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Thinking of admitting this patient? Think again
How observation care is complicating life for you (and your patients)
by Deborah Gesensway



Published in the February 2012 issue of Today's Hospitalist

When the hospitalists at Crozer-Keystone Health System started treating observation patients a year ago, they knew they would face changes--and challenges.

Located in suburban Philadelphia, the health system introduced observation care at two of its hospitals. Today, one out of every five patients the hospitalists treat is a short-stay patient in observation status, not a full-fledged inpatient. While that may be good news to administrators worried about being penalized for inappropriate admissions, physicians in the trenches have a markedly different view.

Stanley Josue, MD, medical director of hospitalist services at the two hospitals, says
"Patients' care doesn't change, but their copay does."

-Stanley Josue, MD
Crozer-Keystone Health System

that the growth of observation care has stretched the resources of the 11-physician group.

There's the faster pace of care that comes when patients leave the hospital after only a day or two, and the extra paperwork. That compressed time frame means more interactions with case managers and utilization reviewers, who scrutinize patients more closely than ever and demand more specific documentation to make the case for observation.

The growth of observation care has also challenged physicians' relationships with patients. Doctors are often the ones who have to tell patients that being in observation likely means higher out-of-pocket costs and possible complications at discharge if a nursing home or rehab is recommended. Because observation status is considered outpatient care, patients typically aren't eligible for the same follow-up services they receive as an inpatient.

"It's a very uncomfortable conversation to have to explain to patients that we're changing them from an inpatient to observation," Dr. Josue says. "Patients' care doesn't change, but their copay does."

Observation Catch-22
Those conversations are at the heart of many hospitalists' frustration with the boom in observation care. 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.

"Two years ago, patients who came in with diabetes, hypertension, hyperlipidemia and a family history and who presented with atypical chest pain would be an inpatient slam-dunk," explains James Rooks, MD, director of hospital medicine at the St. John Health System in Tulsa, Okla. "Now, even patients with multiple risk factors are being admitted under observation status."

The way Dr. Rooks sees it, Medicare is reinterpreting the rules to try to save money. "What we are doing for the patient hasn't changed," he notes. "It's just that they are calling it observation instead of inpatient now."

Then there are downsides in terms of follow-up. Frail, elderly individuals may need a higher level of post-acute care--but if they aren't admitted, that follow-up care is not covered.

They might be a good candidate for short-term skilled nursing," notes M. Ross Tangum, MD, medical director of the hospitalist service at Legacy Good Samaritan Medical Center in Portland, Ore. "But it's not going to be paid for if they are an observation case." That lack of coverage "forces us into really difficult situations where we have to tell patients, 'I would like to get you into rehab for a couple of weeks, but you are going to have to pay out-of-pocket.' And they often don't have the resources."

And while the hospitalists don't make the rules, they're bearing the brunt of patient anger. "We can't keep patients in the hospital who don't need hospitalization," says Dr. Rooks, "but we have to keep the patients and families happy so that satisfaction scores are high. It's a real Catch-22."

Unclear rules
Adding insult to injury, doctors say they can't rely on any one set of rules to determine who should be referred to observation and who should be admitted. According to Dr. Tangum, deciding the appropriate status for individual patients often feels like a purely subjective process.

"You take 10 patients," Dr. Tangum says. "How I assign them will be different from how my utilization reviewer may define them, which may be different from how her colleague may define them. There doesn't feel as if there is an agreed-upon set of rules that we can all go by."

The most commonly used criteria for determining hospital status are McKesson's InterQual Decision Support and the Milliman Care Guidelines. (These are also the standards used by Medicare's recovery audit contractors.) But experts in observation medicine say both sets are flawed because they're not based on quality evidence. Another problem is that they are revised frequently.

"Our observation unit is 2-1/2 years old, and we are on our third InterQual book. It changes every Aug. 1," says Jason J. Ham, MD, a hospitalist who directs the adult medical observation unit at the University of Michigan in Ann Arbor. "I would give classic InterQual guidelines a C to C+ in their ability to match how the physician feels about inpatient or observation status for his or her patient." Without physician scrutiny on the best location for a patient despite status guidelines, he adds, "a sick inpatient could be placed in a short-stay location."

Upsides
But while hospitalists are frustrated with observation care, that doesn't mean they don't see the upsides. There clearly are patients who have traditionally been admitted who could be better treated elsewhere. And experience and evidence show that many low-risk patients can be cared for as outpatients by midlevels following protocols.

For instance, the best care for an 85-year-old with multiple comorbidities who comes to the hospital with syncope but no real acute medical need may not be in a hospital. "An inpatient stay in the hospital is not the right setting," explains Peter Y. Watson, MD, head of the division of hospital medicine at Detroit's Henry Ford Health System, where hospitalists have led observation care for nearly 10 years. "That may be inconvenient" to her family, who want her to be hospitalized while they figure out placement in a nursing home or assisted living. "But we don't really want to bring her into the hospital for syncope."

Moreover, studies have found that chest pain observation protocols reduce the rate of missed heart attacks and improve compliance with recommended diagnostic testing for a number of conditions, ranging from syncope to TIA. The American College of Emergency Physicians in 2008 stated that observation units are a "best practice" when done appropriately.

Workarounds
But even hospitalists who accept the potential for observation care face another problem: Most hospitals don't have well-designed, hospitalist-run observation units or adequate protocols and systems to handle these patients. Many hospitals instead scatter observation patients throughout the medical floors.

Hospitalists who don't work in dedicated observation units, which include Dr. Josue in Pennsylvania and Dr. Rooks in Oklahoma, have developed workarounds to deal with the irony inherent in observation: While these patients may be less sick than admitted patients, their testing, labs and consults are expedited.

"The clock is ticking," Dr. Josue explains. "You don't want patients sitting around waiting for an evaluation if they can leave. When we put a request for a consult in, it is flagged that the patient is observation. The subspecialists know that these patients aren't really sick--they aren't ICU patients--but they still have to be seen promptly."

In Oklahoma, Dr. Rooks says that any lab ordered for an observation patient is marked "discharge pending." That means it takes second priority after those ordered "stat," but before those labeled "routine" or "next day."

"There is pressure not to waste hours in the hospital on observation patients," Dr. Rooks says. "But it really is no different than with inpatients. We are not dilly-dallying with anybody these days."

At Crozer-Keystone, the hospitalists also code observation patients' charts with a special color to "signal to the staff that this is a patient in observation," Dr. Josue says.

In some ways, he adds, observation status means more work for nurses than physicians. "There are times when I've placed patients in observation at 6 a.m. and they are getting discharged at 4 p.m.," he says. "That's a lot of paperwork for one nurse."

The case for observation units
That's one big reason why experts now advocate for dedicated observation units with their own nursing staff who don't also have to provide acute care. And observation medicine experts say dedicated observation units run and operated by hospitalists, not ED physicians, are the way to go. That's because patients classified as observation status are closer to internal medicine than emergency medicine.

"They need a higher intensity of service and a provider who knows more than emergency medicine," says Pawan Suri, MD, chair of the division of observation medicine at Virginia Commonwealth University Medical Center in Richmond. Dr. Suri is double-boarded in internal medicine and emergency medicine.

Dr. Ham in Michigan, who is also double-boarded in emergency and internal medicine, advocates for a mix of ED doctors, hospitalists and family medicine physicians for observation care. But he does note that hospitalists perform well in observation units for complex patients--and that, as economic realities have increased the imperative for observation, more complex patients are being thrust into that setting.

"The traditional ED observation unit does very nicely because of concise pathways for patients with a known problem we can predict will go home in a short period of time, such as a kidney stone," Dr. Ham says. "But the patient with an unknown diagnosis or a number of comorbidities needs a higher level of attention."

In addition, Dr. Ham says, cohorting observation patients in a unit makes it easier to treat them more efficiently. "Whereas an inpatient team may round on a patient once or twice a day, expecting the patient's length of stay to be three to five days," he explains, "we would assess, treat, and communicate with patients as many times as required, given test results, exam changes, and their readiness to go home or to be admitted."

Getting results
At Detroit's Henry Ford Hospital, moving observation rule-out MI chest pain patients from the cardiac inpatient floor, where they were treated alongside admitted cardiology patients, to the new observation unit that opened last fall has already shown its value. By clustering these patients with dedicated observation nurses and hospitalists, Dr. Watson says, patients' length of stay has plunged.

"We went from stays of 24 to 25 hours for chest pain to 15 hours," he points out. "Some of that was tightening admissions criteria, but we were able to dramatically reduce length of stay because hospitalists and nurses can focus their efforts."

The group is now writing pathways for other types of observation patients to be treated in that unit. Conditions include syncope, hypertensive urgency, heart failure, pneumonia and asthma.

David Paje, MD, Henry Ford's associate division head of hospital medicine and the author of those pathways, says that observation status patients who do not fit into protocols will be sent to regular medical beds and interspersed among inpatients.

"Observation is a mindset of identifying patient needs and aligning them with the appropriate resources and level of service," Dr. Paje explains. "An observation unit is an excellent opportunity to drive throughput for a carefully selected patient cohort." While observation patients can be cared for anywhere in the hospital, he notes, "having a dedicated unit allows for more efficient provider workflow. It also eliminates the issue of competing priorities that exist in general units that cater to patients with more acute, complex needs."

Making ends meet
Nationally, Dr. Paje adds, between 20% and 25% of observation patients are eventually admitted. For patients with chest pain and syncope, those figures are in the 10% to 15% range.

In Pennsylvania, Dr. Josue says that his group is "really pushing for" a dedicated observation unit, although the logistics of where to locate it in the hospital haven't all been worked out. Having a dedicated unit, he notes, "would make it clearer to everyone, including patients, that they're out of the ED but they're in observation." In addition to being able to provide more focused care, having a dedicated unit would help patients grasp more readily that they haven't been admitted.

Dr. Josue has also been trying to identify if there is a subgroup of patients who aren't good candidates for observation. In his experience, patients who come in with respiratory complaints like asthma or COPD exacerbation are less likely than others to improve enough after one day of observation to be discharged. As a result, he suspects that more of these patients should be admitted, not observed, from the start.

As for helping observation patients stretch their resources, Dr. Ham in Michigan says that establishing outpatient medical homes and accountable care organizations--which both hold out the promise of providing more comprehensive patient care--might be the type of bridge needed for non-inpatient care.

In Oklahoma, Dr. Rooks notes that his hospital has partnered with a nonprofit organization to open a medical access clinic for uninsured patients, so it has "a safe place" to discharge observation patients who don't have insurance. Newly hired LPN discharge coordinators also help, he points out, by touching base with about 80% of patients after their hospital stay to make sure they understand follow-up instructions and have been able to fill prescriptions.

More scrutiny?
And at Henry Ford Hospital, case managers help observation patients who have specific needs. Plus, Dr. Watson says, "our internal medicine clinic has recently expanded its capabilities to care for patients with high readmission risk, such as heart failure, to reduce their reliance on the inpatient setting."

But he also warns that while many hospitals are learning to embrace observation care, they should be preparing for the time when Medicare and other payers will refuse to pay for observation care they deem unnecessary. Hospitals are already seeing pressure from payers, including Medicare, to make sure that patients meet specific criteria before they're put in observation. Observation is supposed to be an "active" status, not just a default.

As Dr. Watson notes, "People are starting to look and ask, 'Should all these people be in observation?' "

Deborah Gesensway is a freelance writer who covers U.S. health care from Toronto.


Observation care: a bitter pill

A MAJOR IRRITANT FOR PATIENTS about observation is its unintended effect on a Medicare billing rule: Because follow-up in skilled nursing, rehab or a nursing home is paid for only if the patient is hospitalized for at least three days before discharge, patients in observation but not admitted do not qualify. Although many believe observation care is only for 24 hours, it actually can last 48 hours or more.

A truly galling experience for patients is to have been placed in observation for one night, then admitted for two nights--and then told that Medicare won't cover their follow-up nursing home care, says James Rooks, MD, a hospitalist at St. John Medical Center in Tulsa, Okla.

Often, patients don't know their status in the hospital and find out only when they receive a bill for their copay. Medicare copays are higher for outpatient care, which includes observation services.

That dilemma has prompted a class action lawsuit against HHS challenging the expansion of observation status. The lawsuit contends that classifying Medicare beneficiaries who receive inpatient hospital care as outpatients deprives them of Medicare benefits by subjecting them to significant out-of-pocket expenses.

According to the Medicare Payment Advisory Commission, the number of Medicare claims for observation care has been increasing dramatically over the last few years, from 828,000 in 2006 to more than 1.1 million in 2009¡Xand the number of claims for observation care lasting more than 48 hours has risen even more sharply.


What's driving observation?

WHAT'S BEHIND the increase in observation status? Here are factors that remain in force:

  • More and more conditions that were traditionally treated in the hospital are now safely addressed in outpatient settings. Experience with evidence-based protocols and guidelines has helped reassure risk-adverse physicians that observation is a good alternative to hospitalization for patients they worry can¡¦t go home.

  • Medicare used to pay a separate fee for observation for only three conditions: chest pain, asthma and congestive heart failure. In 2008, the rules were changed so that all diagnoses are eligible for observation.

  • Medicare's recovery audit contractors (RACs) have effectively recouped money from hospitals for "overpayments¨ based on their contention that hospitals provided unnecessary care. As a result, hospitals now live in fear of being told that their short-stay admissions were improper.

  • A growing segment of the population - those too sick to be at home alone but not sick enough to be admitted - are ending up in observation status because there simply is no alternative place for them in the American health care system. Hospitalist Peter Watson, MD, at Detroit's Henry Ford Hospital calls this the "disposition doughnut hole.¨ He also notes that the number of people now falling into that "doughnut hole¨ is growing.

  • Hospitals with high readmission rates are preparing to face financial penalties, and observation status patients are considered neither admitted nor readmitted. The new hospital value-based purchasing program, as mandated by the Patient Protection and Accountable Care Act, kicks in in October of this year, as do penalties for hospitals with high 30-day readmission rates for heart failure, pneumonia and acute MI.

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