Academic emergency medicine : official journal of the Society for Academic Emergency Medicine
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Outpatients receive observation services to determine the need for inpatient admission. These services are usually provided without the use of condition-specific protocols and in an unstructured manner, scattered throughout a hospital in areas typically designated for inpatient care. Emergency department observation units (EDOUs) use protocolized care to offer an efficient alternative with shorter lengths of stay, lower costs, and higher patient satisfaction. EDOU growth is limited by existing policy barriers that prevent a "two-service" model of separate professional billing for both emergency and observation services. The majority of EDOUs use the "one-service" model, where a single composite professional fee is billed for both emergency and observation services. The financial implications of these models are not well understood. ⋯ In the one-service model, EDOU staffing costs exceed payments at all levels of patient encounters, making a hospital subsidy necessary to create a financially sustainable practice. Professional groups seeking to staff and bill for both emergency and observation services are seldom able to do so due to EDOU size limitations and the regulatory hurdles that require setting up a separate professional group for each service. Policymakers and health care leaders should encourage universal adoption of EDOUs by removing restrictions and allowing the two-service model to be the standard billing option. These findings may inform planning and policy regarding observation services.