Observing patients better
Allegheny General’s new 20- bed unit may admit fewer but help reimbursement rates
Between 19% and 25% of the 55,000 people who come to Allegheny General Hospital’s emergency room annually for help wind up being admitted to the hospital, Chief Medical Officer Imran Qadeer said.
Now, Allegheny Health Network has added a new 20- bed unit to its flagship hospital on the North Side to try out a system that could improve operating efficiency — helping sort out patients who need to be admitted vs. those who don’t need such intensive care — with the possibility of improving the hospital’s reimbursement rates from insurance providers.
What the unit probably won’t do is reduce out- of- pocket expenses for most of the
patients referred there for care.
AGH’s new observation unit, which is located on the second floor, will serve patients who are first treated in the nearby emergency room but for whom doctors need more information before deciding what’s wrong.
Forbes Regional Hospital in Monroeville is considering developing a similar ward, which Dr. Qadeer said the health care system is calling a clinical decision unit and is overseen by a dedicated team.
Only one- third of hospitals in the U. S. have observation units, but the number of patients who are admitted to what insurers call observation status has been climbing. And that can sting hospitals. Insurers reimburse hospitals far less for an observation stay when compared with an inpatient admission, even though the care provided by doctors and nurses can be the same. That’s a particular burden for smaller, community hospitals that don’t have the resources to make up the difference in dollars elsewhere.
The number of outpatient observation visits covered by Medicare spiked 32% between 2012 and 2017, according to a March report by the Medicare Payment Advisory Commission, an increase that is consistent with many commercial insurers. The reason? Hospitals receive a fraction of the payment for observational patients as they do for inpatient admissions, holding down expenditures for insurers.
The idea of creating an observation unit idea isn’t new. Cleveland Clinic has had them for 20 years, UPMC Mercy Hospital
has had one for seven years and Allegheny General has had variations of the idea for at least five years.
Pain in the chest or belly and a temporary loss of consciousness are among the top reasons for admission to a hospital observation unit, a place for patients who need tests and monitoring before a diagnosis can be made, according to the Society of Hospital Medicine, a Philadelphiabased advocacy group.
In this case, AGH has refined the idea to adapt to changes in payment for care.
Medical care in the observation ward — which has all- private rooms and is staffed by doctors specially trained in caring for people who are hospitalized, midlevel medical providers and nurses — may shorten the patient’s course of treatment, Dr. Qadeer said. The goal is for patients to stay no longer than 24 hours in the unit.
Research has shown that a hospital observational unit can result in “statistically and clinically significant reductions in hospital admissions,” according to a 2010 study that appeared in the European Journal of Emergency Medicine.
But fewer patient admissions doesn’t necessarily mean less hospital revenue.
Inpatient reimbursement from Medicare and private insurers is often tied to the intensity of care patients need. Limiting admissions to the truly sick can result in higher hospital reimbursement, according to a 2013 article that appeared in the Hospitalist, a magazine published by the Society of Hospital Medicine.
Less serious patients are diverted to skilled care or other community medical resources where they can be most appropriately treated, limiting hospital admissions to the most serious — and therefore best- paying — customers.
A well- run observation unit also means that ill people get to the place they need to be faster, whether it’s being admitted to the intensive care unit, moved to a skilled nursing facility or simply sent back to their own homes.
Medicare considers observation status the same as an outpatient visit, and bills are paid by Medicare Part B.
Generally speaking, about 30 percent of patients in the observation unit will exceed their insurance plan’s deductible because of required copayments, Dr. Qadeer said. That means patients would’ve had lower out- of- pocket expenses had they simply been admitted to the hospital as an inpatient, a frustration for both patients and doctors.
In addition, Medicare Part B beneficiaries have deductibles and cost- sharing requirements for time spent in observation, which doesn’t count toward the three- day minimum admission necessary for Medicare to pick up the tab for nursing home care after a patient leaves the hospital.
The health care system’s cost- cutting mantra and the rising tide of observation patients in recent years are forcing health care providers to make better decisions about which patients truly need to be admitted.
Hardest hit by the health insurance industry’s shift to paying observation rates for an increasing number of medical conditions previously eligible for higher inpatient reimbursement have been community hospitals, which have the fewest resources, Dr. Qadeer said.
As a result of the shift, more hospital closures can be expected.
“It really hurts the hospital’s bottom line,” Dr. Qadeer said. “We have to adapt to changes in the health care environment. Hospitals aren’t given a choice.”