1.03 Patient Status and Observation Patient Management
UWHC Administrative Policy Print
December 1, 2014
Administration (Hospital Administrative)
To ensure that patient status (i.e., inpatient, observation, or outpatient short stay) is appropriate throughout the
patient’s hospitalization and that documentation guidelines and workflows are established that support accurate
identification of patient status.
To determine the appropriate patient status throughout hospitalization, the following guidelines will be used. These
guidelines include the use of UWHC’s Utilization Review (UR) status Tools A and B and Medicare Code 44
Process. These tools are reviewed and approved by the UWHC Utilization Review Committee.
The Nurse Case Manager completes patient status reviews for each hospitalization and is responsible for:
A. Using the most current version of the patient status review and Code 44 UR status tools.
B. Making patient status recommendations to the physician based on payer category guidelines.
C. Performing patient status reviews at various designated times throughout each hospitalization.
D. Clearly documenting his/her recommendation and rationale for patient status within each designated
E. Consulting with providers if his/her recommendation is different than the current patient status.
F. Consulting with a Nurse Outcome Manager (OM) when:
1. Assistance in determining appropriate patient status is needed;
2. Provider disagrees with patient status recommendation;
3. Observation (OBS) or Outpatient Short Stay (OSS) status length of stay exceeds one
midnight. The OM will consult with our internal physician advisor(s) as needed.
A. Medicare Two-Midnight Rule when the payer is traditional Medicare:
1. If the length of stay for medically necessary hospital care is expected to be two or more
midnights from the initiation of care, an inpatient status admission is generally appropriate.
2. If the length of stay for medically necessary hospital care is expected to be less than two
midnights, an outpatient (Observation/OBS or Outpatient Short Stay/OSS) status is generally
B. Initiation of care: Time at UWHC or outside hospital or emergency department when the patient started to
receive hospital care, including nursing assessment.
A. Initial Status Reviews
1. Pre-planned hospitalizations: The initial patient status review is performed prior to the patient’s
arrival at UWHC. Designated pre-admission staff and/or Nurse Case Manager (s) perform a status
review based on Health Link information and/or conversation(s) with outpatient providers and
other staff. The Nurse Case Manager performs a patient status review within 16 hours of the
patient’s arrival at UWHC and makes a recommendation of appropriate patient status to the
2. Transfers and unscheduled direct hospitalizations: Access Center staff complete the following:
a. Review available information from documents and conversations with providers and
other staff at the referring facility;
b. Identify and document the initiation of care date and time for inter-hospital transfers;
c. Assists the UWHC provider when needed to determine the appropriate initial patient
d. The Nurse Case Manager performs a patient status review within 16 hours of the
patient’s arrival at UWHC and makes a recommendation of appropriate patient status to
3. Unplanned hospitalizations: The initial patient status review is performed as soon as possible
upon the patient’s arrival to UWHC, but no later than 16 hours after arrival. For hospitalizations
occurring through the emergency department (ED), the ED Nurse Case Manager may recommend
an initial status based on the patient’s severity of illness, intensity of service, and/or anticipated
length of stay at the time the decision to admit is made.
B. Concurrent Status Reviews
1. The Nurse Case Manager performs an after first midnight-before second midnight review for
every hospitalization, incorporating the plan-for-the-day to determine if patient will be discharged
or if a second midnight(s) is needed for continued hospital care. If the appropriate status appears
to be OBS or OSS for a hospitalization of two or more midnights, the Nurse Case Manager
consults with the Outcome Manager (OM). The OM determines if consultation with the internal
physician advisor is needed.
2. When the Nurse Case Manager identifies a hospitalization with an initial patient status of
Inpatient (IP) that appears to be appropriate for OBS or OSS, he/she consults with a designated
a. If the provider makes an independent decision that the hospitalization is appropriate for
OBS or OSS, an OBS or OSS order is obtained. If the payer is traditional Medicare, the
Nurse Case Manager or Social Worker provides the patient, or his/her designee, with a
UWHC Observation Level of Care brochure and answers any questions about OBS/OSS
b. If the provider decides that the patient status should remain IP, the Nurse Case Manager
consults with the OM. The OM determines if consultation with the UR Committee
physician is needed.
c. For traditional Medicare patients, if the OM needs to consult with the UR Committee
physician, the Medicare Code 44 Process is initiated.
3. After the second midnight, subsequent status reviews are performed according to the payer’s
preferred frequency or weekly, whichever is less, throughout the hospitalization.
4. Hospitalizations with lengths of stays of 15 or more days are reviewed weekly at the multi-
disciplinary Long Stay Committee.
5. The UR Committee will review any hospitalization upon request.
C. Retrospective Status Reviews
1. After discharge, short-stay hospitalizations with an IP patient class for traditional Medicare,
Medicare Advantage, traditional Medicaid, and managed Medicaid payers will be reviewed by a UR
Committee Nurse to determine the appropriate patient status for accurate claim submission.
a. If an IP patient status is appropriate, the designated billing indicator will be entered and
the case will be automatically routed for coding and claim submission.
b. If the appropriate patient status appears to be OBS or OSS, the case is routed for UR
Committee Review. First, the UR Committee’s OM member reviews the case. If the OM
recommends OBS or OSS status, the case is routed for UR Committee physician review.
If the UR Committee physician determines that an OBS or OSS patient status is
appropriate, the OM enters the designated billing indicator which will notify billing that
an outpatient claim should be submitted. In these cases, the updated billing indicator
within Health Link will automatically print a written notification that is used within two
days to the patient/beneficiary, the practitioner responsible for the care of the patient
and to the hospital.
D. Documentation and Patient Status guidelines
Documentation standards required for Observation Status patients are the same as those for Inpatient
Status. Refer to Hospital Administrative Policy 6.15-Medical Record Documentation. The medical record
must contain sufficient documentation to describe what is done, and the patient's response to care within
an often-limited time frame. The documentation must support the need for ongoing monitoring or
1. Physician order: There must be an "admit to Inpatient Status" or "admit to Observation Status"
order from the attending or admitting physician to initiate care. The record will clearly indicate
the attending physician. Orders indicating "admit" will be interpreted as an Inpatient status.
2. The History and Physical must provide pertinent physical findings and rationale supporting the
assigned level of care based on the patient's previous medical history and symptoms prior to
admission. Physician notes that discuss level of care criteria or risk stratification are appropriate
and necessary. Physician documentation must include anticipated time frame for the observation
3. Ongoing nursing documentation and progress notes in Health Link must include patient
assessments related to the diagnosis upon assignment to Inpatient or Observation Status.
Assessment of patient status is required and documented for each 2-hour period the patient is in
Observation Status. Documentation indicates the patient is under the care of a physician during
the period of Observation Status. A standardized form, "Observation-Short Stay And Charge
Form" (UWH #SR300037) is completed for each patient assigned to Observation or Outpatient
Short Stay status.
4. Appropriate and timely interventions are documented. Appropriate diagnostic and therapeutic
services are provided based on the patient's condition. Diagnostic and Lab reports must be
included in the patient's observation record. Abnormal results of diagnostic services are
addressed and resolved or the record explains why they are unresolved and efforts for
appropriate follow-up are made. Patient's medication administration record and medication
history is documented. Reassessment of the patient's medical, physical, psychological and social
needs with referrals to other disciplines is completed.
5. Patient Conversion from Observation to Inpatient:
a. The physician must make the determination that the patient meets medical necessity
criteria and enter an order to admit the patient to Inpatient Status before the patient is
discharged. The determination is based on information collected during the Observation
b. Per Medicare billing requirements the admission date will start at the time of the
physician's order. The admission cannot be back-dated to the beginning of services. The
status cannot be changed to inpatient at discharge. The status change must occur
before the patient is discharged.
c. The Health Unit Coordinator or other unit staff will update the patient status in Health
d. Usual and customary inpatient documentation and paperwork requirements now apply.
e. Observation Status charges would be merged with the inpatient DRG.
6. Patient Conversion from Inpatient to Observation Prior to Discharge:
a. The physician determines the patient never met medical necessity criteria and writes an
order for Observation.
b. This status change in Health Link can only be made by the case manager prior to the
c. For Medicare patients, two UR Committee physicians will review the medical necessity of
the inpatient stay if the attending physician does not concur with the UR Committee case
manager regarding the admission or continued stay being medically necessary.
d. No inpatient claim is submitted.
e. The entire stay is considered to be Observation level of care.
7. Coding and Billing Requirements:
a. Observation Status patients are billed under the Observation Status billing codes and are
i. Medicare reimburses medically necessary observation services up to 48 hours;
beyond that time services will be denied as not reasonable and necessary.
b. Health Information Management (HIM) will code Observation Status patients. Patient
Accounting via claims editing software will determine if the patient's diagnosis and
treatment plan meet the requirements for Observation reimbursement in addition to the
Ambulatory Patient Classification (APC) payment by Medicare.
Sr. Management Sponsor: SVP, Patient Care Services & CNO; Chief Financial Officer
Author: Director, UW Health Home Care & Coordinated Care; Director, Access Services; Director, Coding
Review/Approval Committee(s): Utilization Review Committee; Patient Care Policy and Procedure Committee;
Administrative Policy and Procedure Committee; Medical Board
President & CEO
J. Scott McMurray, MD
Chair, Patient Care Policy and Procedure Committee