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New code gives incentive for ED observation

The new ambulatory patient classification (APC) code for ED observation presents an exciting opportunity for better outcomes, both clinical and financial, according to Sandra Sieck, RN, director of cardiovascular development at Providence Hospital in Mobile, AL.

"Show your hospital CEO that this is a win-win situation for patients, hospitals, ED physicians, and cardiologists," she urges. "Finally, hospitals have a financial incentive for ED observation."

Here are some key points to share with your administrator:

  • There will be a boost in revenue.

The new APC code will have a significant impact at William Beaumont Hospital in Royal Oak, MI, according to Michael A. Ross, MD, FACEP, director of the emergency observation unit and chest pain center.

"With the introduction of APCs, we were not paid in any identifiable manner for a third of the patients we observed," he says. "Now we are paid for those cases, in a way that I think is fair and equitable."

The ED observes approximately 7% of its total census, reports Ross. "We have a very high acuity and avoid admitting 80% of the patients we observe," he says.

He reports that of patients older than 65 observed in the ED over the past five years, 34% had chest pain, asthma, or congestive heart failure, the three covered conditions under the new APC.1

Ross says the ED observation service was "hanging by a thread" after the implementation of APCs in April 2000. "If the additional payment had not been given, we might have had no choice but to close the unit and admit everybody," he says.

Ross points to another financial benefit of ED observation. "At our facility, we found that one observation bed effectively opened between 2.35 and 3.15 inpatient beds by providing accelerated care," he says.2,3

The hospital desperately needed the additional capacity because of overcrowding, he explains. "That factored into our decision to continue ED observation," says Ross.

Sieck recommends handing your administrator a single-page flow chart that shows how to optimize clinical and financial outcomes. "The chart demonstrates patient flow from triage through discharge from the ED, admission or observation, and shows you how to receive the additional reimbursement from the new APC code," she says.

  • There are better clinical outcomes.

The new APC code gives you a chance to provide better care without being hindered by lack of reimbursement, says Sieck.

"We are now able to provide the quality of care that the community deserves," she says. "We can find out whether the patient had a heart attack, is going to have a heart attack, and educate them about risk factors for a heart attack, all in the ED."

She points to research showing that patients with sporadic chest pain take over two days to consider coming to the ED.4 "By the time they have compounding symptoms, there is a mean time of 2.5 hours before they enter the hospital," says Sieck.

She points to an ED observation unit as "an environment of easy access" that can reduce delays for patients seeking care.

  • Cardiologists will benefit from ED observation.

According to CMS, cardiologists had a 12% reduction in reimbursement last year and therefore have an incentive to pick up more patient volume, says Sieck.

"They can do this through the ED observation unit," she urges. "More than half of ED patients with chest pain are unassigned to a physician."

The ED physician can call for a consultation from a number of physicians, Sieck explains. "If you would like the referral, play ball with the ED," she says.

  • You can improve patient throughput in your ED.

Sieck gives examples of two typical ED patients that can occupy a bed for hours: a patient with acute myocardial infarction who may be treated with thrombolytics, and a patient with non-ST segment elevation and unstable angina waiting for lab results.

"Meanwhile, a woman in your waiting room is complaining that her child was up all night with a 104-degree fever, and they have been waiting for six hours," she says.

If you create a designated area to observe the chest pain patients, you can dramatically reduce delays in your ED, according to Sieck. "You can then place the other patients in beds which were previously used by chest pain patients," she says.


1. Ross MA, Compton S, Wilson AG. An ED observation unit is effective for elders. Acad Emerg Med 2001; 8:452-453.

2. Ross MA, Wilson AG, McPherson M. The impact of an ED observation bed on inpatient bed availability. Acad Emerg Med 2001; 8:576.

3. Martinez E, Reilly B, Evans A, et al. The observation unit: A new interface between inpatient and outpatient care. Am J Med 2001; 110:274-277.

4. Goff DC, Sellers DE, McGovern PG, et al. Knowledge of heart attack symptoms in a population survey in the United States: The REACT trial. Arch Intern Med 1998; 158:2,329-2,338.