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Inpatient or outpatient? The battle to control costs

Randy Klein had a lovely vacation, three weeks in Europe with her husband, Stephen, for their 36th anniversary. They went to Paris, Rome, Venice, even took a cruise to Monte Carlo. On the last day, they ate oysters in Normandy.

Randy Klein, at home in Rydal, is glad she got to stay at Abington for three nights. Her insurer's decision, however, cost the hospital a portion of its bill. (Tom Gralish/Staff)
Randy Klein, at home in Rydal, is glad she got to stay at Abington for three nights. Her insurer's decision, however, cost the hospital a portion of its bill. (Tom Gralish/Staff)Read more

Randy Klein had a lovely vacation, three weeks in Europe with her husband, Stephen, for their 36th anniversary.

They went to Paris, Rome, Venice, even took a cruise to Monte Carlo. On the last day, they ate oysters in Normandy.

Her stomach started cramping on the airplane. The diarrhea didn't hit, thank God, until she got home, in Rydal, on Oct. 17, but it landed with a fury.

"Doesn't even give you a shot to get to the bathroom," she said.

She went to the emergency room at Abington Memorial Hospital, where they took cultures and she spent the night. She began to feel better and went home the next day.

A few days later, a violent diarrhea slammed her even worse than before. She went back to the ER and soon was on a gurney and hooked to a morphine drip.

Klein, 56, was too sick to know or care, but she was the subject of a conversation taking place down the hall between her ER doctor and an admission review nurse:

Should Klein be admitted to the hospital or treated there but as an outpatient, in what is known as observation?

This may sound bureaucratic, even benign. But this question - and where it leads - tells a lot about the state of health care today, the tension between hospitals and insurers, the impact on patients.

Abington wants to avoid treating Klein as an inpatient, then getting paid only an outpatient rate from the insurer - half as much.

Insurers see themselves as good citizens, responsible parents, doing the difficult job of holding down health-care costs, in part by refusing to pay for what they view as unnecessary care.

Doctors see this as second-guessing by insurers and an erosion of the doctor's role.

And hospital finance people say these cuts in reimbursement will affect the care of Randy Klein, thousands like her, and eventually all of us.

Short-stay reimbursement

One of the biggest challenges in health care is controlling costs. A primary way to accomplish that is keeping people out of hospitals, which are very expensive places, and paying hospitals less money.

In the last year, a central front in this war on cost has been short-stay, or one-day, admissions, cases just like Randy Klein's. Insurers feel hospitals have too often been providing care that isn't necessary, and been paid too much for it.

These skirmishes over reimbursement take place gurney by gurney, patient by patient, like a thousand paper cuts, but the dollars add up.

Abington says it will lose $12 million a year because of this. Hospitals around the state and nation are feeling the same financial pressure.

Observation status, created by Medicare, has existed for years, but was infrequently used by area hospitals until last year, after a crackdown by Medicare auditors.

The idea is basic: If a patient arrives in the emergency room, and it isn't immediately clear whether the patient should be admitted, the patient can be placed in observation - treated in the hospital but as an outpatient.

The idea is to continue to treat, and with a little more time, it will be clear whether to admit or discharge. Observation cases are expected to be resolved in at most 24 hours, and in rare cases 48.

Medicare auditors, in a three-state demonstration project, demanded hospitals repay about $1 billion. Hospitals around the country, including Abington, last year began policing admissions much more closely, pushing many more patients into observation to avoid Medicare audits and denials.

Private insurers such as Blue Cross, following Medicare's lead, are now denying many more admissions that they believe are suitable for observation.

The hospital feels the pendulum has swung too far, with potentially huge consequences.

Randy Klein's case illustrates how many resources the hospital consumes in these administrative disputes and how scenarios like these unfold out of view of patients and the public.

Michael Walsh, chief financial officer at Abington, sees troubling implications in all this. Patients "want to walk into the Ritz-Carlton," he said, "but the payments today are Motel 6."

'Paid to be paranoid'

Steve Fisher is one of 40 emergency-room doctors at Abington. He likes to say, "I'm paid to be paranoid."

On Monday, Oct. 25, before he went to see Randy Klein, he saw that she had been in a few days earlier for the same problem, and that immediately raised concern.

The results of cultures taken the previous week showed she had two parasites, campylobacter and giardia, infections one gets from contaminated food and fecally contaminated water. Fisher knew giardia, which he felt was causing her trouble, is rarely life-threatening, but he is paid, as he says, to be paranoid.

On examination, Fisher felt Klein's belly was incredibly tender, and he contemplated a CT scan of her colon, but decided against subjecting her to the radiation.

He didn't think she had a blockage or anything that would need surgery. But considering the extreme inflammation, a rupture was possible, and he was confident she would need subsequent abdominal exams in the hospital, in the days to come.

Klein was put in Room 421 because it is one of the few ER rooms with a private bathroom, which she surely needed. Fisher prescribed morphine - which in his mind should convey just how intense her pain was - and IV fluids for dehydration.

Since this wasn't something that had just come over her, but had been with her for a week, Fisher felt that six, 12, or 24 hours in the hospital wasn't going to be enough.

The prudent move would be to admit her. "She has pain, diarrhea, and two chronic pathogens," Fisher explained that day. "She's miserable, and I'm afraid she's going to get worse before she gets better."

Column A and Column B

Fisher usually has 10 to 15 patients, and all are listed on his computer screen. Next to Klein's name was a little black ball.

This indicated that she was covered by an insurer - in her case, Independence Blue Cross' Personal Choice - that had observation in its contract with Abington.

Joanne Mainart and Donna Tobin are nurses and case managers at Abington who review admissions. Mainart was hired for this job a year ago; Tobin joined her in March.

They sit at their own computer in the ER, away from patients, and when they see a black ball beside a patient's name, their job is to examine medical records and treatments and determine if the patient meets criteria for inpatient admission.

Doctors still make the decision. These nurses only advise. But their mission is to make sure patients get put in the right category - inpatient admission or observation.

Assigning Mainart and Tobin to the ER was Abington's response to the push toward observation.

Tobin, who was on duty when Klein arrived, picked up a dog-eared little book. It is called InterQual Level of Care Criteria, or just InterQual.

Maryteresa Mintz, head of case management at Abington, said Abington paid McKesson Health Solutions, the publisher of InterQual, $10,000 a year for the first 15 manuals, and then $100 for each additional book.

InterQual has been around since the 1970s, but has grown in influence and has become the fundamental tool that many insurers and hospitals use to determine if a patient qualifies for admission.

It is no bigger than a church hymnal and nearly as sacred.

Tobin flipped through the category of infectious diseases and tried to determine if Klein met the InterQual criteria.

Imagine an old-fashioned Chinese menu from which you choose one dish under Column A, and one under Column B. InterQual, in a sense, is similar.

For almost every ailment, InterQual has two categories: severity of illness (is the patient sick enough to warrant admission?) and intensity of service (is the hospital doing enough to warrant admission?).

Column A and Column B. Are you sick enough, and is the hospital doing enough?

InterQual is also black and white. If Column A says the heart must exceed 100 beats a minute, 99 aren't enough.

Tobin felt that the severity of Klein's illness qualified; her cultures were positive for parasites. But Tobin felt the intensity of service didn't quite make it.

So she came out to talk to Fisher to see what he was thinking, and let him know she didn't think Klein met InterQual.

Fisher had decided to treat Klein with a pill rather than with an intravenous antibiotic.

He had worked with Mainart and Tobin long enough and become familiar with InterQual. The hospital had even bought him his own copy. He knew that an IV antibiotic would be considered a more intensive treatment than a pill, and might qualify under Column B. But he felt it wasn't good patient care.

For problems in the gut, he said, an oral antibiotic may attack more swiftly and directly than IV antibiotics.

Because Klein didn't satisfy InterQual, Fisher knew Independence Blue Cross might refuse to pay the inpatient rate. He didn't want the hospital to lose money, but he couldn't let that influence him. He felt strongly, so he admitted her.

"Her belly is very concerning," he said that afternoon. "I don't think we need more time to be worried about her. She's sick."

Late that evening, the end of Klein's first day, Tobin reviewed the case one more time. The patient was not getting IV antibiotics, but was getting IV fluids to combat dehydration. She was also prohibited from eating. In Tobin's judgment, these two circumstances would now qualify Klein for admission under InterQual, which the nurse noted in her log.

Insurer disagrees

That Monday night, Klein was wheeled up to a standard hospital floor and a private room.

Tuesday morning, Independence Blue Cross was notified that Klein had been admitted as an inpatient.

Blue Cross has its own team of utilization review nurses, all of whom, it says, have at least five years experience and have received special training in utilization review.

One of the nurses, working at the Blue Cross offices in Plymouth Meeting, got access to Abington's computers through a secure logon and reviewed the same records Tobin had the previous evening.

The Blue Cross nurse did not feel Klein met InterQual.

But, according to Blue Cross, this nurse can't deny payment for inpatient care herself. She refers the case to a Blue Cross doctor. The Blue Cross nurse also notified Abington that it had a few hours for an Abington doctor to provide more information before Blue Cross' doctor made a decision.

Abington did not call.

The decision from Blue Cross was faxed to Abington by 3 p.m. Tuesday.

"Patient appropriate for outpatient care."

In other words, Blue Cross would pay at an observation rate, an outpatient rate, even though Abington provided inpatient care.

The Delaware Valley Healthcare Council surveyed its member hospitals in the five-county Philadelphia area in April about this very subject, and released the results in late November:

"From 2008 to 2009, physicians increased by more than 20 percent their direct admissions to observation," the council reported. At the same time, "insurers increased by about 25 percent their downgrades and downcodes to observation." (What Blue Cross had just done with Klein.)

During an interview, Donald Liss, senior medical director at Independence Blue Cross, reviewed the Klein case and applauded Fisher, the ER doctor, for doing what he believed was best for the patient.

"That's the appropriate response, so chalk one up for the doc," he said.

That being said, Liss added, Klein simply didn't meet the InterQual criteria.

He began to explain Blue Cross' denial using the InterQual chapter on gastrointestinal disorders.

When told that Tobin, at Abington, had applied the chapter on infectious diseases, believing that was where Klein had the best chance of qualifying, Liss replied, "With all due respect, I think they looked at the wrong section."

Literally, hospital and insurer weren't on the same page.

Liss said he didn't believe Klein had qualified under severity of illness or intensity of service.

"While she was uncomfortable and had been having diarrhea," he said, "her laboratory results that were presented to us, her vital signs, her exam, her X-ray findings, didn't meet the bar, didn't satisfy the criteria that say this is evidence of somebody who is sick enough to require an inpatient stay." (Column A)

"And then further, the treatment that she was receiving similarly didn't satisfy those criteria for intensity of service." (Column B)

"The rate of IV fluids she was getting to treat dehydration, after the couple of bags she got in the ER, the antibiotics she was receiving, even the pain medication after a couple of doses, didn't warrant significant enough intensity typically required for a hospital inpatient stay."

"Respectfully," Liss added, "I'd say, jeez, this is the perfect case for observation. Is she going to respond, get better in six, eight, 12 hours from now and perk up? That's the one where you would want to keep an eye on her, responding to therapy or not."

Liss wanted to emphasize that "I have a personal interest in the continued existence of Abington. My wife and I delivered our kids there. I live within a mile.

"We don't intend to tell the ER doc how to practice medicine," he added. "I appreciate the conundrum and challenge that creates at the point of care.

"But unashamedly our job is to be a good steward of the dollars our customers entrust us to spend on health care."

Divided views on the manual

Fisher is too busy to find out, and, frankly, doesn't want to know, how often his admissions are denied or downgraded to observation.

But when told of Klein's denial, and Blue Cross' explanation, he became animated, if not upset.

"I hear him," Fisher said of Liss' explanation. "And when I think you're looking at a book and not seeing a patient, that might make sense to you. If they pore through the labs, apply the InterQual book, do they even need me?"

"The thing is, my job is to go in and listen to her and evaluate her current clinical state and render a judgment based on that. And I was worried about her abdomen. I thought she was going to get worse before she got better."

As for InterQual, he said: "It's been absolutely pushed in our lives. It should, in my opinion, have absolutely no bearing on clinical medicine, but it's something that the payers have imposed upon us. It's something that we have to pay attention to. I guess I thought that we were still allowed to override the damn thing. It shouldn't be gospel. It should be a suggestion."

Liss defended the use of InterQual. He said that hospitals agreed in their contracts to use it, and that most of the time it worked perfectly well.

"It is an independent, objective resource that both hospitals and health plans can point to and say those are the standards. . . . There may be nuances, and we may quibble over what warrants an exception and what doesn't, but it's a starting point for the conversation.

"Otherwise," he added, "it would be, 'Well, the ER doc thought she was sick enough,' and again with all due respect to his professional judgment, how do you test that? Would his or her partner have said the same thing? Would the community of docs have agreed? If nothing else, InterQual takes that discussion from the abstract - these hands, my two eyes - to something that subjectively can be addressed."

Reluctant to appeal

Kevin Zakrzewski is a primary-care doctor at Abington with his own practice, but he also heads the hospital's utilization review committee. His job includes appealing denials from Blue Cross and other insurers.

In the small-world department, after he finished his residency, Zakrzewski was in medical practice with Liss, whom he called a "brilliant doctor" and "good friend." But Zakrzewski, like many at Abington, feels the fight with the insurer isn't fair.

He didn't call Blue Cross the morning Klein was rejected and rarely calls anymore.

The Blue Cross nurse applied InterQual once, and in Zakrzewski's experience, the Blue Cross doctor would just apply InterQual again in the afternoon.

"In truth, that [Blue Cross] doctor was always defaulting to InterQual," Zakrzewski said. "It wasn't that I provided more clinical information. I had to provide information that met InterQual. That doctor wasn't using [his] own judgment."

Zakrzewski feels the doctor in the afternoon shouldn't be using InterQual at all. Abington has already failed that standard. This doctor-to-doctor conversation should be about physician judgment.

But Zakrzewski said Blue Cross couldn't do that. It needs that threshold, those InterQual criteria, or Blue Cross doctors would often be persuaded to approve an admission.

And that would cost the insurer more money.

Zakrzewski said that if a patient met the InterQual standard, admission should be automatic, but that if a patient didn't meet it, admission shouldn't automatically be refused. Zakrzewski feels that's the situation now.

Liss responded: "If a physician calls us later with additional information, we review the case, and if a different decision is warranted, we change our decision."

Costs of observation

Unlike Randy Klein, seven to 10 patients a day - 2,500 to 3,000 a year - at Abington go straight into a new Observation Unit on the third floor of its Highland Building.

Even though the hospital is trying very hard to educate them, most observation patients have no idea there is any difference: They're on a hospital floor, eating hospital food, cared for by hospital staff, in a hospital bed, albeit two to a room.

They often don't realize their care is expedited to get them out in 24 hours if possible and reimbursed differently, requiring more documentation by nurses.

John J. Kelly, Abington's chief of staff and top doctor, said: "It actually costs us more money to do observation. You might say that doesn't make any sense."

He said Abington has had to hire more staff and "compress everything" - in other words, try to provide the same care it gives an inpatient but squeeze that into 24 hours of observation.

Kelly also said staff was required to do more documentation "because you're paid by the hour for observation. It's craziness."

"What they're asking us to do sometimes is dangerous, I think," said Kelly, speaking for himself and not the hospital.

"The 'retrospectacope' is the most powerful instrument known to man," he added. "Part of the reason we spend so much of our resources in training physicians is to develop that sense of judgment about who needs what. And we're being second-guessed by everybody strictly on the basis of costs.

"I understand the need to be sensitive to costs, yet they're going to cripple us, the insurers [and] the government."

A $4,184 gap

Randy Klein spent three nights at Abington.

Her diarrhea persisted all day Tuesday. She remained on IV fluids.

Doctors Wednesday were still concerned about elevated levels of enzymes in her liver, and possible hepatitis.

In the few days she had been home after her first ER visit and before she came back, she had some extreme headaches, searing pain. Concerned about that, doctors took a CT scan of her brain, which was negative.

In her hospital bed Wednesday afternoon, Klein was playing Scrabble on a computer. She had just eaten her first solid food. She was feeling better. She was glad to have remained in the hospital.

"A lot of times when you get so dehydrated, a lot of other things can go," she said.

She went home Thursday, better but still far from well.

"We expect $7,773 for her inpatient reimbursement," said Kim Roberts, director of patient financial services at Abington. "If downgraded to [an ER visit] with observation, we'll get $3,589."

A loss of $4,184.

On Nov. 22, Blue Cross denied Abington's bill of $7,773 "due to lack of authorization for inpatient care," Roberts said.

Klein is just one patient, and Blue Cross only one insurer. Imagine 100 cases like hers. Or 1,000.

The pressure to rein in costs will only grow. As Walsh, Abington's chief financial officer, said, "We're going to have to figure out a way to care for the patients we see today with maybe as much as 15 to 20 percent less than we're currently seeing in our reimbursement."

The American people have a stake in both sides.

The public wants great care. The public also wants low insurance premiums.

To read previous articles

in the series, go to EndText