Exploratory Analysis of Observation Stay Pamela Owens, Ph.D. Ryan Mutter, Ph.D. September, 2009 AHRQ Annual Meeting

Advancing Excellence in Health Care 2 History 1988 – American College of Emergency Physicians (ACEP) creates first Observation Unit Guidelines 1988 – American College of Emergency Physicians (ACEP) creates first Observation Unit Guidelines ACEP creates specialty section of Observation Medicine ACEP creates specialty section of Observation Medicine CMS institutes reimbursement for observation stays related to chest pain, heart failure, asthma CMS institutes reimbursement for observation stays related to chest pain, heart failure, asthma 2008 – CMS removed diagnostic criteria for reimbursement 2008 – CMS removed diagnostic criteria for reimbursement

Advancing Excellence in Health Care 3 Observation Stay Defined Well-defined set of specific, clinically appropriate services, which include ongoing short-term treatment, assessment, and reassessment before a decision can be made regarding whether the patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Well-defined set of specific, clinically appropriate services, which include ongoing short-term treatment, assessment, and reassessment before a decision can be made regarding whether the patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. -- CMS, Pub , Chapter 6, Section 20.5

Advancing Excellence in Health Care 4 Background Commonly ordered for patients who present to the ED and who require a significant period of treatment or monitoring in order to make a decision about admission or discharge Commonly ordered for patients who present to the ED and who require a significant period of treatment or monitoring in order to make a decision about admission or discharge – Can also occur as a direct admission to observation from the community. May prevent unnecessary hospital admissions May prevent unnecessary hospital admissions May impact access to skilled nursing facilities (SNFs) for Medicare beneficiaries May impact access to skilled nursing facilities (SNFs) for Medicare beneficiaries – Observation stay does not count toward three-day rule

Advancing Excellence in Health Care 5 Use may be influenced by expected payer Use may be influenced by expected payer – Time allowed in observation Medicare (Part B) minimum of 8 hours; up to 48 Medicare (Part B) minimum of 8 hours; up to 48 Medicaid; up to 48 hours Medicaid; up to 48 hours Private; varies considerably; up to 23 hours Private; varies considerably; up to 23 hours – Reimbursement in conjunction with inpatient stay

Advancing Excellence in Health Care 6 Objective To examine if the use of observation stays decreases the use of inpatient admissions To examine if the use of observation stays decreases the use of inpatient admissions

Advancing Excellence in Health Care 7 Methods: Data Healthcare Cost and Utilization Project (HCUP) State Emergency Department Databases (SEDD) and State Inpatient Databases (SID)  Data Years:  7 states (GA, MN, MO, NE, NY, TN, VT) with sufficient line-item detail for all years  21.6 million inpatient and ED records for 2005  22.0 million inpatient and ED records for 2006  22.1 million inpatient and ED records for 2007 Additional information on the HCUP at

Advancing Excellence in Health Care 8 Methods Measures:  Observation stay  Revenue code of 762  Positive observation stay charge  CPT code of ,  ED visit  Revenue code of  Positive emergency department charge  CPT code of  Point of origin or admission source = ED

Advancing Excellence in Health Care 9 Analysis  HCUP analysis - unit of analysis is the visit  Analyses are performed using SAS  Descriptive analysis aggregate and by state

Advancing Excellence in Health Care 10 Results

Advancing Excellence in Health Care 11 Results

Advancing Excellence in Health Care 12 Results

Advancing Excellence in Health Care 13 Summary Only slight variation is evident during 3 years. Only slight variation is evident during 3 years. Slight increase in inpatient stays (.4%) and slightly greater increase in observation stays (3.8%) between 2005 and Slight increase in inpatient stays (.4%) and slightly greater increase in observation stays (3.8%) between 2005 and Slight increase in ED visits resulting in admission (3.5%) between 2005 and 2007, but Slight increase in ED visits resulting in admission (3.5%) between 2005 and 2007, but – Greater increase in ED visits resulting in discharge following observation (12.9%) – Greater decrease in ED visits resulting in admission following observation (13.4%)

Advancing Excellence in Health Care 14 Summary Drastic variation by state Drastic variation by state – ED visits resulting in admission (no obs), % to 21.7% 9.6% to 21.7% – ED visits resulting in admission (with obs), % to 1.3% 0.1% to 1.3% – ED visits resulting in discharge (with obs), % to 3.5% 0.4% to 3.5%

Advancing Excellence in Health Care 15 Limitations Analysis only exploratory Analysis only exploratory Short period of time due to data limitations Short period of time due to data limitations Few states can provide necessary data across time Few states can provide necessary data across time Known variability of coding by hospital Known variability of coding by hospital Complicated reimbursement structure makes billing more difficult Complicated reimbursement structure makes billing more difficult Identification of observation stays dependent on line item detail Identification of observation stays dependent on line item detail

Advancing Excellence in Health Care 16 Conclusions Worthy of additional analyses Worthy of additional analyses Future research – Data Validity Future research – Data Validity – Coding variation across payer – Coding variation across hospitals – Coding variation across states

Advancing Excellence in Health Care 17 Conclusions Future research – Quality and Value of Care Future research – Quality and Value of Care – Quality and value of observation stay care – Quality and value of observation stay relative to inpatient admission Patient perspective Patient perspective Health care system perspective Health care system perspective

Advancing Excellence in Health Care 18 Conclusions Future research – Quality and Value of Care Future research – Quality and Value of Care – Impact of observation stay utilization on ED overcrowding or ED revisit rate – Expand Zhao’s HCFO-funded analysis examining on how observation stays are used in Medicare program and how they affect beneficiary cost sharing and hospital payments. ( Lan Zhao, Ph.D., SSS )