Take the lead to ensure patients are placed in the right status
Emergency, outpatient surgical departments are key targets
Hospitals tread a fine line when it comes to placing patients in observation status. If patients don’t meet criteria for observation, your claim probably will be denied.
On the other hand, if patients are admitted for a one-day stay when they should be placed in observation status, your claim also likely will be denied.
"Getting patients into the right status is a win-win situation for everyone. We benefit financially by getting paid for observation, and it is the right thing to do for the patients. People don’t need to be exposed to longer stays if it’s not necessary," says Toni Cesta, RN, FAAN, vice president, patient flow optimization for the North Shore-Long Island Jewish Health System based in Great Neck, NY.
Before the Centers for Medicare & Medicaid Services (CMS) developed the Medicare Outpatient Prospective Payment System (OPPS), hospitals received cost-based reimbursement. Many hospitals tended to overuse observation status because they feared that their claims for inpatient admission would be denied, says Deborah Hale, CCS, president of Administrative Consultant Services Inc., a Shawnee, OK-based health care consulting firm.
Under the current rules, Medicare’s OPPS does not include a separate payment for observation status other than for chest pain, congestive heart failure (CHF), and asthma.
The question of whether a patient goes into observation vs. admission is confusing, Cesta says. "You have to put patients in the right level of service regardless of the payment you’ll receive," she points out.
When CMS established separate observation status payments for asthma, CHF, and chest pain, the confusion began, Hale asserts.
Some hospitals interpreted that as meaning those are the only patients who should be placed in observation and everyone else should be admitted as an inpatient, explains Teresa Fugate, RN, BBA, CPHQ, CCM, a manager with Pershing, Yoakley & Associates, a Knoxville, TN-based health care consulting firm.
"We found that, all of a sudden, hospitals were admitting all patients on inpatient status and many were staying only one day. The quality improvement organizations [QIOs] felt that the percentages were too high," she says.
For instance, one-day stays in 2002 accounted for 8% of admissions. By 2003, it had jumped to 17%.
"Hospitals tend to go to one extreme or another. They either admit everybody in observation status and keep them in observation status when they should be in inpatient, or they say they don’t have observation status. Neither is the right strategy," Hale says.
However, observation status may be appropriate for patients with conditions other than the three specified in the Medicare OPPS.
In those cases, when patients are put in observation status, CMS expects that they are receiving services similar to those they would receive in the emergency department (ED). The hospital doesn’t get a separate room and board payment, says Fugate.
According to CMS, the purpose of observation status is to determine the need for inpatient admissions. It has declared that 24 hours should be enough to determine if a patient can be discharged home safely or should be admitted as an inpatient and has been allowing hospitals to keep patients up to 48 hours in observation.
Since CMS pays a flat fee (approximately $400) for observation status for chest pain, asthma, and CHF and rolls payment for other diagnoses requiring observation into the ED charges or the ambulatory surgery services, it doesn’t make sense to keep a patient in observation any longer than 24 hours, Hale points out.
"Hospitals don’t want to overuse observation status. It’s financially devastating. Also, CMS advises that a hospital shouldn’t substitute observation status for inappropriate inpatient admission," she says.
The situation is complicated by the fact that Medicare fee-for-service, Medicare Advantage, Medicaid, and commercial payers all have different rules for appropriate use of observation.
"While Medicare rules are clear, other payers have different rules, and it has created chaos," Hale says.
For instance, if a hospital sees a patient older than 65, it knows it has to follow strict observation guidelines. But if the patient isn’t covered under fee-for-service Medicare and instead has a Medicare HMO, the payer may want a 72-hour observation period, she adds.
There are two ways to assign observation patients to beds — creating a dedicated unit just for observation and using scattered beds, Cesta points out.
The advantage to a dedicated unit is that staff focus on expediting the patients’ discharge in a short period of time. When observation patients are scattered on units with other patients, they might not receive the same focused attention, she says.
Setting up a dedicated unit requires additional staff and results in additional costs, but it may be the best solution for hospitals that have capacity issues, Cesta says.
In hospitals without capacity issues, it’s effective to place patients on observation status in the specific unit that is appropriate for their reason for observation, Cesta suggests.
For instance, patients with mild head trauma are placed in neurology. If they are placed in observation for chest pain, they are given a bed in the cardiology unit. If the patient record meets Interqual or other criteria, the decision to place a patient in observation status should be made by the ED staff and the private attending physician, she says.
Once the decision to place a patient in observation status has been made, the ED should notify the admitting office so a proper bed assignment can be made.
At the end of the observation period, the attending physician must make a decision as to whether the patient should be discharged or admitted to inpatient status. The documentation should include the rationale for conversion to inpatient or discharge diagnosis.
The national conversion rate from observation to inpatient status is about 25%, Cesta explains.
If your rate exceeds the national standard, review the types of patients to make sure they were appropriate for observation, she adds.
Hospitals tread a fine line when it comes to placing patients in observation status. If patients dont meet criteria for observation, your claim probably will be denied.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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