Financial and operational benefit of improving patient status assignment and observation services across seven hospitals in the United States

Objective: This aim of this project was to assess, develop and implement a paradigm for patient status assignment and more efficiently provide observation services. Patients who require hospitalization in the United States may remain an outpatient receiving observation services in the hospital, instead of inpatient status. Accurate and justifiable designation of patients to the right classification is of paramount importance because observation stays are reimbursed significantly less than inpatient admissions, incurring financial losses for hospitals, and sometimes patients. Methods: We reviewed the processes for patient status assignment and observation service delivery at seven hospitals over a 12 month period for each facility between February 2017 and December 2020, conducted interviews with key stakeholders, and reviewed medical records for medical necessity documentation and accuracy of patient status designation. We implemented a bundle of interventions to improve accurate patient status assignment and operational performance, such as the length of stay and proportion of patients undergoing status changes. Results: At all hospitals we achieved decreases in the proportion of patients assigned to observation services (38% to 17%, p < .001), average observation patients’ length of stay (from 34 to 23 hours), and average daily observation census (from 24 to 12 patients). The accuracy of initial status assignment and medical necessity documentation increased, with a decrease in the proportion of hospitalized patients undergoing any status change ( p < .001 for all). The annual post-intervention financial gain ranged from $2.5M to $20.8M. Conclusions: A comprehensive bundle of interventions achieved large operational and financial improvements in observation service delivery at hospitals of various sizes in the US.