Identifying Observation Stays in Medicare Data: Policy Implications of a Definition
Observation stays are increasingly common, yet no standard method to identify observation stays in Medicare claims is available, including events with status change. To determine the claims patterns of Medicare observation stays, define comprehensive claims-based methodology for future Medicare observation research and data reporting, and identify policy implications of such definition, we identified potential observation events in a 2014 20% random sample of Medicare beneficiaries with both Part A and B claims and at least 1 acute care stay (1,667,660 events). Observation revenue center (ORC) and Healthcare Common Procedure Coding System codes occurring within 30 days of an inpatient hospitalization were recorded. A total of 125,920 (7.6%) events had an ORC code, and 75,502 (4.5%) were in the outpatient revenue center. Claims patterns varied tremendously, and almost half (47.3%, 59,529) of the ORC codes were associated with an inpatient claim, indicating status change and demonstrating a need for clarity in observation policy. The proposed University of Wisconsin method identified 72,858 of 75,502 (96.5%) events with ORC codes as observation stays, and provides a comprehensive, reproducible methodology. Funding: National Institute on Minority Health and Health Disparities of the National Institutes of Health under Award Number R01MD010243.
© 2019 Society of Hospital Medicine
Observation Stay Case Finding
Inpatient and outpatient revenue centers were queried for observation revenue center (ORC) codes identified by ResDAC,22 including 0760 (Treatment or observation room - general classification), 0761 (Treatment or observation room - treatment room), 0762 (Treatment or observation room – observation room), and 0769 (Treatment or observation room – other) occurring within 30 days of an inpatient stay. Healthcare Common Procedure Coding System (HCPCS) codes G0378 (Hospital observation service, per hour) and G0379 (Direct referral of patient for hospital observation care) were included per MCPM.23 A combination of these ORC and HCPCS codes was also used to identify observation stays in every Medicare claims observation study since 2010. When more than one ORC code per event was found, each ORC was recorded as part of that event. Presence of HCPCS G0378 and/or G0379 was determined for each event in association with event ORC(s), as was association of ORC codes with inpatient claims. In this manuscript, “observation stay” refers to an observation hospital stay, and “event” refers to a hospitalization that may include inpatient and/or outpatient (observation) services and ORC codes.
Status Change
All ORC codes found in the inpatient revenue center were assumed to represent status changes from outpatient (observation) to inpatient, as ORC codes may remain in claims data when the status changes to inpatient.24 Therefore, all events with ORC codes in the inpatient revenue center were considered inpatient hospitalizations.
For each ORC code found in the outpatient revenue center and also associated with an inpatient claim, timing of the ORC code in the inpatient claim was grouped into four categories to determine events with the final status of outpatient (observation stay). ResDAC defines the “From” date as “…the first day on the billing statement covering services rendered to the beneficiary.”24 For most hospitals, this is a three-day period prior to an inpatient admission where outpatient services are included in the Part A claim.25 We defined Category 1 as ORC codes occurring prior to claim “From” date; Category 2 as ORC codes on the inpatient “From” date, between the inpatient “From” date and admission date, or on the admission date; Category 3 as ORC codes between admission and discharge dates; and Category 4 as ORC codes occurring on or after the discharge date. Given that Category 4 represents the final hospitalization status, we considered Category 4 ORC codes in the outpatient revenue center associated with inpatient claims to be observation stays that had undergone a status change from inpatient to outpatient (observation).
University of Wisconsin Method
After excluding ORC codes in the inpatient revenue center as true inpatient hospitalizations, we defined an observation stay as 0760 and/or 0761 and/or 0762 and/or 0769 in the outpatient revenue center and having no association with an inpatient claim. To address a status change from inpatient to outpatient (observation), for those ORC codes in the outpatient revenue center also associated with an inpatient claim, claims with ORC codes in Category 4 were also considered observation stays.
