1. Observation Status Medicare Rules
©2003 Duke University Hospital

2. These rules apply to all patients, regardless of payer.
Who does this apply to?
These rules apply to all patients, regardless of payer.
Although these guidelines are Medicare specific, they will be applied to all patients in observation status. This approach prevents confusion in terms of practice and billing.

3. Medicare
Medicare established Observation Status in 1984 and developed specific guidelines for placing a patient in this status. These guidelines are strict and any variance is considered fraudulent and could cost the hospital millions of dollars.
Medicare has ongoing investigations of hospitals related to the use of observation services. They have determined that considerable fraud has occurred in the use of this patient status and have fined many hospitals for the inappropriate use of observation status.

4. Medicare
CEU Protocols for all Assigning Conditions have been established to meet Observation criteria. Protocols can be clineval.dukehospital.org
Additionally, Medicare has provided guidelines for three Observation diagnoses
These diagnoses are:
Chest Pain
Asthma
CHF
Stringent guidelines for care are required!
Medicare has ongoing investigations of hospitals related to the use of observation services. They have determined that considerable fraud has occurred in the use of this patient status and have fined many hospitals for the inappropriate use of observation status.

5. Requirements for Chest Pain Observation
Two sets of cardiac enzymes, as well as two sequential EKGs, are required.
The DUKE ED chest pain protocol ensures these requirements are easily met.
Inclusion and Exclusion criteria should be used to determine the need for observation care.
Medicare has ongoing investigations of hospitals related to the use of observation services. They have determined that considerable fraud has occurred in the use of this patient status and have fined many hospitals for the inappropriate use of observation status.

6. Requirements for Asthma Observation
A peak expiratory flow rate or pulse oximetry reading must be taken once during the ED visit and at least once during the CEU visit.
Inclusion and Exclusion criteria should be used to determine the need for observation care.
Medicare has ongoing investigations of hospitals related to the use of observation services. They have determined that considerable fraud has occurred in the use of this patient status and have fined many hospitals for the inappropriate use of observation status.

7. Requirements for CHF Observation
A Chest X-Ray, EKG, and pulse oximetry must take place during the visit.
Inclusion and Exclusion criteria should be used to determine the need for observation care.
Medicare has ongoing investigations of hospitals related to the use of observation services. They have determined that considerable fraud has occurred in the use of this patient status and have fined many hospitals for the inappropriate use of observation status.

8. What is Observation Status?
Services which are reasonable and necessary to evaluate an outpatient’s condition to determine the disposition.
Observation status allows physicians to have additional time needed to evaluate and determine whether to admit or discharge.
This is the only definition that Medicare accepts and is intended to allow physicians to have more time to evaluate a patient and make a disposition to admit or discharge. Observation services are not to be used for the convenience of the hospital, physicians, patients or patient’s families.

9. Observation Status cannot be used for:
A substitute for medically necessary admissions
Routine surgical procedures, routine post operative or pre-operative phases of care
Routine diagnostic tests and therapeutic interventions unless an untoward, unexpected, situation occurs
This has implications in terms of billing which are explained on the next slide.
Medicare does not condone assigning a patient to observation in order to minimize documentation requirements, or for any reason other than the reasons listed in the definitions.

10. Surgical Procedures
Surgical procedures can only be outpatient or inpatient. From the ED, both types can exist.
A complicated trauma patient with internal injuries would be admitted as inpatient.
A patient with a simple fracture could be an outpatient.
When Medicare reimburses the hospital for surgical and other procedures, they include the pre and post operative phases of care in the reimbursement. If the patient is placed in observation for a routine procedure, the hospital bills a special observation code. In this scenario, the hospital is getting paid twice. Once for the procedure, which includes pre and post op, and again for post operative period.
This is considered double billing and could be construed as fraud.

11. Outpatient Therapeutic Services
Observation may not be used for the administration of blood, drugs, or other treatments unless the patient experiences an unanticipated reaction and the physician requires more time to evaluate the patient and make a disposition
The same reason as the previous two slides

12. Direct Admissions Observation may not be used for direct admissions
Direct admissions imply that a full diagnosis has been made. If a diagnosis is made a treatment plan should be available and a disposition should be made to admit or discharge.

13. Inpatient Status
Once an order for Inpatient Admission has been written, it CANNOT be changed to Observation.
Medicare considers the physician’s original order, the physician’s intent and views any change in that order as Fraud. Physicians must not change the admission order to observation just because the patient was in the hospital for less than 24 hours.

14. If the patient needs admission
Observation status may not be used as a substitute for a medically necessary admission, even if a short stay is anticipated.
A patient may be admitted after the observation period is completed
Note the difference here. Observation may always be converted to admission, if that is the disposition that is indicated after the observation period. As previously stated, admission cannot be changed to observation for any reason.

15. When can observation be used?
Patients typically fall into two groups when coming into the CEU from the Emergency Department:
Patients who present with symptoms in which additional time is required to make a diagnosis and/or disposition (chest pain/abdominal pain)
Patients who require more than the usual time to respond to interventions (asthma/CHF).
Example: A patient presents with abdominal pain, an initial set of tests are run, and no diagnosis can be made. The patient is placed in observation status for further monitoring until a disposition can be determined.
This is a classic presentation for an observation patient.

16. How long can a patient be in observation?
Medicare generally views observation status as LESS than 24 hours.
The patient should only be kept until a Disposition is made and no longer.
24 hours is simply a guide and patients should not remain in observation for a full 24 hours unless that period of time is necessary
Medicare never intended that all patients in observation status be kept for 23 hours. This time frame was attached as the longest time a patient should be in observation. When observation status was first created, without a time limit, hospitals were keeping patients in that status for several days at a time.

17. How do I write the order? The Observation order should read:
Place or Assign to Observation Status
Date, sign and time the order
DO NOT use the word “ADMIT” with an OBSERVATION ORDER, or the phrase “23 HRS”!!
Observation services are measured in hours and the observation period is from the time the order is written until the time the disposition is made and documented in the medical record. It is not the time the patient actually leaves the hospital or is admitted. Medicare requires clear documentation of placement and disposition.

18. Documentation
Documentation must clearly support the medical necessity and rationality of observation services.
Supporting ancillary reports such as labs and diagnostic test, frequent nursing and physician notes, must also be present.
Chart notations by the physicians and nurses must reflect the reason continued observation services are necessary, as opposed to admitting or discharging the patient. An initial note and a discharge note are not adequate. Documentation must be done throughout the patient’s stay.

19. Documentation
All Nursing and Medical Staff will follow the approved documentation requirements for Observation patients
Must reflect the reason for continued observation
Chart notations by the physicians and nurses must reflect the reason continued observation services are necessary, as opposed to admitting or discharging the patient. An initial note and a discharge note are not adequate. Documentation must be done throughout the patient’s stay.

20. Observation at Duke
Most Observation patients should qualify to be assigned into the Clinical Evaluation Unit.
If a service requests Observation Status for a Duke north bed, please contact the CEU Patient Resource or Bed Control for assistance.
This has led to mass confusion regarding observation. It is difficult to identify an observation patient vs an admitted patient when they share the same room. This makes compliance with Medicare guidelines challenging.

21. Information on Observation
The PRMs or the PRM office can be contacted for questions about Observation status
Information sheets are available from the PRMs and also on the inpatient units

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