Focus on Observation

Observation means quality care

New codes benefit all

"Observation is medicine's best-kept secret," says Michael Ross, MD, FACEP, medical director of the chest pain center and emergency observation unit at William Beaumont Hospital in Royal Oak, MI. (See Beaumont's observation units' clinical pathway for chest pain, p. 77.) "There are few places in medicine that provide such a win-win-win - payer, patient, and provider all benefit from observation. The provision of cost-effective care, better patient satisfaction, and better outcomes are the most exciting aspects of this."

Hospital Peer Review asked Ross if he thought hospitals might lose money due to overutilization. "Yes and no," he answered. "How you use the codes is somewhat confusing to physicians right now because they're new. And for the same reason, some payers may not adapt them this first year. So I don't think there will be an immediate landslide due to utilization of the new codes." (See related article on overutilization on p. 65.)

Ross was chairman of the section on observation medicine of the Dallas-based American College of Emergency Physicians (ACEP), and started the initiative that led to the creation of the new codes because of the inequity in physician reimbursement for observation. "Before observation status became readily available, at the end of our evaluation in the ED, we'd just admit or discharge the patient - usually admit," he says. When his team began transferring to observation, they would perform a work-up that previously took two to three days in-hospital and accelerate it down to 12 to 14 hours. That meant added work.

"We'd cut the cost - cost, not charge - in half, and in some cases to a third," explains Ross. The piece that was missing was that there was no consistent reimbursement for physicians using the former CPT coding. Ross identified the weakness in the system and presented the case to the AMA CPT board. They acknowledged that this was a missing piece and adopted the proposed new codes. The AMA's reimbursement committee agreed, and now HCFA has accepted the new codes as of Jan. 1.

The new coding does not represent a windfall for physicians in Ross' opinion. It just covers the costs of the added work of taking care of observed patients. The system opened an opportunity for ED physicians to have financial recognition for the added work they're doing, but it also has set up parameters for appropriate use.

HCFA adopted the codes as-is this year, but may modify the parameters next year. Ross says the agency may be concerned that unscrupulous ED physicians will send ankle sprains, for example, to the observation unit to game the system. To avoid that, next year HCFA may add in a six- or 12-hour time minimum on length of stay, from time of arrival in the ED to departure from observation.