September 5, 2018

Observation Care for Elderly Patients

Medicare is the largest payer of healthcare in the United States (US) for adults 65 and older and is administered by the Centers for Medicare and Medicaid Services (CMS). Observation services are an outpatient status and covered under Medicare Part B. Medicare Part B covers 80% of outpatient services, with the patient responsible for the remaining 20%. There has been an increase in both the frequency (25%) and duration (7%) of observation stays among Medicare beneficiaries in recent years, and as a result, there has been an increase in awareness to both the benefits and potential risks of patient status.1 

Observation services are increasingly used to manage patients who do not “meet criteria” for inpatient admission but who are too sick to be discharged. The cause of the increased use of these services has been multifactorial. An increase in available evidence supporting dedicated, protocol-driven (type 1) observation units as the best practice delivery model for patients requiring short-term hospitalization, coupled with enhanced reimbursement for observation services and recognition of type 1 OUs by the Institute of Medicine (IOM) as part of the solution for hospital crowding, have contributed to widespread growth of OUs. Additionally, pressures created by recent health care policy changes have motivated health care systems to utilize observation status as a strategy to mitigate financial risks associated with inpatient claim denials, readmission penalties, and costly recovery audit contractor (RAC) or quality improvement organization (QIO) audits. 

The US population is aging, and the number of ED visits among older patients is increasing. With the current focus on value-based healthcare (ie. high quality, low cost), OUs present themselves as an ideal delivery model for the geriatric patient population to manage certain conditions. In the ED, pressures to reduce crowding and maximize throughput push the emergency physician to make an efficient disposition decision, which can be challenging considering the complexity of this patient population and the time that may be needed to reach an accurate diagnosis. Older patients often present to the ED with challenging or ambiguous complaints (ie. failure to thrive, loss of appetite, weakness, dizziness, etc), delayed presentations, cognitive impairment, complications from polypharmacy, and unique psychosocial challenges (ie. living alone, fixed income, etc). These factors can require a relatively longer period of evaluation to make an accurate disposition decision than many crowded EDs can provide.

With timely diagnosis and short-term treatment in type 1 observation units, older patients can be safely managed following the initial ED evaluation, but without the need for inpatient admission.2 This essential clinical function has the benefit of avoiding an unnecessary and costly inpatient stay for both the patient and healthcare system and allow for a brief period of hospitalization. OU care can provide a setting for standardized evaluations by social work, physical therapy, medication reconciliation, and geriatric assessments to evaluate medical, social and functional issues prior to discharge.3

Geriatric-specific clinical protocols ensure timeline delivery of geriatric services to EDOU patients, such as the Frailty and Fragility Fracture protocols previously described.4 Efficient, protocol-driven care in the OU has the added benefit of reducing the duration and inherent risks of hospitalization in elderly patients, such as development of delirium, deconditioning, falls, hospital acquired infections, pressure injuries, and medication errors. 

Recently, an analysis of 363,037 observation stays in evaluated patients 65 and older demonstrated that 20% of patients revisited the hospital within 30 days post observation discharge, which result in inpatient admissions 50% of the time.5 Importantly, this study did not distinguish how the observation services were structured (ie. it was not possible to evaluate the observation service delivery model such as dedicated EDOU, ‘scatter bed’, etc). While the study does highlight an important potential vulnerability in this patient group, the generalizability of the conclusions is limited, since the study did not specifically analyze dedicated, protocol-driven OU care. The results do suggest that this population may benefit from increased focus on care transitions, home services, and outpatient follow up to prevent avoidable revisits after discharge from an observation stay. This finding is important considering patients in observation status do not accrue the requisite inpatient days necessary to qualify for the SNF placement.6

Delivering observation services in a dedicated unit with evidence-based clinical protocols is the best practice delivery model for observation services. This is the only model of delivering observation services where the clinical and economic benefits have been proven, particularly in older patients.  Future research should continue to validate observation care for older patients, as well as evaluate the impact of Medicare policy, billing status, and benefit eligibility on clinical outcomes.


  1. Feng Z, Wright B, Mor V. Sharp rise in Medicare enrollees being held in hospitals for observation raises concerns about causes and consequences. Health Aff (Millwood). 2012 Jun;31(6):1251–9.
  2. Ross M, Compton S, Richardson D, et al. The use and effectiveness of an emergency department observation unit for elderly patients. Ann Emerg Med. 2003 May;41(5):668–77.
  3. Mosely M, Hawley M, Caterino J. Emergency department observation units and the older patient. Clin Geriatr Med. 2013 Feb;29(1):71–89.
  4. Southerland L, Vargas A, Nagaraj L, et al. An emergency department observation unit is a feasible setting for multidisciplinary geriatric assessments in compliance with the Geriatric Emergency Department Guidelines. Acad Emerg Med. 2018 Jan;25(1):76-82.
  5. Dharmarajan K, Qin L, Bierlein M, et al. Outcomes after observation stays among older adult Medicare beneficiaries in the USA: retrospective cohort study. BMJ. 2017 Jun 20;357:j2616.
  6. Sheehy A, Graf B, Gangireddy S, et al. Hospitalized but not admitted: characteristics of patients with “observation status” at an academic medical center. JAMA Intern Med. 2013 Nov 25;173(21):1991-8.

Christopher Caspers, MD
Chief, Observation Medicine, NYU Langone Health
Associate Chief of Service
Associate Professor, NYU School of Medicine