Observation Status
Getting It Right
the First Time
By Carol Teets, MSN, RN, CEN, NE-BC, Patient Care Services, Lehigh Valley Health Network
By Lynne Roth, MSN, RN, PCCN, Patient Care Services, Lehigh Valley Health Network
CE: 1.0 contact hours
By Cindi Boderman, BA, BSN, RN, Patient Care Services, Lehigh Valley Health Network
By Elizabeth Hoch, BSN, RN, PCCN, Patient Care Services, Lehigh Valley Health Network
PSNA is accredited as a provider of continuing nursing education by the American Nurses Credentialing Center’s Commission on Accreditation.
The planners and author for this continuing education activity have declared they have no conflict of interest.
Introduction
The United States spends more money on health care than any other country in the world. In 2012, the U.S. spent
$8,745 per capita on health care followed by Norway who spent $6,140 per capita (Allen, 2014). In October 2010,
President Obama signed the Affordable Care Act (ACA). This health care reform law was designed to include a series
of reforms projected to provide billions of dollars in savings for Medicare and strengthen the care beneficiaries receive.
The law also included provisions that would improve the quality of care, develop and promote new models of care
delivery, appropriately price services, modernize our health system and fight waste, abuse and fraud (Gable, 2011).
The ACA posed many challenges for hospitals and changed the way reimbursement is delivered. Over the next few
years, health care will continue to move from the fee-for-service world into the pay-for-performance arena. In this era,
hospitals are no longer reimbursed for specific hospital-acquired infections and pressure ulcers. Additionally, there are
penalties for readmissions within 30 days linked to certain diagnoses (O’Reilly, 2012). Hospitals will have the opportunity to earn additional funds by outperforming competitors in quality and patient satisfaction.
Observation status was used for patients who required overnight care or longer, determined using evidence-based
decision criteria. The most commonly used tools are InterQual and Milliman. Since observation status is outpatient,
readmission penalties do not apply. From 2006-2011, there was an 8 percent increase in the use of observation status.
Thirty-seven percent of these cases had a length of stay (LOS) greater than 24 hours. Of the 37 percent of the observation stays greater than 24 hours, almost 30 percent have an average LOS greater than 72 hours (Ross, 2013). In an
attempt to control the use of observation status, the Centers for Medicare & Medicaid Services (CMS) instituted the
two-midnight rule.
Winter 2014 Pennsylvania Nurse 14