Imagine you're a Veteran treated for abdominal pain at a hospital emergency care unit. You think you'll be leaving in a few hours, but the doctor advises you to stay overnight for further evaluation.
The next day upon discharge, you learn you've been classified as "observation status," not "inpatient," a distinction that will change your billing code.
Why the observation designation, you ask? After all, you had the same size room, were on the same floor, and received the same services and care as an inpatient.
Welcome to the ambiguity of observation stays, a hospital practice that has provoked its share of criticism and scrutiny since being introduced more than a decade ago.
"While the use of observation status may impact how patients are billed, this is not the driving force in determining the patient's status."
Three VA-funded studies published in medical journals in September 2016 by the same team of researchers, including Drs. Mary Vaughan-Sarrazin and Amy O'Shea of the Iowa City Veterans Affairs Health Care System, yield insight on the use of observations stays at VA hospitals. The research notes how use of observation status has increased rapidly at VA facilities in recent years, explores the factors that influence observation stays, and explains how the designation may impact a patient's financial bottom line and health outcomes in VA and non-VA hospitals.
Observation status is an administrative classification of patients seen in hospital emergency rooms or outpatient clinics. The patients have conditions potentially serious enough to warrant close observation, but usually not so serious as to require hospital admission.
Typically, a patient is placed in observation for ongoing evaluation and treatment, while a decision to admit or discharge is being made. According to Medicare, an observation stay may not exceed 48 hours. Overnight stays are thus possible and do occur. A discharge or admission decision is usually made in about 24 hours.
The average observation stay was 1.12 days in two of the three VA studies. Those two studies include data on Veterans with chest pain who were classified as observation at a total of 102 VA facilities.
"Observation stays are increasingly being used as a substitute for short-stay admissions among patients with a chest-pain diagnosis," the researchers write. "Identifying which patients are placed in observation and which are admitted is the first step in developing clinical protocols and pathways to accurately identify which patients are appropriate for observation. More research is needed to determine whether there are differences in clinical outcomes following observation stays versus short-stay admissions."
Readmission less likely for chest pain patients in observation
Over the years, observation stays in the Veterans Health Administration system have meant a difference in billing, but not in placement or care management. Unlike private hospitals, VA hospitals do not have dedicated observation units and do not provide explicit observation care.
"Observation status really only impacts billing, coding, and documentation," O'Shea says.
This raises the question: If the billing code is the only distinction, why is the observation code necessary in the first place? Plus, the clinical benefits of observation stays remain unclear.
One of the three studies focuses on readmission and mortality rates when patients with chest pain are placed in observation versus a short stay. The average Veteran in both groups was a 62-year-old white male living in an urban area with 1.5 to 1.6 chronic conditions.
The research, published in BMC Emergency Medicine, finds that patients in observation status had 25 percent lower odds of dying within 30 days, and 12 percent lower odds of a 30-day readmission, compared with short-stay patients. Those in observation were more likely to be female, white, and from a rural area.
In explaining the difference, O'Shea says Veterans in observation may be healthier at baseline than those who are admitted, which is likely to translate into an improved outcome.
"There are clinically observable differences in outcomes between patients admitted to observation and those admitted as short-stay patients," the researchers write. "We find no evidence that the increase in observation stays reflects a lack of proper care for patients placed in observation status, even in the absence of a dedicated observation care [unit]."
Another study by the group, published in INQUIRY: The Journal of Health Care, says chest pain patients in VA hospitals are increasingly more likely to be observed than admitted for short stays. Of a total of 121,584 hospital events—all observation and short-stay admissions for chest pain patients in VHA hospitals between 2005 and 2013—the proportion of observation stays increased "markedly" over the study period. The odds of an observation stay were higher among women, but lower among older patients and rural residents.
There are few differences in how observation status is used among different patients in the same VHA hospital, according to the researchers.
Hospital beds a key factor in observation classification
A third study, published in the journal Medicine, uses VHA data from 2005 to 2012. The study shows that observation stay rates are inversely related to how many beds a hospital has, or the number of staffed beds a hospital can accommodate. Specifically, hospitals with 25 to 49 beds had, on average, an observation stay rate nearly 20 percent higher than hospitals with 100 to 199 beds. In contrast, hospitals with 400 to 499 beds had, on average, an observation stay rate 6 percent lower than those with 100 to 199 beds.
This indicates that the number of staffed beds is "statistically significant," and that smaller hospitals have higher observation stay rates and larger hospitals have lower rates, according to the study.
The same study, which isn't limited to chest pain patients, also finds that the greater a hospital's proportion of patients under age 56, the greater the use of observation. "This may reflect a tendency to use observation more often for lower acuity patients, assuming that younger patients are lower acuity," the researchers write.
The study shows, further, that hospitals with more patients from small rural areas, where patients have extensive travel times to VA facilities or where there's a dearth of physicians, had higher observation stay rates. That trend may be because clinicians, aware of such difficulties, want to observe those patients to gain a firm understanding of their health status before discharging them.
O'Shea emphasizes that the decision to place a patient in observation is based on the need for evaluation and is not related to cost.
"While the use of observation status may impact how patients are billed, this is not the driving force in determining the patient's status," she says. "It is important to note that the billing policies of VA are not the same, for example, as [those of] Medicare. In the VA system, it is actually cheaper for the patient to be listed in observation status than to be admitted as an inpatient," compared with the higher costs a patient may incur when covered by Medicare.
"Clearly, patient prognosis and diagnosis can be a complicated endeavor," O'Shea adds.
So if you're a Veteran arriving at a VA hospital or clinic with chest or abdominal pain, or certain other conditions, you may be more likely than in the past to find yourself in observation status while you're evaluated. But don't worry—this doesn't mean you'll get any less care, or that you'll be hurting in the pocket.