Economic Issues in Observation Unit Medicine

https://doi.org/10.1016/S0733-8627(05)70166-8Get rights and content

Emergency department (ED) observation units (OU) improve the use of health care resources and improve the quality of patient care. Costs increase with observation of patients who would otherwise have been released after the ED evaluation. Observation improves the quality of patient care by identifying patients whose diagnosis otherwise would be missed because they presented with atypical symptoms, for example, an acute myocardial infarction (MI) patient presenting with shortness of breath (SOB). Costs decrease with observation of patients who would otherwise have been admitted to the hospital after the ED evaluation. Observation evaluates patients for serious disease who otherwise would have been admitted to the hospital. This improves utilization because 80% of patients are found during observation to not have a serious disease and therefore can avoid hospitalization. The overall financial effect with observation is cost savings because of avoidance of hospital admissions and the avoidance of those costs.

This article examines the overall economic effect of implementing ED observation units, which varies at individual institutions depending on the physicians' threshold for hospitalization of patients. Avoiding hospitalization with observation does dramatically lower the costs to healthcare system. Most healthcare costs are due to hospitalizations, and the costs are reduced over 50% for patients managed in observation units.1, 2, 3, 4, 5, 6, 8, 10, 12, 13, 17, 19, 20, 25, 26, 27, 29, 31, 35, 36, 40, 41, 43 Affects on profitability (costs versus revenue) of those participating in this healthcare reform (e.g., the payer, the physician, the hospital) is more difficult to predict given the large variability in contract negotiations between payers and providers over payment (revenue) and the variability in efficiency of clinical paths constructed in different observation units.

Even after decades of health care cost-containment activity aimed at health care, cost increases continue to be of critical concern. This article outlines the issues related to cost that affect physicians and others making patient care decisions about observation units. Many of these same issues are applicable to other areas of medicine as well. Physicians must be familiar with these concepts, because in the current practice of medicine they directly or indirectly influence everything they do.

This article begins with definitions of important economic terms, then follows with a brief review of some of the literature on observation unit cost outcomes. Clinical studies are reviewed on the cost-saving aspects of implementing an observation unit to manage selected patients with different clinical conditions. The economic impact of implementing ED observation units is reviewed from the perspective of the different participants in the health care system (e.g., hospital, payer, patient, and physician).

Section snippets

BASIC ECONOMIC TERMINOLOGY

In the experience of most people, cost is really the “price” paid to a vendor for something bought. In medicine, cost is much more complicated. When one is defining cost, the first thing to clarify is the frame of reference, or who is paying. Cost from the hospital perspective is what it pays for the raw materials of health care: buildings, labor, utilities, equipment, supplies, medicine, and paper. This is what is usually meant by cost when comparing costs with charges. Conversely, charges are

Chest Pain Evaluation

In the area of chest pain evaluation, there has been the most research demonstrating the cost savings from ED observation units. Initial criticisms of the application of observation to chest pain evaluation questioned whether the opening of an observation unit would be cost effective. Some speculated observation units would simply cause physicians to send patients there whom they would have previously discharged home, leading to higher costs and no improvement in quality of care (e.g., fewer

HOSPITAL'S ECONOMIC PERSPECTIVE OF OBSERVATION

Observation units arise as an alternative to hospital care. The decision to open an observation unit is made by the hospital, so that the hospital frame of reference or perspective must be assumed in measuring their value. The hospital's profitability depends on its revenue versus costs. As shown above, the observation unit has markedly lower costs than inpatient care. These costs do vary depending on the observation unit's management's astuteness in structuring the unit. Those observation

PAYER'S AND PATIENT'S ECONOMIC PERSPECTIVE OF OBSERVATION

Observation is the rational and most cost-effective alternative for the evaluation and management of patients with acute emergent conditions. This is true whether the payer is the patient or the patient's insurance company. With observation, the costs of patient care and the resultant charges are one half that of traditional hospitalization.

In one way the payer and patient's perspective of observation varies—the valuing of the quality of care provided during observation. Certain payers have

PHYSICIAN'S ECONOMIC PERSPECTIVE OF OBSERVATION

Compensation of physicians treating patients in the observation unit has now become standardized. In 1993, the first set of CPT codes were developed for reimbursement of physician services to observation patients discharged the day after admission to the observation unit. The physician initially codes 99218, 99219, or 99220. At discharge, the next day the physician codes 99217. There was, however, a problem with these codes. If the patient were discharged by the physician on the same day the

SUMMARY

Emergency department observation units are the rational choice for improving the utilization of health care resources and at the same time improving the quality of patient care. Potential pitfalls can be avoided by flexibility on both the part of the observation unit and the hospital administration staff. The continued growth of observation medicine throughout the country is evidence that most have been successful in designing creative solutions to accommodate this new health service.

References (43)

  • M.G. Mikhail et al.

    Cost-effectiveness of mandatory stress testing in chest pain centre patients

    Ann Emerg Med

    (1997)
  • R. Shesser et al.

    The chest pain emergency department and the outpatient chest pain evaluation center: Revolution or evolution?

    Ann Emerg Med

    (1994)
  • J. Talbot-Stern et al.

    Catheter aspiration for simple pneumothorax

    J Emerg Med

    (1986)
  • H.J. Thomson et al.

    Active observation in acute abdominal pain

    Am J Surg

    (1986)
  • H.H. Ting et al.

    Impact of physician experience on triage of emergency room patients with acute chest pain at three teaching hospitals

    Am J Med

    (1991)
  • P. Vallee et al.

    Sequential treatment of simple pneumothorax

    Ann Emerg Med

    (1988)
  • R. Zalenski et al.

    A National survey of emergency department chest pain centers in the United States

    Am J Cardiol

    (1998)
  • A.C. DeLeon et al.

    Chest pain evaluation unit: A cost effective approach for ruling out myocardial infarction

    South Med J

    (1989)
  • L. Dunbar

    Congestive heart failure

  • M.E. Farkouh et al.

    A clinical trial of a chest pain observation unit for patients with unstable angina

    N Engl J Med

    (1998)
  • J.L. Field

    Economics of chest pain centers: What really matters?

    Clinician

    (1992)
  • Cited by (40)

    • Reply

      2014, Revista de Calidad Asistencial
    • Aggressive approach and outcome in patients presenting atrial fibrillation and hypertension

      2013, International Journal of Cardiology
      Citation Excerpt :

      Because of its high prevalence in the population, hypertension independently accounts for more AF cases than any other risk factor [18,19]. Several other studies stated Observation Units as a rational choice for improving the utilization of health care resources [20], especially for successful treatment of chest pain [21], asthma [22], syncope [23] and eventually for treatment of AF, in order to reduce in-hospital stay [24]. Nonetheless no strategy to pursue normal sinus rhythm including antiarrhythmic drug therapy, conversion and ablation has definitely being shown to reduce the risk of stroke and hospitalization [25], in our setting physicians were strongly invited to consider pharmacological conversion as first line treatment [9].

    • Clinical management of atrial fibrillation: Early interventions, observation, and structured follow-up reduce hospitalizations

      2012, American Journal of Emergency Medicine
      Citation Excerpt :

      More than a quarter of patients have been sent to the outpatient clinic for elective treatment and short-term follow-up, eventually avoiding admission. Consistent with our findings, previous studies have reported observation units as a useful choice for improving the utilization of health care resources [20], especially for successful treatment of chest pain [21], asthma [22], and syncope [23] and eventually for treatment of AF, to reduce in-hospital stay [24]. Another study showed cost savings with the use of oral rate control agents, appropriate anticoagulation, and electrical cardioversion, with expedited referral to an outpatient AF clinic [25].

    View all citing articles on Scopus

    Address reprint requests to Rebecca Roberts, MD, FACEP, Cook County Hospital, 1900 West Polk, 10th floor, Chicago, IL 60612

    View full text