Observation Initiative

Medicare Observation Frequently Asked Questions
for University of Minnesota Medical Center - Fairview

1.  Under what circumstances is the use of observation appropriate?

• The physician is unsure about the patient’s need for inpatient admission but requires additional time to evaluate the patient;
• The physician anticipates that the patient’s condition can be evaluated or treated within 24 hours and/or rapid improvement of the patient’s condition can be anticipated within 24 hours.  
• There are many patients who meet inpatient criteria for admission but only stay in the hospital for 24 hours so please do not use this time frame as a means to determine status.

2.  What types of services would/would not qualify for observation?

• Although the reimbursement for outpatient has changed, the rules for use of observation have not changed. There must be documentation of medical necessity of observation services in the medical record.
• Routine stays following late surgery, diagnostic testing, or outpatient therapy/procedures MAY NOT be billed as observation UNLESS there is documentation that the patient’s condition is unstable. Normal postoperative recovery time following surgery cannot be billed as observation.

3.  How should the physician word the order for observation versus inpatient admission?

When a patient is being placed in observation status the CPOE order should state “Place in observation status.” When a general medicine or family medicine patient is in observation status, these order sets will available for completion:

• • Abdominal pain
  • General pain
  • Diabetes
  • Weakness/fatigue         
  • Dehydration

4.  If a physician determines that a patient is acute and is not responding to treatment after a stay in observation, can the patient then be admitted as an inpatient?

• Yes. An observation stay can be converted or progress from observation to inpatient admission if the patient has an acute condition that requires treatment in an inpatient setting.
• A physician order is required. The physician should document the medical necessity of admission in the medical record. Admission criteria should be met at the time the inpatient order is written.  You may consult with the care manager regarding this.

5.  Can a hospital place the patient in observation status prior to outpatient surgery or procedure?

• No.
• Observation status may be appropriate following a planned surgery if complications develop that require monitoring and treatment outside the scope of the routine postoperative recovery requirements.