How Hospitals can Cut Costs by Improving Observation

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HCC-thumb6In searching for ways to save your hospital money, have you looked at your organization’s observation services?

According to Dr. Michael Ross, associate professor of  emergency medicine at the Emory University School of Medicine and lead author of a revealing study in Health Affairs, most hospital’s observation services are “inefficient and disorganized,” thus “putting huge drains on the country’s already taxed emergency health care system,” reports Sarah Corapi of the PBS NewsHour. “Between 1997 and 2007, visits to emergency departments in the U.S. grew at double the rate of population growth, while the number of emergency departments decreased. The heightened demand and shrinking resources didn’t bode well. And observation services that are administered without a dedicated setting or defined care guidelines are only adding weight to the load.”

Corapi writes that 66 percent of U.S. hospitals are using “inefficient practices.” As you’ve probably already guessed, these practices cause patients, whom Dr. Ross calls “six- to 48-hour patients” or “patients who need more than six hours of emergency care but who might only need to spend 24 or 48 hours in a hospital if actively cared for,” to actually spend longer than necessary in the hospital. This can add another $331 per patient to a hospital’s expenses, and in some cases, provide lower-quality care for patients in what has been astutely called “observation purgatories.”

Dr. Ross believes that hospitals nationwide could save billions each year, anywhere from $1 billion to $8.5 billion, if they focused “on the way they deliver observation services.”

To do this, he advises the implementation of “designated observation units with clear care protocols [that] could get people back to their normal lives more quickly and keep them out of the hospital for longer. They could provide up to 28 percent shorter lengths-of-stay and potentially a 44 percent lower probability of subsequent inpatient admission.”

Unfortunately, he said, the six- to 48-hour patients tend to “fall between the cracks,” because “hospitals are so focused on inpatient care or outpatient care.”

Dr. Ross elaborates on all of these theories in an interview that’s attached to the article. His ideas are thought-provoking, to say the least, including his insight on what causes patients to stay longer than necessary.

What is the state of the observation services at your hospital? Have you implemented any initiatives to curb inefficient observation practices? According to Dr. Ross, many hospitals are addressing these matters: “About a third of hospitals in America have a dedicated observation unit, and about half of those hospitals treat patients using defined protocols — so about 1 in 6 hospitals are using this Type 1 practice.”

What has worked best for curbing inefficiency within your hospital’s observation services? What insights have you gained, and what was the immediate impact on your health care costs?

-by Pete Fernbaugh

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