Observation units and who $aves

By  |  July 9, 2013 | 

This week, JAMA IM released a nice study profiling patients on observation status for the years 2010-11.  While only involving one site, the large sample and thorough accounting of data enhances our knowledge of the growing obs trend.

The paper, along with Bob Wachter’s commentary, deserve a read.

I wish to highlight two findings–both of which I cite in the table below:


obs chart 2


–In red, you will notice the time general medicine patients spent in observation mode.  Only a third of patients remained in a unit less than 24 hours.  The most common DRG was chest pain (at 12%). Not what the architects of observation units had intended I am sure.

–In green, compare the delta between cost and reimbursement when gen med patients boarded in an observation unit versus those directed to the wards.  Given the choice between admitting an individual and risking a denial, or more ominously, if the patient returns within 30 days of discharge, do you choose inpatient status with the lesser loss?  Or rather, do you take the devil you know, observe in your unit, and take the greater hit?

The answer depends on your payer mix and aggregate readmission burden.  I am willing to bet the answer will vary at different institutions.

The savings envisioned with obs unit uptake accrue to the system, not the hospital.  Once we learn the math, as other policy missteps demonstrate, the unexpected occurs.  If studies replicate the findings above, the observation unit as optimal strategy, envisioned as “penalty prophylaxis,” may prove financially untenable in some hospitals.

We will likely experience a rule change from CMS before we see gaming on these lines however, as Bob alludes to in his commentary.  The confusion current policy creates for hospitals, beneficiaries, and providers cannot continue indefinitely.



About the Author:

Brad Flansbaum
Bradley Flansbaum, DO, MPH, MHM works for Geisinger Health System in Danville, PA in both the divisions of hospital medicine and population health. He began working as a hospitalist in 1996, at the inception of the hospital medicine movement. He is a founding member of the Society of Hospital Medicine and served as a board member and officer. He speaks nationally in promoting hospital medicine and has presented at many statewide meetings and conferences. He is also actively involved in house staff education. Currently, he serves on the SHM Public Policy Committee and has an interest in payment policy, healthcare market competition, health disparities, cost-effectiveness analysis, and pain and palliative care. He is SHM’s delegate for the AMA House of Delegates. Dr. Flansbaum received his undergraduate degree from Union College in Schenectady, NY and attended medical school at the New York College of Osteopathic Medicine. He completed his residency and chief residency in Internal Medicine at Long Island Jewish Medical Center in New York. He received his M.P.H. in Health Policy and Management at Columbia University. He is a political junky, and loves to cook, stay fit, read non-fiction, listen to many genres of music, and is a resident of Danville, PA.


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One Comment

  1. Cynthia Heidke July 10, 2013 at 10:05 am - Reply

    Just a clarification about the paper, the University of Wisconsin Hospital and Clinics (UWHC) does NOT have an obs unit at this time. The obs population analyzed in this paper are obs patients that are on general medicine wards–a “virtual” obs unit. ~Cindy, Administrator for the Hospital Medicine Division at UWHC

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