Shedding Light on “Observation”

It was a strange day for Dr. Welby. The night before, three new patients arrived in the telemetry unit, all with chest pain. A next-day discharge was possible for each patient. One patient was placed in observation, while the other two patients were admitted as inpatients. When Dr. Welby reviewed their charts, one case didn’t seem serious, and certainly not more serious than the patient who was placed in observation. Dr. Welby considered why this might be.

There have always been those patients who just aren’t ready to go home from the emergency department (ED) and need a little more time to finalize a diagnosis or get treatment for a safe discharge. In the “fee for services” world, these patients would be placed in a hospital bed as an inpatient and billed accordingly. Once Medicare began paying by the diagnosis, it didn’t take long for payers to question proper Diagnosis Related Group (DRG) payments. Out of this, the observation stay was born.

Centers for Medicare & Medicaid Services (CMS) defines “observation” as “a set of specific, clinically appropriate services that include ongoing short-term treatment, assessment, and reassessment that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they’re able to be discharged from the hospital”

Furthermore, CMS declares that “the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours.”

Observation can be discouraging for some physicians and hospital administrators and has become a focus for utilization review (UR) case managers. To help simplify matters, clinicians can depend on how CMS and others define observation. Synthesizing such a conclusion and documenting it at the end of the history and physical (H&P) will sharpen a physician’s ability to rule appropriate observation vs. inpatient declarations.

If the following conditions exist, document them in the H&P:

• The patient is only mildly to moderately ill.
• The patient will require short term ongoing evaluations and or treatment to judge stability for a safe discharge.
• It is anticipated the decision to admit or discharge can be made within a 24-hour (and certainly no more than 48 hour) time frame.

The CMS “Two-Midnight” rule supports this process. From the CMS perspective, when a physician documents a patient is sick, requiring significant hospital level services with a management plan requiring at least two midnights in the hospital, that patient is inpatient appropriate. CMS even states that if such a patient has an unexpected improvement that allows for discharge before the second midnight, CMS will still agree with acute inpatient status and pay accordingly.

What about Dr. Welby’s three patients on the telemetry unit?

One was a traditional Medicare patient who came in before midnight with chest pain and dehydration. The admitting physician knew that this patient would require serial enzymes to rule out a myocardial infarction (MI), ongoing intravenous (IV) fluids, and follow up labs prior to completing a cardiology consultation and nuclear stress test. This required the patient to stay the second midnight and therefore would make the patient inpatient appropriate, according to the Medicare CMS rule.

Another patient came in around the same time with the same situation on a Medicare Advantage plan. The Two-Midnight rule didn’t apply for this patient and his management plan was set according to the plan’s medical director, appropriate for observation care.

The third patient, like the first, was also a traditional Medicare patient. He had a similar history but with more risk factors and previous episodes of exertional chest pain. His care team also planned serial enzymes and IV fluids to address his acute kidney injury but also planned cardiac catheterization and a possible stent. He was sicker and needed more intensive services, including two or more days in the hospital, resulting in his qualification for inpatient admission.

With the power of being the frontline caregiver who can document the severity of illness, the intensity of treatment, and the minimum length of stay required to treat the patient, frontline physicians can continue determining the proper status of their patients.

Get your observation questions answered in Sound Advisory Services’ latest webinar. You’ll hear from three experts and come away with a better understanding of:

• The definition of observation
• How to assess if observation services are appropriate
• The impact of observation services on utilization and throughput
• Best practices to treat observation patients and manage the observation clock

To learn more about observation, check out the Sound Advisory Services webinar Observations on Observation: Best Practices from our Experts. Click here to watch the webinar.