Patient Care

Observation-Status Patients Are Clinically Heterogeneous, Costly to Hospitals


Clinical question: What are the characteristics of a large cohort of patients under observation status?

Background: The use of observation hospital services has increased significantly. The Centers for Medicare and Medicaid Services (CMS) defines observation status as a “well-defined set of specific, clinically appropriate services,” usually lasting <24 hours and exceeding 48 hours in “only rare and exceptional cases.”

Study design: Retrospective descriptive study.

Setting: University of Wisconsin Hospital and Clinics, a 566-bed tertiary academic medical center.

Synopsis: A total of 43,853 hospitalizations were reviewed during the study period. Of those, 4578 (10.4%) were observation. The mean observation LOS was 33.3 hours, which included 16.5% of patients with LOS >48 hours. Although chest pain was the top observation diagnosis, 1141 distinct observation diagnosis codes were found.

These findings illustrate a significant disparity between the CMS definition for observation stay and the description of observation patients in this cohort, despite using CMS-endorsed InterQual criteria to determine status. While the cost per encounter for observation care was less than inpatient care, reimbursement was insufficient to cover those reduced costs. Ultimately, the net loss of revenue per observation encounter was $331, compared to a net gain in revenue per inpatient encounter of $2,163. This operating loss for hospitals is coupled with the fact that some of this cost is being transferred to patients.

Bottom line: Definitions and reimbursement models for observation status warrant continued research and discussion in the context of our evolving healthcare climate.

Citation: Sheehy AM, Graf B, Gangireddy S, et al. Hospitalized but not admitted: characteristics of patients with “observation status” at an academic medical center [published online ahead of print July 8, 2013]. JAMA Intern Med.

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