 (57%)

44 (100%)

Table 4. Time to Discharge for Pilot Patients Who Stayed in Observation Status

Time to OBS Pt Discharge

7/1/2014 -1/28/2015

During Pilot

48 hrs or less


18 (72%)

49 hrs or more


7 (28%)

Table 5. Reason for Observation Patient D/C Post 48 Hours During Pilot

Hours to Discharge






















Table 6. Top Diagnosis for All Patients Seen by Pilot Physicians

Top Diagnosis

4 Weeks Pre Pilot

During Pilot

Diagnosis 1

Chest Pain (NOS&NEC)

Cellulitis (Leg, Finger, Face, NOS)

Diagnosis 2

Syncope and Collapse/Palpitations

Subendo Infrc-Init Episode

Diagnosis 3

Subeno Infrc-Init Episode

Acute Kidney Failure NOS

Diagnosis 4

Acute Kidney Failure NOS

Atrial Fibrillation

Diagnosis 5

Urinary Tract Infection (NOS)

Chest Pain (NOS&NEC)

    1. Pilot context for this essay

The findings of this small (small n value) pilot at UPMC East are relevant to the purposes of this essay to show the ever growing and prevalent usage (Feng et al., 2012) of the observation patient status. The results indicating that the ratio of observation patients to inpatients was reduced from 49% to 37% in a six week period is a clear indicator that the type of patient may not be changing but the way patients are handled is. It is agreed that a patient can erroneously be placed in observation status due to simple issues such as poor documentation or a lack of understanding surrounding the observation status usage. This may be a contributing factor to the growing length of stay as shown in the pilot. Patients with higher acuity may indeed be placed in observation status simply because of missing documentation that would convert a patient from observation status to that of inpatient; further augmenting the reality of the impact of observation patient status on the healthcare system, including the general welfare of the public.
  1. disussion

The observation patient is becoming increasingly common; however, its use is still not fully understood. As a result, the patient experience can suffer, financial obligations can be blurred, and provider confusion can be prevalent. In fact, observation patient experiences have been dissatisfactory enough that a class action lawsuit has been taken up in Observation Status & Bagnall v. Sebelius with the Center for Medicare Advocacy (Advocacy, 2011). Other governmental action has been occurring as well, including the recent bill working its way through United States Congress with would require hospitals to explain the patient's status as an “outpatient under observation” (or any similar status) and not as an inpatient as well as explain the reason for that classification within 36 hours of the patient arriving to the hospital ("Notice of Observation Treatment and Implication for Care Eligibility Act," 2015).

To further understand the impact of the observation status on the patient experience Today’s Hospitalist interviewed several physicians and found the sentiment to be negative because the observation status challenges physicians' relationships with their patients. As physicians are often the ones who have to tell patients that being in observation status likely means higher out-of-pocket costs and possible complications at discharge may arise if a nursing home, rehabilitation, or other skilled facility is recommended. One interview with Dr. Josue of Crozer-Keystone Health System found him saying, "It's a very uncomfortable conversation to have to explain to patients that we're changing them from an inpatient to observation," and "Patients' care doesn't change, but their copay does" (Gesensway, 2012; Sheehy et al., 2014).

When all factors are considered there is what appears to be a financial shift. As hospitals are reimbursed less they seek lower cost alternatives for the provision of care, observation status is one such alternative. Changing perspectives but not topics, the previously noted increase in average length of stay indicates a likely increase in the acuity of patients admitted under observation status. This may in fact stem from confusion and a lack of understanding regarding observation status implications. Considering the pilot done at UPMC East perhaps the largest lesson learned is that physician education can make a large impact. During this transformative period in healthcare, physician education is a never ending process, as such infrastructure to support physician education and system awareness should be implemented.

  1. Conclusion

A number of issues coupled to observation patient status have been discussed throughout this essay. These issues include:

  • An increase in average observation patient length of stay

  • An increase in the number of patients admitted under observation status (meaning a decrease in number of patients admitted under inpatient status)

  • An overall lower reimbursement/bundled payment to the hospital/provider for care provided to observation patients

  • An increased patient copay for observation patients due to their outpatient status

  • Blurred definitions of what is or is not an observation patient and/or inpatient

Each of these indicates an overall financial shift from the payer, such as Medicare/Medicaid, to the provider (in the form of forced cost reduction), and to the patient as forced out of pocket payments (government mandated healthcare spending). Furthermore, when considered in conjunction with the increased emphasis on the patient experience, hospitals are at an undesirable crossroads. Questions linger as providers embark on the uncharted territory of forced cost control while simultaneously maintaining high satisfaction among staff and patients.

Efforts to decrease the length of stay are necessary to avoid financial loss yet the patient can feel rushed or less cared for due to those efforts. Hospitals are being asked to be a 5 star hospitality service while payers continually suggest 5 star service shouldn’t cost as much. The ongoing shift to outpatient care such as outpatient surgery centers is one clear advancement and is the future of healthcare. The provision of services in a low cost fashion is crucial for success.

In conclusion, the care provided to those in observation patient status is, in all reality, no different from the care which has been provided in previous decades. However, the amount of payment received is different, this change is the product of the ongoing effort in the United States to reduce the amount spend on healthcare services, the same services which are the cause of the health status of United States being ranked no higher than worst in the 2014 updated of the Commonwealth Fund’s “MIRROR, MIRROR ON THE WALL How the Performance of the U.S. Health Care System Compares Internationally” (Davis, Stremikis, Squires, & Schoen, 2014). As we try to adjust the healthcare system in the United States the only constant is change. It is only natural to expect some dissatisfaction along the way. Use of the observation patient status is certainly a source of some dissatisfaction. However, whether the dissatisfaction of patients sitting in observation status is a byproduct of United States Healthcare improvement or lack thereof is yet to be determined.


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