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Avoidance of inpatient medical necessity denials for short-stay admissions: an evaluative study

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Avoidance of inpatient medical necessity denials for short-stay admissions: an evaluative study

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Avoidance of Inpatient Medical Necessity Denials for Short-Stay Admissions:
An Evaluative Study
by
Cynthia L. Dennis

Rossier School of Education
University of Southern California
A dissertation submitted to the faculty
in partial fulfillment of the requirements for the degree of
Doctor of Education

December 2021

© Copyright by Cynthia L. Dennis 2021
All Rights Reserved

The Committee for Cynthia L. Dennis certifies the approval of this Dissertation

Dr. Monique Datta
Dr. Bryant Adibe
Dr. Emmy Min, Committee Chair

Rossier School of Education
University of Southern California
2021

iv
Abstract
One-third of United States hospitals have dedicated observation units, which leads to
inappropriately classified inpatients who do not meet medical necessity criteria, resulting in
reimbursement denials. The purpose of this study was to use a gap analysis framework (Clark &
Estes, 2008) to evaluate knowledge, motivation, and organizational (KMO) influences related to
the implementation of a dedicated observation unit in a 349-bed acute care hospital. Following a
review of the literature, examination of assumed KMO influences took place using a qualitative,
emergent design. Validating or invalidating assumed influences through analysis of interview
data, along with work record and performance data assessment. Recommendation follow for an
implementation and evaluation plan following the New World Kirkpatrick Model (Kirkpatrick &
Kirkpatrick, 2016). The steps offered in the recommendations chapter increase stakeholder’s
knowledge and motivation and reduce gaps in organizational influences to achieve the
organization’s goals.

v
Dedication
To my husband, who is the reason I have been able to fulfill my educational goals and dreams.
Without Greg’s support, encouragement, and words of wisdom about so many things along this
journey and life in general, I would not be the whole person I have now become. This
accomplishment is the completion of yet one more experience in life with the best human being I
know by my side cheering for me. I am blessed.

vi
Acknowledgements
Thank you to my son, Charlie, who unknowingly nudged me to have the courage and
embark on this journey. Thank you, Ryan and Jen, for sharing your alma mater, USC. Many
thanks to two influential mentors in my life, Nancy Fricke and Wayne Frieders, both of who saw
my potential and have continued to champion for me throughout my career.
Mary Beth Kropp offered her wisdom and support from the beginning as my USC alum
mentor, and I will always be grateful for her insight, coaching, and personal perspective. The
members of Cohort 14 have been an additional gift of camaraderie, friendship, expertise,
wisdom, and intellectual wealth, so thank you to all whom I had the pleasure of having as
classmates. Thanks to all of the professors, lecturers, and guest speakers, we had the honor of
sharing these experiences. Thanks, of course, to my dissertation committee led by Dr. Emmy
Min, my chair. Dr. Min’s guidance along with Dr. Suzanne Foulk’s suggestions made my work
tighter, more focused, and much more organized. A special thank you to Dr. Monique Datta for
her inspiration in Framing and the impact she had on us all during our first immersion. I knew
then that I would want her on my committee. Thanks to Dr. Adibe who gave his time and unique
perspective as a physician and helped me stay on track. Sincere thanks to the advisors, student
success advisors, and support members that made this program run like clockwork.
Finally, I would be remiss in not saying a word of gratitude for having the honor of
writing this missive while living in our fifth wheel beside a lovely Pacific Northwest lake only a
few miles from where I was born. Sixty years later, I have come full circle. I think my parents
would have been proud of their little girl.

vii
Table of Contents
Abstract .......................................................................................................................................... iv
Dedication ....................................................................................................................................... v
Acknowledgements ........................................................................................................................ vi
List of Tables .................................................................................................................................. x
List of Figures ............................................................................................................................... xii
Chapter One: A Study of Limited United States Observation Units .............................................. 1
Organizational Context and Background of the Problem ................................................... 3
Organizational Goal ............................................................................................................ 5
Importance of the Study ...................................................................................................... 6
Description of the Stakeholder Group ................................................................................ 7
Purpose of the Project and Research Questions .................................................................. 9
Overview of Theoretical Framework and Methodology .................................................. 10
Definitions......................................................................................................................... 11
Organization of the Dissertation ....................................................................................... 11
Chapter Two: Literature Review .................................................................................................. 13
Centers for Medicare and Medicaid .................................................................................. 13
Historical Content ............................................................................................................. 14
Clark and Estes Gap Analysis Conceptual Framework .................................................... 26
Knowledge Influence Factors ........................................................................................... 27
Motivation Influence Factors ............................................................................................ 30
Organizational Influence Factors ...................................................................................... 33
Service Line Implementation ............................................................................................ 37
Conceptual Framework ..................................................................................................... 38
Summary ........................................................................................................................... 40

viii
Chapter Three: Methodology ........................................................................................................ 41
Research Questions ........................................................................................................... 41
Overview of Design .......................................................................................................... 41
Research Setting................................................................................................................ 43
Method 1 ........................................................................................................................... 45
Method 2 ........................................................................................................................... 46
Method 3 ........................................................................................................................... 47
Participants ........................................................................................................................ 47
Data Analysis .................................................................................................................... 51
Validity and Reliability ..................................................................................................... 52
Interviews .......................................................................................................................... 52
Work Records ................................................................................................................... 53
Performance Data.............................................................................................................. 53
Ethics................................................................................................................................. 54
Limitations and Delimitations ........................................................................................... 55
Chapter Four: Results and Findings .............................................................................................. 56
Stakeholders ...................................................................................................................... 57
Research Question One ..................................................................................................... 58
Knowledge Findings ......................................................................................................... 59
Research Question Two .................................................................................................... 67
Motivation Findings .......................................................................................................... 67
Work Record Analysis ...................................................................................................... 72
Knowledge/Motivation Influence Findings Summary ..................................................... 74
Research Questions Three ................................................................................................. 74
Organizational Findings .................................................................................................... 74

ix
Summary ........................................................................................................................... 86
Chapter Five: Recommendations .................................................................................................. 88
Discussion of Findings ...................................................................................................... 88
Recommendations for Practice to Address KMO Influences ........................................... 89
Organizational Recommendations .................................................................................... 93
Cultural Setting ................................................................................................................. 94
Integrated Implementation and Evaluation Plan ............................................................... 95
Four-Stage Theory of Physicians' Self-Directed Learning Model .................................... 96
Organizational Purpose, Needs, and Expectations ........................................................... 97
Three Stages of Transition .............................................................................................. 103
Evaluation Tools ............................................................................................................. 104
Data Analysis and Reporting .......................................................................................... 104
Strengths and Weaknesses of the Approach ................................................................... 104
Limitations and Delimitations ......................................................................................... 105
Recommendations for the Future .................................................................................... 105
Conclusion ...................................................................................................................... 106
References ................................................................................................................................... 108
Footnotes ..................................................................................................................................... 115
Appendix A: Interview Questions .............................................................................................. 116
Appendix B: The Business Office System (BOS) Report .......................................................... 117
Appendix C: Livanta Initial Results Review Letter Dated August 8, 2018................................ 118

x
List of Tables

Table 1: Hospital Settings in Which Observation Services Are Provided 5

Table 2: Organizational Mission, Goal, and Stakeholder Goal 9

Table 3: Four Levels of Observation Settings 17

Table 4: Knowledge Influences and Assessments 30

Table 5: Motivational Influences and Assessments 33

Table 6: Organizational Influences and Assessments 36

Table 7: Top 10 Barriers to Successful Hospital Change Efforts 37

Table 8: Data Sources 43

Table 9: Composition of Study Participants 58

Table 10: Validation of Factual and Procedural Knowledge Findings 60

Table 11: Summary of Provider Competency in Addressing Knowledge Influences 61

Table 12: Validation of Motivation Findings 68

Table 13: Summary of Provider Performance in Addressing Motivation Influences 69

Table 14: CMS Complex Medical Factors 73

Table 15: Validation of Organization Findings 76

Table 16: Summary of Provider Performance in Addressing Organization Influences 77

Table 17: Summary of Knowledge Influences and Recommendations 90

Table 18: Summary of Motivational Influences and Recommendations 92

Table 19: Summary of Organizational Influences and Recommendations 94

Table 20: Outcomes, Metrics, and Methods for Outcomes 98

Table 21: Critical Behavior, Metrics, Methods, and Timing for Evaluation 99

Table 22: Required Drivers to Support Critical Behaviors 101

xi

Table 23: Program Evaluation Methods 103

xii
List of Figures
Figure 1: Conceptual Framework 47

1

Chapter One: A Study of Limited United States Observation Units
This study addresses the problem of limited dedicated observation units in nationwide
healthcare facilities, which leads to inappropriately classified inpatients who do not meet medical
necessity criteria, resulting in reimbursement denials. Observation units provide an appropriate
service for patients who stay in the hospital less than forty-eight hours but do not require
inpatient care and serve as a landing place to assess a patient’s medical condition to determine if
they meet the inpatient admission criteria (Schrager et al., 2013). Without an observation unit,
patients remain in the emergency department or admit to the inpatient floor. Organizations can
incur negative monetary impacts as the result of denials due to inappropriate inpatient stays
under forty-eight hours. The National Academy of Medicine (NAM) recognizes these dedicated
care units as a means to improve the use of hospital resources and the administration of
appropriate care. Yet, according to Baugh et al. (2012), only one-third of United States hospital
designs have dedicated observation settings. This problem is important to address, as there is a
negative financial impact on hospitals with avoidable inpatient admissions. Researchers
performing a simulation model in 2012 indicated that there could be a potential savings of $3.1
billion nationally by all hospitals offering this service delivery (Baugh et al, 2012).
Hospitals experience several cascading effects from the lack of dedicated observation
units, reminds Komindr et al. (2014). Emergency department crowding, hospital employee
shortages, less than optimal patient care, and unhappy patients are often the result. Yet these
seemingly conflicting interests between organizational throughputs, staffing, and revenue issues
as weighed against patient concern for both satisfaction and affordability only serve to highlight
complexities. Additionally, observation care does not count toward a patient requiring a “three-
day inpatient stay” for qualification to admit for rehabilitation in a nursing home. These
2

confusing parameters leave Medicare patients bewildered and unable to understand what hospital
financial personnel are trying to explain to them while in a compromised health situation.
Patients just know they are in the hospital, and they do not understand the difference between an
outpatient observation service and an inpatient stay.
There are financial implications for Medicare beneficiaries dependent upon whether they
are an outpatient observation patient or admitted to inpatient status (Kangovi et al., 2015). Unlike
inpatient admissions with a singular fixed cost, observation care has many different financial
ramifications beginning with how much patients pay out of pocket. There is much dissatisfaction
among Medicare beneficiaries due to the 20% copayment required with observation services
(Ross et al., 2013). Kangovi (2015) outlines how observation patients pay a percentage of each
service received instead of a deductible toward one inpatient bill. The covered services for
observation are different from those covered for inpatient care, and they do not count toward
eligibility for skilled nursing facilities, which require three-day inpatient hospitalization. Finally,
there can be financial impacts as a result of the 60-day benefit period, which limits beneficiaries
from having to pay the inpatient deductible only once within 60 days no matter the number of
hospitalizations. Once the patient's claim processes, if the payer denies the claim for any reason,
a portion or perhaps the entire bill might fall to the patient’s responsibility.
There are several reasons why the majority of the nation’s hospitals do not have
observation units. Mace et al. (2003) outlined how hospital financial challenges limit new
construction or remodeling and have reduced reimbursement structures from governmental and
commercial payers over the years. These financial constraints, coupled with nursing shortages,
make implementing a new service line difficult. However, there is potential to reduce both
emergency department and inpatient crowding as patients with needs for lower levels of care are
3

more appropriately roomed in an observation unit. Yet hospitals across the country have not
made the significant investment in infrastructure or resources to support revised modalities of
practice despite substantial losses with existing processes.
Organizational Context and Background of the Problem
Pacific Hospital
1
is the pseudonym given to the northwest non-profit healthcare
organization founded by community leaders and volunteers over sixty years ago. Begun initially
as a 56-bed hospital, it has grown to include a campus licensed for 349 inpatient beds, as well as
5 outpatient clinics in the surrounding area. The facility provides award-winning, patient-
centered care while maintaining high standards of quality medical attention. Through community
reinvestment, the medical center is now able to handle almost any medical need, except for
pediatric and severe trauma treatment. Recently, a behavioral health and substance abuse
treatment center launched, and a new single-bed patient wing finished construction with a
complete state-of-the-art childbirth center. Yet, despite this well-equipped center for health
services, issues exist for a certain population of patients, those that are too sick for discharge to
home but are not sick enough to require inpatient care.
Pacific Hospital does not have a dedicated observation unit, and observation care occurs
on the general inpatient units throughout the hospital. Data gathered by the Healthcare Cost and
Utilization Project (HCUP) in 2010 indicated that of thirty-nine million inpatient encounters,
11.7 percent were found to have been eligible for observation services (Ross et al., 2013). The
Center for Medicare and Medicaid (CMS) defines observation care as:
A well-defined set of specific, clinically appropriate services, which include ongoing
short-term treatment, assessment, and reassessment, are furnished while a decision is
4

being made regarding whether patients will require further treatment as hospital
inpatients or if they can be discharged from the hospital. (CDC, 2018, p. 224)
It is important to understand how the issuance of a rule change effective October 1, 2013,
by CMS influences patients, physicians, and hospitals. As of this date, according to CMS,
patients with a stay of fewer than two midnights are “observation,” and those staying greater than
two midnights are “inpatients.” This change would appear to be in response to the 33.6%
increase in observation encounters among Medicare beneficiaries between 2004 and 2011, and
the decrease in inpatient encounters by 7.8% during the same timeframe (Sheehy et al., 2014).
This is an important factor, as patients do not understand that observation is an outpatient
service, which can make a substantial difference in cost to the patient. Patients just know they are
in a hospital bed. When a patient fails to meet inpatient medical necessity criteria, their Medicare
Part A benefits will not cover their care. Hospitalized observation outpatients only receive
Medicare Part B hospital insurance coverage, which has a 20% copay. In addition, patients who
do not stay a minimum of three days as an inpatient are not eligible for skilled nursing facility
(SNF) benefits (Sheehy et al., 2014). In these scenarios, the type of coverage and payment
reimbursement is dependent on patient status for Medicare and Medicaid patients.
There are four specific observation service settings, ranging from Type 1-4. The best
practice considers Type 1 the most optimal setting, consisting of dedicated units with condition-
specific protocols. The preponderance of data indicates successful outcomes with this model
(Peacock et al., 2014). Generally, a Type 1 observation unit is adjacent to the emergency
department and most often staffed with emergency department physicians. The use of the term
“dedicated” refers to a service line in which only specific locations in the hospital admit
5

observation patients and the employees that work on that unit do not rotate shifts on any other
floor.
As described in Table 1 below, there are four types of observation services recognized by
CMS. Pacific Hospital falls into the Type 4 category, Discretionary care, bed in any location,
which is the most common among nationwide hospitals.

Table 1
Hospital Settings in Which Observation Services Are Provided

Setting

Description

Characteristic

Type 1

Protocol driven, observation
unit

Highest level of evidence for favorable outcomes

Care typically directed by ED

Type 2 Discretionary care,
observation unit
Care is typically directed by a variety of
specialists

The unit is typically based in ED

Type 3 Protocol driven, bed in any
location

Often called a “virtual observation unit”

Type 4

Discretionary care, bed in
any location
The most common practice with unstructured
care

Poor alignment of resources with patients’ needs

6

Organizational Goal
The fiscal year for Pacific Hospital spans July 1 - June 30. Budget preparation begins in
February preceding the beginning of the new fiscal year, and once vetted through executive
leadership, the Board must grant final approval. Development of budgetary expectations are
directly tied to performance goals, and knowing the organization lost $1.4M in 2018 due to
medical necessity denials informs the decision to create an FY22 goal for denials. A 50%
reduction in denials by June 30, 2022, is possible to achieve by aligning 100% of two-midnight
admissions to CMS medical necessity criteria. The study will determine the gap between
provider-perceived understanding of this criteria and actual understanding of the conditions.
Importance of the Study
This problem is important to address because observation units help clinicians provide
appropriately located healthcare at a lower cost while addressing quality of care ramifications for
optimal patient outcomes (Baugh et al., 2011). Schrager et al. (2013) discussed one of the
nation’s most expensive medical conditions, heart failure. Treatment for this condition and
others such as asthma and chest pain provide avenues to reduce post-discharge readmissions.
Schrager et al. (2013) conducted a retrospective cohort study between 2007 and 2011 and
determined that a protocol-driven observation unit was effective at managing select heart failure
patients and avoiding unnecessary admissions. Additional benefits were also indicated in studies
conducted by Gabele et al. (2016), indicating that dedicated observation units help to decompress
emergency departments and reduce crowding.
Financially, Pacific Hospital suffers a revenue loss every year because of medical
necessity denials. Incorrect statuses contribute to readmissions, however, would not be included
within readmissions statistics if treated as observation outpatients during one of two stays within
7

30 days. Ross et al. (2013) outlined how the “setting” contributes to the level of service
provided, and CMS distributes different outpatient payments for emergency visits versus
observation services. The real unmeasured cost is in labor resources themselves, as once a Type-
4 observation patient is admitted to an inpatient unit, no matter the status, the clinicians provide
the same level of treatment they would to any other inpatient. Creating a dedicated observation
unit with a distinct footprint will serve as a contextual reference for separation from the inpatient
ward with a different expectation of care.
Staffing models for nursing and physicians are different in observation units compared to
inpatient units, as the fixed costs of managing a dedicated observation unit usually support a ratio
of five patients to every nurse, with minimal physician staffing. Some OBS units even use
physician assistants (PAs) or nurse practitioners (ARNPs) to care for this low acuity population.
The key to optimal use of a dedicated observation unit is to develop patient selection inclusion
and exclusion criteria that have well-established diagnostic and treatment algorithms (Baugh et
al., 2011), referred to as protocols. Aside from the general definition of CMS's observation care,
there are few guidelines to assist the clinician in decision-making (Feng et al., 2012). Regardless
of the financial implications, the goal for the hospital should be the right care for all patients in
the right place at the right time (Baugh et al., 2011).
Description of Stakeholder Group
The primary stakeholder group involved in patient status selection is providers, which
includes hospitalists, which Pantilat (2006) describes as physicians whose focus is the general
medical care of hospitalized patients. Physician Assistants (PAs) and Advanced Registered
Nurse Practitioners (ARNPs) are also mid-level providers often used in dedicated observation
unit models, and Napolitano and Saini (2014) outline how these allied health professionals’
8

function ideally in low acuity situations. All providers must have current admitting privileges to
the hospital, whereby they assess the patient once notified by an emergency department
physician who feels a patient is not stable enough to discharge from the emergency department
to home. If the provider makes the determination to hold the patient for observation services or
admit them to inpatient status, the provider places an order to designate the appropriate
admission. Once placed, the ordering provider serves as the attending practitioner and assumes
care of the patient and their treatment plan.
Stakeholder Group for the Study
This study focuses on the provider stakeholder group at Pacific Hospital that makes the
decision to admit patients to observation service or inpatient status. While a complete
performance evaluation would focus on all stakeholders, for practical purposes, the key
stakeholder in this analysis is providers admitting patients from the emergency department to
either observation service or inpatient status. For the purposes of this discussion, the physician is
tasked with two main responsibilities; a declaration that a patient is likely going to be in the
hospital for two midnights or more, along with the need for the patient to receive “reasonable
and necessary” care which would only be provided as an inpatient (Cooke & Krawitt, 2015).
Once admitted, the treating physician follows the patient daily assessing their condition and
updating their status, if necessary. Peacock et al. (2014) explained how CMS requires providers
to evaluate patients on the day of discharge.
Whether the patient is in observation service or inpatient status, Medicare has specific
criteria for each and the provider must ensure the appropriate designation. The clinician must be
confident in their decision-making to avoid denials, yet Singer and Bergthold (2001) confirm that
clear evidence and guidance for defined criteria is lacking. In fact, Cooke and Krawitt (2015)
9

suggest that only 40.4% of survey respondents felt confident making status decisions of their
own accord, and 46.3% of those surveyed were confident making status decisions while having
the help of clinical reviewers. The design of the qualitative study seeks to gather rich, descriptive
information from providers to understand the knowledge, motivation, and organizational barriers
providers face when meeting inpatient medical necessity in 100% of admitted patients. The use
of interviews is critical to understand the physician’s perceptions about the difficulties they face
while making medical necessity decisions. These interviews will provide information from
among the group about their confidence in their decisions. Whether their interpretation of the
situation is accurate is irrelevant, because for them it is their reality and in order to change their
reality, one must understand it first. Finally, the study questions seek to find common themes and
opinions about perceived barriers such as processes or procedures or missing aides and tools that
make it easier to accomplish the necessary tasks to complete the mission.
Table 2 provides an example of the organization and stakeholder performance goals.

Table 2
Organizational Mission, Goal, and Stakeholder Goal
Organizational Mission
Pacific Hospital has a mission to provide optimal healthcare to patients of the community.
Organizational Performance Goal
By Fiscal Year-End 2022, denials for medical necessity on inpatient accounts with stays less
than 48-hours will decrease by 50% from the 2018 denial rate.
Organizational Goal Stakeholder Goal
By FY22, Pacific Hospital will ensure its two-
midnight inpatient admissions align 100%
with CMS medical necessity criteria.
By FY22, providers at Pacific Hospital will
align their medical decision-making criteria
for inpatient status 100% to CMS medical
necessity criteria.
10

Purpose of the Project and Research Questions
The purpose of this project is to explore the degree to which the organization is able to
meet its organizational goal of zero denials for inpatient hospitalizations with patients admitted
for less than 48-hours at Pacific Hospital. Information gathered from a semi-structured,
qualitative interview process with providers, along with data collected from internal work
records and external performance data, would inform the researcher as to the knowledge,
motivation, and organizational influences contributing to current denial decisions. The following
questions will guide the evaluative study:
1. What knowledge influences affect provider medical decision-making when determining
patient status?
2. What motivational influences affect provider medical decision-making when determining
patient status?
3. What organizational influences affect provider practice when selecting patient status?
Overview of Theoretical Framework and Methodology
A trend in limited dedicated observation units in United States hospitals creates a gap in
care for patients who may not be sick enough for the emergency department but are not well
enough to discharge to home. The theoretical framework used to analyze this issue relies on the
Clark and Estes Gap Analysis Model, employing three critical factors to examine knowledge,
motivation, and organizational barriers (Clark & Estes, 2008). Methods used to explore this gap
analysis will include a semi-structured, qualitative interview process involving one dozen
providers, along with data collection of work records and performance data gathered by
permission of the Compliance Manager at Pacific Hospital. Organizations achieve success when
goals are defined and translated into operational work performance processes at the individual
11

level. Once employees clearly understand the organizational goals, Clark and Estes (2008) assess
the current state as gauged against future performance for positive achievement, an important
step toward identifying gaps. In medical terms, this requires a diagnosis for the cause of these
gaps, where then a treatment plan can optimize a positive outcome, or prognosis. Examining the
three important influencing factors of knowledge, motivation, and organizational barriers helps
to establish a shared understanding of the current state.
Definitions
The following section contains definitions of frequently used terms used throughout this
dissertation and research study.
Hospitalist – A physician whose primary focus is the general medical care of hospitalized
patients. At Pacific Hospital, these individuals generally serve on twelve-hour shifts for four
days, then take three days off, and repeat a second series. As each physician ends their shift, they
“hand off” the patients they were caring for to the physician who is just beginning their shift.
Observation Unit and/or Service - CMS defines observation status for hospitalized
patients as a “well-defined set of specific, clinically appropriate services, usually lasting less than
24 hours, and that in “only rare and exceptional cases” should last more than 48 hours” (Sheehy
et al., 2013).
Protocol - Patient selection inclusion and exclusion condition-specific criteria that have
well-established diagnostic and treatment algorithms (Baugh et al., 2011).
Readmission - A patient readmits to the hospital within 30 days of initial hospitalization,
regardless of the reason for the first admission.
Low acuity - Patient’s medical condition does not warrant level of care needed for
inpatient admission.
12

Presentation - A patient “presents” to the hospital for assessment of acute medical
condition.
Organization of the Dissertation
This study consists of five chapters. The introductory chapter serves to provide the reader
with an understanding of the underlying issues and vocabulary typically relevant to discussions
regarding the topic of limited dedicated observation units in acute care facilities. Following is a
review of the organization’s background and mission, along with an outline of the specific area
of concern for stakeholders with potential observation service needs. A design framework for the
study and proposed research questions explains the process involved in assessment for the need
of an observation unit. Chapter 2 reviews current literature concerning the lack of observation
units in the healthcare industry. Topics include the evolution of observation status as defined by
CMS, conditions typically appropriate for observation care, the shift from primary care to
emergency department admissions resulting in ED overcrowding, increasing inpatient denials by
third-party payers for medical necessity, decreasing patient satisfaction, and increased
readmission penalties due to inappropriate status. Chapter 3 outlines the methodological design
used in the research study, and the selection process for the three qualitative data sources:
historical documentation analysis, stakeholder interviews, and post-survey information. Chapter
4 includes a discussion of the data collection process, along with an assessment and analysis of
the data. Finally, Chapter 5 discusses the findings and offers recommendations for Pacific
Hospital going forward.

13

Chapter Two: Literature Review
Observation service in the hospital setting has existed for many decades, yet the design
and utilization in each facility across our nation are as varied as the multifaceted topic itself. This
review of the research addresses the use of observation services, the history of many regulatory
changes that prompted practice shifts within the healthcare and third party payer industries, and
the current lack of observation units in hospitals across the United States. The first Observation
Unit Guidelines were created in 1988 by the American College of Emergency Physicians
(ACEP), which was soon followed by the ACEP Section for Observation Medicine in 1991
(Baugh et al., 2010). Observation units target limited patient populations, such as those
experiencing low-risk chest pain (Southerland et al., 2018). Through the decades, other medical
conditions have been added to the list of specific protocols considered eligible for observation
classification, such as abdominal pain, syncope (fainting), cardiac dysrhythmias, mood disorders,
skin and soft tissue infections, and congestive heart failure (Napoli et al., 2014). In a study
conducted from 2009 to 2010, Napoli et al. (2014) found that approximately 2% of all
emergency cases convert to observation cases. Southerland et al. (2018) pointed out these are
often patients that require low-intensity service diagnostic testing and procedures that do not
need the acute, critical care resources of an emergency room visit.
Centers for Medicare and Medicaid
Originally the CMS intended observation stay as a period of determination for whether a
patient coming into the hospital suddenly for an acute condition needed to be an inpatient
admission or could be discharged home (Powell et al., 2020). Over the years, beginning in 2003,
changes to Medicare-designated revenue center codes provided more leeway for the application
of observation services. Many qualify as pre-planned visits and short-term treatments. CMS has
14

not provided further guidance on the use of these revenue codes, which account for two-thirds of
observation stays. In 2012 as part of the Affordable Care Act, the Hospital Readmissions
Reduction Program (HRRP) was implemented (Albritton et al., 2018), which included penalties
for significant readmissions within a 30-day timeframe of the initial hospitalization. CMS
enacted the Two-Midnight Rule change on October 1, 2013, assuming that a large number of
short inpatient cases qualified as observation service, however, Sheehy et al. (2014) implies there
was no evidence for this conclusion. January 2016 brought a legislative amendment to the CMS
rule explicitly recognizing that hospitalizations less than two midnights can be appropriate if
based on documented physician judgment (CMS.gov, 2015).
Historical Context
CMS provides the establishment of medical necessity criteria for inpatient care. The
Recovery Audit Contractor (RAC) program created through the Medicare Modernization Act of
2003 assesses short-stays for inappropriate admissions based on criteria (Bellolio et al., 2016).
The criterion runs through an algorithmic application based on diagnoses and comorbid
conditions, primarily used by the Utilization Review (UR) nurses who perform admission status
determinations. There are two electronic application systems used by the nations’ hospitals,
Milliman and InterQual. Ideally, every observation patient’s case flows through the algorithm.
Notification pushes to the physician to change the status of the patient from observation to
inpatient if appropriate when notified by the UR nurse. The same is true for a patient admitted as
an inpatient but later does not qualify based on medical necessity criteria. The physician must
change the status before the patient discharges, as Medicare will not accept a status change
retrospectively. There are also additional review and documentation steps necessary per
regulatory standards.
15

The following section will discuss the evolution of establishing observation units, the
impact of regulatory changes on the healthcare industry, the effect on hospital readmission rates,
the many factors involved in a facility’s emergency department and inpatient unit crowding, and
the decision to invest in a dedicated observation unit. This literature review also looks at the
variety of financial considerations involved with observation units, and the impact of CMS
denials from short-stay admissions. Data is provides an explanation for the administrative burden
placed on the healthcare industry and the ostensibly inequitable financial cost to patients.
Evolution of Dedicated Observation Units
Gabele et al. (2016) explained how CMS restructured observation guidelines intended to
serve a certain patient population, those that are not sick enough for the ED but are too ill to go
home. As of October 1, 2013, observation status is for patients brought to the emergency
department who are not ready to discharge in under eight to 24 hours; however, they do not yet
qualify for inpatient admission by CMS medical necessity criteria. Clinicians still need time to
assess and monitor the patient, possibly running diagnostic tests to determine if it is safe to
discharge the patient home. Sheehy et al. (2013) conducted studies that found that although the
CMS definition of care typically required less than 24 hours and infrequently more than 48
hours, 44.4% of patients with observation status discharged in less than 24 hours. Furthermore,
16.5% stayed more than 48 hours, challenging the “23-hour observation” norm, and giving
evidence that stays over 48 hours are no longer “rare and exceptional.”
The development of the 2012 Hospital Readmissions Reduction Program (HRRP) put
legislation in place aimed at reducing the number of hospital readmissions in certain medical
conditions. However, the program encourages the use of observation services without
corresponding infrastructure in place among two-thirds of the nation’s hospitals. Ross et al.
16

(2013) described the need for an organizational redesign for these facilities to accommodate this
enhanced service line model. Survey data collected in 2007 from the Centers for Disease Control
(CDC, 2018) indicate that half of the 120 million emergency department visits annually result in
an inpatient admission (Baugh et al., 2011). For those facilities with an emergency department
observation unit (EDOU), this allows for an additional discharge option for ED patients,
admission to observation service. Baugh et al. (2011) explained that when patients with one of
the top ten common diagnoses seen in observation admit as an inpatient, Medicare might not
fully cover the hospital’s costs. By placing these patients in an EDOU, inpatient beds remain
available to a patient with more severe conditions, which helps to decrease inpatient
overcrowding.
Researchers found that 44.4% of observation patients discharged in less than 24-hours,
while 16.5% of accounts had stayed over 48 hours in duration. These research results by Sheehy
et al. (2013) suggest that the CMS definition of observation stay as that requiring care under 24
hours and rarely over 48 hours is no longer reflective as typical. Sheehy’s data also indicate that
the rise in observation stays versus short-stay inpatient admissions builds a strong case for the
adoption of a dedicated observation unit model nationally (Adrion et al., 2017). “Dedicated”
refers to a physical location where only observation patients are treated (Peacock et al., 2014).
Facilities can save anywhere from 27-42 percent when using an observation unit with defined
protocols rather than traditional inpatient care, indicating a savings of $5.5-$8.5 billion per year
throughout the United States (Ross et al., 2013).
The best practice observation unit is typically located adjacent to the emergency
department and staffed by emergency room physicians. Evidence supporting Type 1 settings
with protocol-driven care in dedicated observation units provide the improved length of stay
17

metrics and patient outcomes (Peacock et al., 2014). Healthcare executives must weigh the
benefits of adding resources against the cost of the investment. Accurate data assists in decision-
making, and informing efforts for the successful implementation of an observation unit program.
Ross et al. (2013) showed the many benefits of a Type 1 design, which include the following
components; unit-specific operational manuals, condition-specific protocols, appropriate staffing
modeling, ancillary services support, designated medical and nursing director staffing, and
development of key utilization and quality metrics. Additional best outcomes include lower rates
of inpatient admissions and lower costs.
Peacock et al. (2014) explained that nationally there is a wide variety of settings among
facilities with observation units. The most common setting currently in nationwide hospitals is a
Type 4 design, which is discretionary care delivered in any bed in the hospital. The care received
is considered equivalent clinically whether the patient is designated as an observation service or
inpatient, and in fact, clinicians tend not to differentiate between the two (Peacock et al., 2014).
Table 3 depicts the four levels of observation services recognized by CMS.

Table 3
Four Levels of Observation Settings

Type 1: Protocol driven with a dedicated Observation Unit
Type 2: Discretionary care with a dedicated Observation Unit
Type 3: Protocol driven, care in any bed in the hospital
Type 4: Discretionary care in any bed in the hospital
Note. There are four accepted types of hospital settings in which to provide observation services, each defined by
the presence or absence of dedicated units and protocols. 1) Type 1 is the best practice setting, yet 2) Type 4 is the
most common setting in United States hospitals.
18

Regulatory Impact on Observation Patients
Beginning in 2005 and continuing through 2014, CMS made many changes to rules
concerning reimbursement. The first was the creation of the Recovery Audit Contractor (RAC)
program in 2006, targeting Medicare waste in short-stay admissions, or those under 48 hours
(Venkatesh et al., 2011). According to Wiler et al. (2011), auditors collect overpayments by re-
categorizing short, inpatient stays as observation status, which reduces the payment received by
the hospital. The RAC program has recovered billions in Medicare payments from these audits
(Baugh et al., 2011). In a study by Feng et al. (2012), researchers found that the ratio of
Medicare enrollees in observation status over inpatient status increased by 34% during two years
between 2007 and 2009, while another study by Kangovi et al. (2015) indicates that annual
observation hours increased by almost 70% between 2006 and 2010 for Medicare beneficiaries.
In 2007, CMS expanded reimbursement for observation services (Venkatesh et al., 2011), and in
2008, eligible conditions increased from three to any clinical condition. Conditions thus became
more conducive for facilities to utilize this transitory service, although 10 diagnoses continue to
make up 40% of observation conditions: nonspecific chest pain, abdominal pain, syncope
(fainting), cardiac dysrhythmias, mood disorders, skin infections, congestive heart failure,
coronary heart disease, other injuries, and transient cerebral ischemia (TIA).
With the introduction in 2013 of the Two-Midnight Rule, CMS reimbursement policies
became more restrictive for the qualification of short-stay hospitalization in meeting medical
necessity (Blecker et al., 2016). Before October 1, 2013, physicians used “InterQual” clinical
criteria to determine if a patient qualified for observation care. According to Sheehy et al.,
(2014), the time-based Two-Midnight Rule now pivots on whether the patient stays for a
duration of two midnights or more. Sheehy’s research concluded that the CMS Two-Midnight
19

Rule brought unintended consequences of longer length-of-stays, reduced efficiencies, and
increased cost of care.
Research shows that while the number of emergency rooms and hospital beds across the
United States has decreased, observation care provides a delivery alternative for common
observation conditions that may require additional rapid diagnostic and treatment protocols, and
are appropriate for the observation setting (Huntington et al., 2015). Two strong cases exist for
implementing an observation unit, according to Baugh et al. (2011). The first advantage is that
clinical decision-making applies to several specific conditions. For instance, patients with
clinical indications of chest pain, abdominal pain, and asthma benefit from well-constructed
inclusion and exclusion criteria. Scientific literature supports the use of observation diagnostic
and treatment algorithms (Baugh et al., 2011), which are generally not supported in the more
fast-paced emergency environment. As an example, with patients experiencing chest pain, serial
cardiac checks every six hours for acute myocardial infarction result in higher sensitivity and a
more definitive diagnosis of significant coronary artery disease (Baugh et al., 2011).
A second advantage is the realization of stronger profit margins when caring for this
patient population. An efficient observation unit design operates as a Type 1 setting, utilizes
defined protocols, and aims to provide service for eight to 24-hour patient length-of-stays
(Southerland et al., 2018). Researchers involved in a multicenter study in 2011 examined patients
with symptoms of syncope, or fainting, as treated in a protocolled care setting in a dedicated
observation unit versus routine care given on an inpatient floor (Baugh et al., 2015). This
Emergency Department Observation Syncope Protocol (EDOSP) demonstrated both cost savings
and a reduced length of stay for patients with syncope if treated in an observation unit as savings
20

and a reduced length of stay for patients with syncope if treated in an observation unit as
compared to treatment on an inpatient unit.
Hospital Readmissions
Facilities are potentially subject to a financial penalty if hospitalized patients with any of
six medical conditions readmit within 30 days of the first admission for the same condition. The
hospital that originally admitted the patient (the index admission) is the entity that incurs the
penalty. The HRRP program has penalized hospital facilities for approximately $1.9 billion
through 2017, and Thompson et al. (2016) argued that unreliability within risk-standardized
readmission rate (RSRRs) measures provide little feedback for institutions to identify areas for
improvement. Studies show that almost half of excess readmissions occur with those patients
having surgical procedures, and readmissions for conditions involving total hip and/or knee
arthroplasty (THKA) and coronary artery bypass graft (CABG) surgeries are more conducive to
performance enhancement initiatives (Thompson et al., 2016) than in the other four more general
categories.
In a study conducted through analysis of the HCUP Nationwide Inpatient Sample (Ross
et al., 2013), researchers estimate that 12% of the 39-million inpatient admissions in 2010 were
eligible for observation care, or 4.6M beneficiaries. That amounts to almost five million patients
who will have no impact on the readmission penalty factor because observation care is an
outpatient service. Thompson et al., (2016) outline how the Affordable Care Act (ACA) led to
changes that which incentivize hospital reduction of readmissions. Financial penalties are
imposed on facilities that have higher than expected inpatient readmission rates if a patient has
more than one inpatient stay within a 30-day timeframe, no matter the reason. However, for the
remaining 34 million, the creation of the Hospital Readmissions Reduction Program (HRRP) in
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2012 placed hospitals in a position of careful consideration in the use of observation status so as
not to appear as if they are attempting to avoid a readmission penalty. Albritton et al. (2018)
performed a study using Medicare data within a healthcare collaborative from 2012 through
2015 and concluded that the HRRP program does incentivize the use of observation care for
patients with certain conditions. Thompson et al. (2016) explained that the HRRP program
targets six medical conditions; acute myocardial infarction (AMI), congestive heart failure
(CHF), pneumonia (PN), chronic obstructive pulmonary disease (COPD), THKA, and CABG.
The development of the 2012 HRRP program put legislation in place aimed at reducing
the number of hospital readmissions in certain medical conditions; however, the program
inadvertently encourages the use of observation services without a corresponding infrastructure
in place among two thirds of the nation’s hospitals. Ross et al. (2013) describe the need for an
organizational redesign for these facilities to accommodate this enhanced service line model.
Survey data collected in 2007 from the CDC indicate that half of the 120 million emergency
department visits annually result in an inpatient admission (Baugh et al., 2011). For those
facilities with an emergency department observation unit (EDOU), an additional discharge
option is now available for ED patients, admission to observation status. Baugh et al. (2011)
explain that when patients with one of the top ten common diagnoses seen in observation admit
as an inpatient, Medicare may not fully cover the hospital’s costs. By placing these patients in an
EDOU, inpatient beds remain available to a patient with more severe conditions, which helps to
decrease inpatient overcrowding.
CMS also applies a two-midnight presumption, meaning a patient’s care plan expects to
span two or more midnights and meets the criteria for inpatient medical necessity. The
organization is careful to outline that when CMS or its review contractors assess an inpatient stay
22

that is under two midnights as described in their Frequently Asked Questions document (CMS,
2013); they take into account the physician’s documentation of the patient’s condition. There are
many complexities involved in the provider’s treatment plan, including the patient’s general
health and history, the severity of illness, any comorbidities or complications, and the risk of a
poor outcome if not treated promptly. Clear documentation in the medical record by the
admitting physician that there was a reasonable expectation that the patient would need to stay
for two midnights or more allows consideration for each stay under 48-hours based on its merit.
CMS understands there will be circumstances when patients recover more swiftly than their
physician had anticipated.
The Decision to Place Patient in Observation Service
Utilization resources such as nurses trained in medical necessity review are available to
assist physicians in the decision-making process when determining if patients meet the criteria
for either observation service or inpatient admission. As Singer and Bergthold (2001) denoted,
these additional clinicians contribute to the eligibility reviews and help to interpret criteria and
coverage policy issues for physicians. For either observation or inpatient classification, the best
way to defend the medical record against a potential denial from a third-party auditor is for clear
provider documentation of his or her thoughts as to why they believe the patient requires the
treatment ordered. In both situations, the physician’s assessment and evaluation should include a
history of the present illness, how the patient arrived at the facility and at what point they entered
the organization, the chief complaint as stated by the patient, any signs and symptoms as
described by the patient or their representative, and any known treatment the patient may have
received before arriving (Peacock et al., 2014). Further, the physician’s evaluation should outline
their objective assessment of the patient’s condition, the results of any diagnostic testing they
23

may have ordered, and their medical decision-making statement to support the necessary
forthcoming treatment. The physician generates his or her best estimate as to how long the
patient will require either observation services or inpatient treatment. Only the physician can
provide direction for continued services through an order either placed in the hard copy medical
record or filed in the electronic medical record.
There are particular requirements for both observation services and inpatient admissions
for regulatory compliance, such as timed and dated signatures by a physician. When absent,
orders are considered non-complete. Powell et al. (2020) also suggest that there may be a
difference in how physicians and the healthcare systems operationalize the use of observation
services versus the intended Medicare observation purpose. It is worth mentioning once again,
the CMS definition of observation service is “short term treatment, assessment, and
reassessment, that are furnished while a decision is being made regarding whether patients will
require further treatment as hospital inpatients or if they can be discharged from the hospital”
(CDC, 2018). The use of observation services tripled between 2001 and 2008, and yet Blecker et
al. (2016) explain that only one-third of the nation’s hospitals have dedicated observation units,
creating an unmet demand for this resource.
ED and Inpatient Crowding
Crowding in both the emergency department and in inpatient units minimizes when
instituting the use of an observation unit. The National Hospital Ambulatory Medical Care
Survey (NHAMCS) estimated that 107 million Americans per year flowed through emergency
departments (Southerland et al., 2018), and about half of them were admitted to the hospital. On
average, about 20% of patients might be eligible for consideration as observation before inpatient
admission. The type of conditions dealt with in an Observation Unit (OU) are those requiring
24

fewer resources than on an inpatient unit. If a dedicated OU is available, the patient discharges
from the ED, transfers to the OU, and could go home from that service or admit later in the stay.
It is always up to the physician and their decision-making as to whether the patient should admit.
Financial Considerations
There is a strong contrast between hospital administration efforts to optimize revenue
resource management versus the financial predicament that many Medicare patients find
themselves in when their inpatient stay downgrades due to lack of medical necessity. A
misconception also exists that hospitals approval reimbursement, when in fact, third party payers
such as CMS and other insurers make these decisions. If payers determine that the patient’s
condition meets medical necessity criteria, then the stay is covered. However, if the payer deems
that the stay appropriately qualified as outpatient service, Adrion et al. (2017) outline those
Medicare beneficiaries are subject to outpatient coverage policies, which places patients
responsible for 20 percent of each service received. Most Medicare recipients have a
supplemental policy that helps to cover this co-payment, although Adrion et al. (2017) document
that 15 percent of beneficiaries lack this additional coverage.
Outpatient observation care disqualifies the hospitalization from counting toward their
required three-day hospital stay before being eligible for a Skilled Nursing Facility (SNF)
placement. If a patient’s condition does not meet medical necessity for inpatient status, but their
condition does not warrant their safe discharge, they may stay in the hospital under observation
service for days. Observation service does not count toward care in an SNF, and patients will be
liable for up to 20% of the cost of the outpatient care for the hospitalization (Napolitano & Saini,
2014). Often patients are not able to return to their own homes as they live alone or their loved
ones cannot care for them. Social workers strive to find placement situations other than an SNF,
25

such as an adult family home or assisted living environment, however, these facilities are often
overburdened and limited placements are available. Sheehy et al. (2014) found that there should
be a return to the original intent of the CMS definition of observation care, a short period of care
to determine if the patient can safely return home. Regardless of whether the stay goes beyond
two midnights or more, Sheehy et al. (2014) felt that the two-midnight rule has lost the intent of
observation care and shifted the focus of the service for the patient.
CMS Denials for Short-Stay Admissions
Medicare targeted “short stays” in 2006 by instituting the Recovery Audit Contractor
(RAC) program (Venkatesh et al., 2011). Originally only reimbursing beneficiaries for
observation services for three conditions (chest pain, CHF, and asthma), Veskatesh et al. (2011)
state that as of 2007 observation care can be for any condition. An important result of the HRRP
program was the Notice of Observation Treatment and Implication for Care Eligibility
(NOTICE) Act of 2015 (Albritton et al., 2018). The NOTICE Act ensures that hospitals inform
patients that they are receiving observation services at the twenty-four-hour mark. The RAC
project created an argument for hospitals to treat patients with less severe illnesses in settings
such as observation, although certain conditions still have a higher likelihood of failing
observation care, such as CHF. When Medicare patients admit as Inpatient and stay less than 48-
hours, then discharge to home, Medicare may determine after the fact that the patient’s condition
did not meet medical necessity for inpatient care. According to CMS rules, status can only
change during hospitalization, not after discharge. If the physician decides after discharge that
the patient did not qualify for inpatient care, it is too late to change the status and the entire visit
is subject to denial by Medicare. Once the hospital receives a denial notice, management must
26

choose whether to bill the patient or write off the denied amount due to non-payment by the
payer.
This concludes the historical contextual background for the benefit of the reader, and the
focus will now turn to the theoretical framework, exploring the next steps toward analysis.
Clark and Estes Gap Analysis Conceptual Framework
Clark and Estes Gap Analysis Model is the theoretical framework used to diagnose the
human cause of poor performance. Clark and Estes (2008) explained that performance
expectations must tie to the organizational business goals and in the case of medical necessity
denials at Pacific Hospital, the goal is to have zero denials. Currently, this denial reduction is not
part of any established business goal or stakeholder goals, or incentive programs. Setting
performance goals, determining the gap between current achievement and said goals, and
identifying performance solutions to bridge those gaps will provide Pacific Hospital with
direction (Clark & Estes, 2008). The Gap Analysis Model will provide a framework for
exploration into the knowledge, motivation, and organizational influence gaps that prevent
stakeholders from reaching the organizational goal. Following is a breakdown of the three main
influential areas that constitute the organizing structure that promotes comprehension
(Krathwohl, 2001). Utilizing the Clark and Estes Gap Analysis Model, the study will investigate
the knowledge, motivation, and organizational barriers existing at Pacific Hospital, which
contribute to the current state of the performance gap. The following section will provide a
breakdown of each of these influential areas as connected to the broad research questions
focusing on reducing organizational medical necessity denials. Providers have the ultimate
decision authority regarding status selection for patients, therefore a thorough understanding of
27

their ability to assess the patient’s condition and appropriate treatment plan is necessary for the
accomplishment of stated goals.
Knowledge Influence Factors
Merriam and Tisdell (2016) explained that as humans interact with their world, meanings
are constructed. How participants interpret these meanings, what their understanding of them is,
and what attributions the meanings contribute to their experiences all influence perception. Using
methods such as stakeholder interviews, historical system records, and revenue performance
data, gaps in processes that prevent the achievement of work goals will surface. The gap analysis
design is especially relevant in the healthcare arena due to it being so process-driven (Ross et al.,
2013). The Clark and Estes framework model helps to ferret out the hidden assumptions and
perceptions from among divergent stakeholders. This knowledge is critical toward understanding
how participants feel about the reality of their situation. In this context, it is not the true reality of
the situation; it is the perception of that reality. The qualitative interview design helps
researchers understand these perceptions, and therefore the knowledge gaps as expressed by
participants. This should build an awareness of what could or should happen to attain greater
effectiveness. This work should focus solely on the processes themselves, rather than the
individuals performing them, and Clark and Estes (2008) recommend listening actively and
neutrally. Identifying and understanding paves the way for a game plan development to motivate
stakeholders to implement new processes.
Clark and Estes (2008) indicate that “perceptions of reality control performance,” and
this is no less true in the healthcare arena. People often form entirely different ideas about a
situation even when they are collectively out to achieve the same goals. Healthcare tends to
promote a silo perspective dependent on the functionality of roles, which Bento et al. (2020)
28

explain is a barrier toward internal cooperation. Gap analysis allows a thorough examination of
performance issues and possible misconceptions. It is necessary to understand if providers feel
they have the appropriate information, technology, and tools for properly triaging patients to the
correct placement situation. Interviews seek general information about the process for
determining observation service versus inpatient status and allow the researcher to identify
patterns of understanding for further review and possible education and/or training. Individuals
need knowledge and skill enhancement when unsure of how to perform unclear tasks, such as
providers determining if patients meet medical necessity criteria for observation or inpatient
status as defined by CMS. Traditionally, the availability of additional information through job
aids, training and education augments these competency gaps. However, deficiency
identification must occur first for the development of needed supplemental tools (Clark & Estes,
2008). The following sections offer insight into specific literature reviews regarding each topic
for further exploration.
Utilization of Milliman and/or InterQual Criteria
There are two medical screening tools accepted by CMS and third-party payers to aid in
determining the appropriate level of care for patients, Milliman and McKesson’s InterQual
(Wang et al., 2013). Utilization reviewers, also referred to as case managers, use these tools
concurrently as they review patients to determine continued inpatient eligibility. In a study of
CHF patients admitted to the emergency department in Fort Worth, Texas, researchers found that
the use of InterQual criteria did not accurately predict the need for observation versus inpatient
hospitalization (Wang et al., 2013). In fact, results from Sheehy et al. (2013) research at the
University Of Wisconsin School Of Medicine showed that even when applying CMS-endorsed
InterQual criteria, many of the observation visits they investigated did not meet the very CMS
29

definition of observation. The study question regarding these screening tools will help to
ascertain the level of effectiveness the physicians feel the tool provides in guiding providers to
select their final patient status selection.
Appropriate Patient Classification
Huntington et al. (2015) substantiate that CMS will reimburse providers for inpatient
status if clinical documentation justifies the need for a patient to stay for a period of greater than
two midnights. Therefore, the importance of thorough documentation of provider thought
process cannot be overstated. CMS acknowledges instances where patients recover more quickly
than expected, and Cooke and Krawitt (2015) confirm that sufficient documentation in the
medical record is the best defense to safeguard against denials. Unfortunately, as Singer and
Bergthold (2001) found in their research on decision-making approaches, contractual definitions
are vague and often denial letters contain little information or evidence supporting the denial.
Understanding the provider’s competence in thoroughly documenting his or her thought process
in what might appear to them to be quite an obvious narrative language will offer evidence as to
the missing information to substantiate the care treatment plan for the patient.
Use of Electronic Predetermined Protocol Tools
The use of protocols in healthcare is a common, well-established process, and LaRoche et
al. (2016) make a case that electronic medical record functionality vastly increases the data
availability for the clinician. Mahler et al. (2018) conducted a study at three hospitals in North
Carolina, finding that the use of diagnostic protocols integrated within electronic medical record
applications predicted low-risk patients qualifying for discharge without hospitalization.
Exploring the inclination, or conversely the reluctance, to utilize these electronic tools will offer
30

helpful insight as to how to better equip providers with state-of-the-art technology to enable their
medical decision-making at a more rapid pace.
Table 4 succinctly outlines the semi-structured, open-ended topics explored in the
qualitative interview process regarding knowledge influences.

Table 4
Knowledge Influences and Assessments

Knowledge Influence

Knowledge
Influence Type
Knowledge Influence Assessment

The provider needs to know how to
identify a patient meeting
observation service versus inpatient
status.
Declarative
(Factual)

Providers asked about their
understanding of Milliman and/or
InterQual medical necessity
criteria (interview question).

The provider needs to know how to
demonstrate his or her medical
decision-making ability in assigning
patient status by means of thorough
documentation of his or her thought
process.
Procedural

Providers asked to explain the
process of determining if a
patient meets inpatient medical
necessity based on their own
medical knowledge (interview
question).

The provider needs to know to use
predetermined protocol navigators
in the electronic system to guide
them through a selection of
appropriate treatment care paths.

Procedural

Providers asked how they utilize
observation protocols to
determine observation eligibility
(interview question).

Motivation Influence Factors
Clark and Estes (2008) found that motivation has a substantial influence on whether or
not we carry out the work ahead of us. Do we understand and align with the goal we face; do we
have the persistence to see the work through to completion and do we have the mental fortitude
to finish the task? The work done by Clark and Estes (2008) indicates that of the many elements
31

that destroy work motivation, vague and changing performance goals is the top reason people do
not commit to work and put their best efforts forward. The resulting motivational programs
require full vetting of gap analysis first so to identify all knowledge and organizational process
issues. Distinguishing the motivation for physicians to assign correct medical necessity criteria
may seem clear-cut; however, this study will focus on the motivational control factors involved
in an environment that provides resources for effective status selection. Clark and Estes (2008)
explain that belief differences may affect people as to what motivates their choices. The
qualitative semi-structured interview process will provide rich, detailed data for the assessment
of perceived existing barriers in status selection.
As Singer and Bergthold (2020) illustrate, licensed providers are the only stakeholders
allowed to make decisions regarding status even though the criteria and policy guidelines are
vague and uncertain. Additionally, third-party payer contractual definitions of medical necessity
are also unclear and subject to interpretation. To complicate the situation further, physicians
often express disassociation with hospital financial performance based on their employment
structure. When non-employed providers at the facility have medical privileges, they may not
feel vested in the performance of the organization.
Clark and Estes (2008) argue the need for humans to feel effective in their work. The
motivational study questions will seek to determine if providers feel they have the resources
necessary to make appropriate medical necessity decisions. An area of exploration the study also
investigates is physician understanding of the criteria contributing to status decisions. As
providers feel a higher level of confidence in the ability to select status based on these
parameters, their sense of motivation will increase accordingly.

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Readmission Consideration
There have been concerns hospitals have been utilizing observation more frequently since
establishment of HRRP in 2012 as a way to avoid possible payment penalties as the result of
excessive readmission rates (Albritton et al., 2018). In a study conducted with Medicare patient
claims from July 1, 2012, through June 30, 2015, Albritton et al. (2018) researchers found that
hospitals responded to the HRRP with greater use of observation status, although this higher
incidence is equally prevalent among both penalized and non-penalized hospitals. This study
concurred with research performed by Mehtsun et al. (2018) indicating two-thirds of hospital
leaders felt that HRRP was highly impactful with the implementation of system-wide strategy
use in United States hospitals to reduce readmission rates. The study question will assess
whether the provider factors in a readmission likelihood within 30 days of admission while
determining a patient’s status between observation services or inpatient status.
Provider Confidence in Status Selection
Bandura and Jourden (1991) described how the expected self-satisfaction of individual
achievement functions as a positive motivational influence. Yet, as Cooke and Krawitt (2015)
reveal from surveyed hospitalists, not even fifty percent of providers feel confident in their
ability to select patient status on their own. The construct of acquiring the ability for self-efficacy
is important, and Bandura and Wood (1989) mention this as a motivator for individuals to
continue their path of self-development. The study question seeks to discover the level of self-
assurance, which providers possess, and perhaps more importantly, feel they must singularly
display. Table 5 addresses the study questions designed to gauge motivational factors perceived
as barriers for physicians in carrying out the selection of patient classification.

33

Table 5
Motivational Influences and Assessments
Assumed Motivation Influences Motivational Influence Assessment
Utility Value: Providers need to see the value of
appropriately admitting the patient and avoid
readmission, which could adversely affect their
personal scorecard.
Providers asked how the potential for a
patient’s readmission to the hospital within
the next 30 days factors into a decision to
admit the patient to either observation or
inpatient (interview question).
Self-Efficacy: Providers need to feel confident
in their ability to appropriately select patient
status and achieve an organizational denial goal
of zero denials for inpatient stays for 48-hours
or less.
Providers asked about confidence in their
ability to discern medical necessity criteria
for patient classification selection (interview
question).

Organizational Influence Factors
The final focus of the study will illuminate the physician’s perspective of how
successfully the organization supports the work processes involved in status selection. Clark and
Estes (2008) contend that even when stakeholders possess the knowledge and skills to perform
the tasks to achieve organizational goals if organizational process barriers exist, performance
may still suffer. There are six features inherent to successful organizational change that have
been shown to produce improvements for process efficiencies which tie directly to our study
questions, however, for purposes of our study interview questions two of these six will be
addressed together; candid communication and top management involvement, considering the
necessary collaboration between providers and leadership.
Visions, goals, and progress measurement
The organization must have a clear vision in which it outlines the intended concept for
success. This “game plan” includes the business processes and work procedures necessary to
34

achieve the stated goals. Needed is a means to evaluate and gauge the accomplishment of the
stated goals, and a formal method of communicating progress to the workforce reinforces
motivation (Clark & Estes, 2008). The study question will delve into whether providers
understand the organizational goals concerning the reduction of denials for inpatient stays with
durations of 48-hours or less.
Structure and process alignment with goals
Achieving a goal of zero medical necessity denials among inpatient claims with length-
of-stays under 48-hours must also align with business processes and existing organizational
structures (Clark & Estes, 2008). Currently, the business is experiencing a revenue loss due to
this misalignment, and this study question will seek to gather information as to whether the
provider has an appreciation of the amount of revenue lost due to the inaccurate assignment of
status for this population of patients.
Clear and candid communication
Providing constant information to people develops trust and buy-in for acceptance of
performance improvement initiatives. People engage and commit toward changing goals when
they receive the necessary information and have the opportunity to offer feedback. Beeson
(2009) stresses the importance of establishing strong relationships between administration and
physicians as a means to improve the performance of the organization. The involvement of
executive management in these conversations must be genuine to establish trust with physician
representatives (Clark & Estes, 2008). The study question will gauge the extent to which
physicians feel leadership informs and engages them to affect change.
35

Teamwork training
It is a mistake to assume all employees will understand and therefore embrace change. A
training program designed to educate stakeholders on the new knowledge and skills needed to
accomplish the stated goals is crucial for success (Clark & Estes, 2008). Physicians will require
training to use observation protocol tools, and the organization will need to provide this training.
A number of low-acuity medical conditions lend themselves to observation protocol, such as
chest pain, syncope, and CHF. The study question will assess the current state of knowledge
regarding the use of these observation protocol tools and the level of comfort each provider
expresses with utilizing them.
Selection of appropriate change process application
There are many different change process approaches, and the change philosophy
selection utilized with every situation is dependent upon circumstances. With each change
process approach, there is a cascading effect, and Clark and Estes (2008) recommend using very
clear descriptive procedures and processes and a robust training effort to assimilate the new
methods into practice. On the surface, it may appear that a variety of people perform the same
task, but when assessing how each individual actually performs the assignment, there are
generally many variations. Clark and Estes (2008) recognize that it takes job retraining to
establish and maintain replicable procedures. With these new selection protocols and the impact
of capacity in the ED, the observation unit, and on the inpatient floor, a final study question will
rate how the providers feel regarding the effect that this change to the workflow will have on
their daily practice.
Table 6 provides an outline of the five support types and study questions Clark and Estes
(2008) use to assess the potential achievement of organizational vision and performance goals.
36

Table 6

Organizational Influences and Assessments

Organizational Influence

Organizational
Influence Type

Organizational Influence
Assessment

The organization needs to ensure the
achievement of the organizational
vision and goal of zero medical
necessity denials for inpatient
admissions with stays of 48-hours or
less, along with progress
measurements.

Cultural Model

Providers asked about their
understanding of organizational
goals regarding medical necessity
denials for patients with stays of 48-
hours or less (interview question).
The organization needs to provide
information to providers for
understanding the appropriate
classification of patients to avoid
denial of claims due to lack of
medical necessity.

Cultural Model

Providers asked about their
understanding of revenue gains
and/or losses due to medical
necessity issues (interview question;
work records; performance data).
The organization needs a culture of
collaboration that encourages
organizational leadership and
providers to support the accurate
selection of patient status.

Cultural Model Providers asked about how they
collaborate with organizational
leadership in their effort to assess
patient status (interview question).
The organization needs to ensure
provider access to appropriate
education and training for how to
recognize and diagnose medical
conditions appropriate for
observation service.

Cultural Setting Providers asked about the formal
and informal training they received
through their organization regarding
medical conditions generally treated
in observation units (interview
question).
The organization needs to ensure
adequate capacity for placement of
patients in either an emergency,
observation, or inpatient setting.

Cultural Setting

Providers asked about the impact of
reducing ED and inpatient crowding
by creating a dedicated observation
unit (interview question).

37

Service Line Implementation
There are many complexities inherent to the creation of an observation unit, along with
evidence-based best practice recommendations (Longnecker & Longnecker, 2014). As with most
services in healthcare, an observation unit does not just involve one operational characteristic,
but many; physicians, nurses, Admitting, Utilization Management, Social Work, Health
Information Management, Coding, and Financial Services (Komindr et al., 2014). Exploration of
the underlying issues and particular challenges and barriers that come with the establishment of
this service will help hospital leadership address the current denial problem, and Longnecker and
Longnecker (2014) offer ten top barriers to successful hospital change gathered from a
leadership development experience from four Midwest community hospitals. Table 7 identifies
the results from 42 focus group discussions among the 167 frontline hospital leaders.

Table 7
Top 10 Barriers to Successful Hospital Change Efforts
1. Poor implementation planning and overly aggressive timelines
2. Failing to create buy-in/ownership of the initiative
3. Ineffective leadership and lack of trust in upper management
4. Failing to create a realistic plan or improvement process
5. Ineffective and top-down communications
6. A weak case for change, unclear focus, and unclear desired outcomes
7. Little or no teamwork or cooperation
8. Failing to provide ongoing measurement, feedback, and accountability
9. Unclear roles, goals, and performance expectations
10. Lack of time, resources, and upper-management support

38

Komindr et al. (2014) indicated that observation units serve to mitigate overcrowding,
compromised patient care, decreased patient satisfaction, and shortages of emergency and
hospital personnel. However, as Peacock et al. (2014) suggest, the key to a successful
observation program is one that maximizes efficiencies, and careful attention paid to deliver the
appropriate care to the right patient in the correct setting.
Conceptual Framework
In the most simplistic terms, a conceptual framework is a model of what the researcher is
going to investigate (Maxwell, 2013). Merriam and Tisdell (2016) further explain that
components of the framework include key concepts, variables, and questions posed. Not unlike a
model, a framework needs a type of blueprint: the research design, the sample procedures, data
collection strategies and techniques, and the final analysis of the findings (Merriam & Tisdell,
2016). Maxwell (2013) holds that the main application of the conceptual framework is to assist
the researcher in developing a theory about what is going on and why.
The focus of the study is the high number of CMS denials for inpatient stays of a duration
of 48-hours or less at Pacific Hospital, and the Clark and Estes Gap Analysis Model will isolate
specific gaps with knowledge, motivation, and organization influences that hinder the
achievement of organizational performance goals (Clark & Estes, 2008). Each of these areas of
influence explores an in-depth analysis of assumptions, expectations, and beliefs during the study
through the qualitative interview process and evaluation of work records and performance data.
The qualitative study findings will help to explore the perceived organizational policies,
processes, or resource levels that are missing or inadequate, and they may be results that are
unexpected and not necessarily accurate. When assessed collectively, all influences interconnect,
demonstrating the conceptual framework as represented in Figure 1. Each component builds
39

upon the other and is only successful with the totality of the pyramid completed. Clark and Estes
(2008) explained that performance expectations must tie to the organizational business goals. In
the case of medical necessity denials at Pacific Hospital, that goal is to have zero denials.
Currently, this denial reduction is not part of any established business goal. Setting performance
goals, determining the gap between current achievement and said goals, and identifying
performance solutions to bridge that gap will provide Pacific Hospital with direction (Clark &
Estes, 2008). Achieving the goal at the top of the pyramid in Figure 1 represents the successful
transition to performance realization.

Figure 1
Conceptual Framework: The Interaction of Stakeholders’ Knowledge and Motivation and the
Organizational Context

40

Summary
Several main contributing factors affect the medical necessity denial problem of practice
at Pacific Hospital. Only one third of United States hospitals devote resources to dedicated
observation units despite significant denials for patients that might qualify for this service. CMS
has revised their guidelines and reimbursement model during the past two decades, but have not
kept these policies up-to-date with the changing increases in emergency department usage and
the shift in care to outpatient settings for many conditions. Financial benefits exist for hospitals
that treat patients in the most appropriate setting for efficient resource utilization and avoidance
of readmission penalties.
Using the Clark and Estes theoretical model of Gap Analysis, qualitative semi-structured
interviews will gather perceptions from the stakeholders most affected along with the patient, the
physicians. The physician is the sole decision-maker who determines the status of the patient
based on their medical condition, and if this decision does not align with CMS criteria, payers
may deny the stay. It is then up to the financial services personnel to argue the denial rationale,
but without strong provider documentation, it will likely be unsuccessful. By having a strong
understanding of what is being denied and why, education and training can be put into place to
prevent denials in the future.

41

Chapter Three: Methodology
The focus of this research is to determine gaps in work processes that lead to the optimal
selection of patient placement in either observation units or inpatient admission. The evaluation
study intends to identify the knowledge, motivation, and organizational influences that affect the
stakeholder performance goals of achieving zero medical necessity denials for inpatient
admissions with length-of-stays under 48-hours. The design utilized in the study includes a gap
analysis framework following an emergent, qualitative semi-structured interview process along
with the analysis of work records and performance data. This chapter delineates the subsequent
elements of the research study, an overview of the research design, a description of the research
setting and the researcher, and the data sources, instrumentation, collection procedures, and
analysis. The final section focuses on validity and reliability issues, the approach utilized
concerning ethics during the study, and any limitations and/or delimitations. The emphasis for
discovery will center on the three core research questions as described below.
Research Questions
1. What knowledge influences affect provider medical decision-making when determining
patient status?
2. What motivational influences affect provider medical decision-making when determining
patient status?
3. What organizational influences affect provider practice when determining patient status?
Overview of Design
Qualitative research seeks to understand the perceived reality as to why the stakeholders
have difficulty deciding on patient categorization. Stakeholders answered a series of questions
administered in semi-structured interviews with one dozen providers to understand the influences
42

a physician uses to construct experiences. It is important to understand the perceived barriers
facing clinicians as they evaluate patients, according to their sense of reality. Comprehension of
the knowledge, motivation and organizational influences will inform the researcher as to the
resources needed, whether it be training, education, improved work processes, etc.
Clark and Estes (2008) recommended this work begins with learning from those people
performing the work and what they feel is the cause of the gap in reaching the organizational
goals. Using a standard set of questions and interviewing a subset of representative clinicians
that are typical of the larger population, the researcher must take care to listen carefully, actively
and remain neutral so all data can be collected to understand what the participants believe.
Beeson (2009) offers that physicians will help hospital administration build clinical efficiency
when their meaningful input is considered. This data formulates the assumptions surrounding
meanings and interpretations of knowledge gaps that may exist, along with recommendation
from stakeholders as to what will achieve the goal of zero medical necessity denials.
The researcher seeks to gain an in-depth understanding of the participant’s level of task-
specific confidence in the selection of patient medical necessity concerning observation service
or inpatient status. Clark and Estes (2008) tell us it is important to ascertain whether individuals
are overconfident in their ability to make these choices appropriately. The final goal of the
interview process for data collection is to ensure that the organization has provided the resources
necessary for physicians to select classification without hesitation. Further utilizing work records
and performance data to validate the current state of the denial situation for the facility will
solidify the problem of practice, clarify financial losses, and quantify the need for establishing
achievable goals. Outlined in Table 8 are the multiple data methods as applied to the research
questions.
43

Table 8
Data Sources

Research Questions

Method 1
Interviews
Method 2
Work
Records
Method 3
Performance
Data

RQ1: What knowledge influences affect provider
medical decision-making when determining
patient status?

RQ2: What motivational influences affect
provider medical decision-making when
determining patient status?

RQ1

RQ2

RQ3: What organizational influences affect
provider practice when determining patient
status?

RQ3 RQ3

Research Setting
Admitting physicians served as the general role for participant selection. Each provider
has the responsibility to determine the placement of the emergency patient: discharge to home,
admit to observation service, or admission to inpatient status. This medical decision for
placement occurs ideally within the first 90 minutes of the patient arriving in the emergency
department. Currently, the decision to admit the patient to observation service at Pacific Hospital
means the patient goes to an inpatient unit as an observation patient because there is no dedicated
observation unit. The physician is the only person allowed to create the order for patient
placement.
The Researcher
The researcher has the advantage of having insider status and is an employee of Pacific
Hospital. Concerning access and familiarity with the participants, the researcher is able to readily
44

identify and gain contact with the subjects, and in fact, had an established working relationship
with many of the interviewees before the study. However, no formal reporting relationship exists
within the organization between the participants and the researcher before or after the study
(Merriam & Tisdell, 2016). The researcher serves as the director of medical records at Pacific
Hospital and has had varying degrees of interaction over the years with approximately half of the
subjects used in the research study. Merriam and Tisdell (2016) explain how researcher
reflexivity toward the study is mindfulness of the researcher’s impact, and concurrently, how
findings can have an impression on the researcher. It is important for the researcher to indicate to
the interviewees that information from participation will not compromise them or place them at
any risk (Creswell & Creswell, 2018). Obtaining permission to conduct the study from both the
Institutional Review Board (IRB) at Pacific Hospital and the University of Southern California is
also necessary before study implementation. Being a member of the revenue cycle, the
researcher does have a stake in helping to resolve the financial losses of the organization.
However, as stated earlier, only the physician can choose the patient’s classification regarding
observation service or inpatient admission. In that regard, the researcher cannot influence the
provider’s medical decision-making outcome.
Data Sources
The qualitative research study involved a gap analysis framework with participant
interviews as the primary form of research to seek solutions to the medical necessity denial issue.
Work records derived from an internal system called Business Office System (BOS) and
performance documentation from the CMS sponsored audit conducted by Livanta are also tools
used to collect findings for the identification of themes and categories to understand the problem
in this workplace (Merriam & Tisdell, 2016). The researcher conducted a series of one-hour
45

interviews with participant via Zoom technology, while collecting work records and performance
data simultaneously. Interviews with one dozen physicians satisfied a goal of saturation, with a
requirement that each participant has been a hospitalist at Pacific Hospital. Hospitalists all share
similar workloads and shifts, and all have privileges to admit for both observation service and
inpatient status. The researcher will use a purposeful selection process, contacting physicians
from the Medical Staff Roster and utilizing their email addresses for initial contact. Subjects that
granted an interview received a $25 Starbucks gift card at the conclusion of the process along
with a copy of the transcribed interview for their review.
Method 1
Interviews – Participants took part in answering a series of 12 open-ended, semi-
structured questions, allowing them as much time as they chose to answer the questions and any
additional information offered. Interview sessions were set up for 60-minute time slots,
adjustable based on brevity or expanded length. Internet technology utilizing a Zoom application
provided an automatic transcription functionality and the ability for the physicians to participate
at a setting of their choice. Merriam and Tisdell (2016) elaborate on a primary strength of this
type of synchronous data collection method as the ability to chronicle video and audio recording
for future reference.
Six recommended question types as outlined by Patton (2015) provided a template for
design of the 12 questions in the final interview set. Following is a short description of each type,
which aligns with the actual study questions in Appendix A.
1. Experience – These are the things a person does or says, including the way they act
and how they conduct themselves.
2. Opinion – These questions attempt to find out what a participant believes about a topic.
46

3. Feeling – Emotional reactions pertaining to the subject discussion provides
understanding.
4. Knowledge – These questions attempt to discover what specific information the
participant knows about the matter.
5. Sensory – This type of question is similar to behavior questions but seeks more precise
and explicit detail.
6. Background/demographic questions – Finally, questions addressed help to bring
relevant information about the respondent to the study.
As an example, one topic of conversation during the interview process will be the
discussion as to whether the participants are aware of the organizational denial problem, and if
so, will change their behavior for decision-making in the future. Use of this method gauges the
motivation of the participants to alter their processes. Another topic for discussion is whether the
subjects feel the availability of a utilization reviewer for each patient being admitted from the
emergency department is a necessary resource, and if so, why. These types of questions seek
reflective contemplation from interviewees.
Method 2
Work records – Data was solicited from the Revenue Integrity Department of Pacific
Hospital, whose area is responsible for tracking claim data and subsequent payer denial
information for submission to the financial department of the hospital. Records gathered reflect a
reporting period from March through April 2018. The internal system referred to as the Business
Office System (BOS) tracks the number of claims processed at Pacific Hospital during this
timeframe that met the criteria of inpatient admission with a length of stay under 48-hours.
Analysis of the data system determined the monetary impact of the claims, the processed denial
47

information, and a comparison against the official audit results by the CMS auditor to validate
the findings.
Method 3
Performance data – CMS initiated an audit in August of 2018, performed by Livanta, a
Medicare Beneficiary and Family-Centered Care Quality Improvement Organization (QIO) for
the designated respective area. Conducting reviews on a regular basis determined if the services
provided by the facility met medically acceptable standards of care. It is the responsibility of the
organization to ensure medically necessary care adhered to Title 42 of the Code of Federal
Regulations (CFR) section 412.3 for inpatient hospital admission (Livanta, 2018).
CMS contracts with Livanta to conduct record reviews to assess inpatient claims for
determination of adherence to criteria as outlined in the Calendar Year (CY) 2016 Outpatient
Prospective Payment System (OPPS) Final Rule CMS-1633-FC (Livanta, 2018). Claims
reviewed were for hospital admissions between March 2018 and April 2018. The researcher
received permission to access the audit findings from the facility Compliance Manager, redacting
any identifying information before publication. Appendix C includes pertinent pages of the
redacted report.
Participants
Qualitative interviews followed purposeful sampling for selecting 12 participants from
among physicians with admitting privileges at Pacific Hospital. The researcher accessed Medical
Staff Roster to select a list of email addresses for hospitalist participants, and sent email
messages to possible interviewees. The likely participants received three contact emails without
response before then considered a non-respondent. Follow-up contact will be done through
telephone or in-person contact. The study was limited to Pacific Hospital with privileges to
48

guarantee that participants are familiar with organizational issues; however, there will be no
specification for years of experience required.
The subjects of the interviews, “hospitalists,” are physicians whose primary focus is the
general medical care of hospitalized patients (Pantilat, 2006). At Pacific Hospital, these
individuals generally serve on twelve-hour shifts for four days, then take three days off, and
repeat a second series. As each physician ends their shift, patients are “handed off” to the next
physician who is just beginning their shift. Thus, several different physicians as their shifts rotate
likely care for a patient who stays in the hospital for a period of several days.
In most acute care facilities, hospitalists usually report to a Hospital Medical Director, a
highly experienced, practicing hospitalist who serves in a leadership capacity for the group and
interacts with not only patients and other hospitalists, but also administration. There is usually a
“break-room” or office environment set aside where hospitalists are able to congregate,
discussing current patients and their treatment plans, along with providing a place for them to
dictate or transcribe their documentation. Often these areas are equipped with “sleep rooms” so
the physicians are able to rest in between shifts if they are not able to leave the hospital and
return in an expeditious manner. Hospitalists wear scrub attire to identify them as physicians,
many in physician-issued white lab coats with their names embroidered on the shirt pocket. All
hospitalists wear hospital-issued identification badges displaying their “MD” credentials.
Instrumentation
This research study relies upon three different collection instruments, each unique to the
three individual methods of data source: interviews, work records, and performance data.
49

Interview Protocol
The researcher administered a questionnaire in a semi-structured interview format,
delivered with questions generally in the same order unless a participant addresses a topic out of
sequence. If that occurred, the researcher addressed the question at the time of introduction by
the respondent. Probing questions or prompts elicited a better understanding of a topic previously
raised that the researcher was interested in learning more about.
The questionnaire consisted of 12 individual questions, utilizing the six types of
questions as suggested by Patton (2015), including: experience and behavior questions, opinion
and values questions, feeling questions, knowledge questions, sensory questions, and background
and/or demographic questions. Respondents are encouraged to provide rich, descriptive
information about their individual and personal experiences as applied to their ability to
determine inpatient medical necessity for patients requiring inpatient hospitalization under 48
hours. Additional probing questions served as follow-up when the participants offered expanded
narratives. Appendix A outlines the interview questions.
These questions correlate with the overarching research questions focusing on
knowledge, motivation, and organizational influences affecting physicians themselves and the
impact their decisions have on facility profitability. The study objective, by means of the
interview process, is to understand the collective understanding of the participants as to the
meaning they attribute to the world in which they practice. Merriam and Tisdell (2016) tell us
that through the use of a theoretical framework focused on identifying concepts and key
variables that pinpoint process gaps in knowledge, motivation, and organizational influences, a
plan can be developed for recommended solutions to these areas needing attention. Additional
information harvested from work records and performance data demonstrates what has happened
50

in the past and how the consequences of current processes shape outcomes that do not meet
performance goals. The interviews also seek to understand the level of knowledge the
participants have regarding the consequences of the work they perform and the selections they
make in their medical necessity decision-making.
Data Collection Procedures
There are over sixty practicing hospitalists at Pacific Hospital, and the goal for the study
will be to interview a minimum of 12 hospitalists to achieve a saturation factor where no new
information or perceptions are surfacing (Merriam & Tisdell, 2016). Participants received
communication via email, and 60-minute Zoom interviews scheduled with each respondent.
Conducting interviews within a six-week period, each interview took advantage of Zoom
technology, transcribed by the researcher.
Work records accessed through internal information databases and records obtained from
within a tracking database used by the Revenue Integrity Department serve as a source of
historical information. Business Office System (BOS) application tracks claims submitted to
third-party payers, and the subsequent payment received. When claims deny, this information is
also collected and the data returned with denial information. This is the evidence gathered to
support the current state of denials at Pacific Hospital as discussed in Figure 1, Chapter 2 review.
Performance data generates through the production of a standard audit of short-stay
inpatient admissions by CMS and its contracted subsidiary conducting the assessment, Livanta.
The organization receives notification of the audit after completion and the final audit results.
CMS encourages facility review of the findings and then receives an invite to participate in an
education session for any corrective action needed. Depending upon any need for change
intervention, the organization may find itself in a secondary review cycle to confirm the actions
51

taken and subsequent outcomes resulting from adjustments. The report information used for this
study was the initial review performed in August of 2018 and the resulting outcome of that
review. The Compliance department granted permission to access this data for study purposes.
Data Analysis
The selected method of data analysis used for this study is simultaneous research done at
the same time as the data collection process (Merriam & Tisdell, 2016). The researcher will
address the problem of the high incidence of medical necessity denials among inpatient
admission for patients with length-of-stays under 48-hours. Interviews followed a purposeful
sample of 12 hospitalists from the total population of hospitalists that are responsible for
admitting patients to inpatient status. Analysis of the data occurred concurrently while collecting
information from the interviews as a means to organize and categorize the information gleaned.
Merriam and Tisdell (2016) recommend saturation as the indication for completion of interview
collection, with a goal toward having received enough descriptive information in which topic
classifications begin to emerge. Themes used to ascertain any knowledge, motivation, and
organizational influences contribute to the participant’s ability to select appropriate patient status
selection.
Microsoft Word processing software enabled analysis of the qualitative research data. As
outlined by Merriam and Tisdell (2016), three phases of data management include data
preparation through typed, transcribed interviews; data identification through the assignment of
researcher-determined codes; and data manipulation where the categorized data is arranged and
interpreted. All interview data will have participant identification removed and participants will
have the ability to screen their interviews to edit any data they would like removed in hindsight.
52

Validity and Reliability
A goal for the study included investigating specific knowledge, motivation, and
organizational influences that lend themselves to overall perceptions formed and acted upon by
stakeholders in a position to affect organizational goal outcomes. Three distinct qualitative
method strategies ensured triangulation and provided internal validity and reliability of the study
and credibility for the findings.
Interviews
As Firestone (1987) explained, the use of interviews helps to draw out specific details via
quotes from participants, which allow the reader to literally “picture” the rationale in their own
mind and understand how the concept would seem to make sense to the user. These perspectives
are as important as if they are indeed real, as they are the basis upon which the participants form
their decision-making, which affects the organizational outcomes. The research questions
explore the physician’s interpretation of knowledge, motivation, and organizational influences
with regard to the need for a dedicated observation unit. The purposeful selection of physician
hospitalists who perform the function of patient assessment for criteria qualification of
observation services versus inpatient admission with a goal of information saturation.
The initial design of the study was to interview a minimum of one dozen physicians for
data collection. Following each interview, the process of transcription and data coding took place
concurrently as a means to identify emerging findings (Merriam & Tisdell, 2016). Building a
collection of data sufficient to reach saturation ensures that a true understanding of the
circumstance is surfacing. The researcher transcribed the sessions and provided the interviewee
with a copy of their individual transcript.
53

Work Records
The Revenue Integrity department provided the second source of qualitative data, which
identified the financial consequence of the observed error rate during the review period, along
with the projected financial impact for denial loss. The BOS database tracks all claims submitted
to third-party payers, and the subsequent payment received. If the claim denied, this information
is also collected and the data returned with denial information. This is the evidence gathered to
support the current state of denials at Pacific Hospital as discussed in Figure 1, Chapter 2 review.
Performance Data
The third and final source of qualitative data used in this study is performance data
pertaining to existing denials at the organization. This additional resource provides a three-
pronged approach toward triangulation that solidifies the purpose of the study and the need for
intervention. Performance data provided through the Compliance Department at Pacific Hospital
corroborated an error rate of 36% of initial claims for inpatient admissions with stays of 48-hours
or less during the timeframe of March through April 2018 (Livanta, 2018). This classified the
provider as being in a Major Concern category, requiring follow-up action. The purpose of this
study is to determine the level of understanding providers have with matching observation
service and inpatient status indicators, thereby reducing denial of claims for inappropriate
admissions.
Ethics
An important responsibility of the researcher is that of establishing credibility and
trustworthiness, and Merriam and Tisdell (2016) explain the basis for ethical practices rests
foundationally on the researcher’s personal values and ethics. The qualitative study involves the
interview process of gathering perceptions from stakeholders about knowledge, motivation, and
54

organizational influences while protecting the participants from suffering any harm. The
researcher provided a study purpose and interviewee responsibility outline prior to the
commencement of the study. The researcher and some participants are employees of Pacific
Hospital, while other participants have an affiliation relationship with Pacific Hospital and King
County. In all cases, there is no reporting relationship between the researcher and the
participants.
Subjects will be asked to grant their informed consent to participate, and are guaranteed
that their participation is completely voluntary and can be withdrawn at any time they choose to
do so. All information they disclose is also under strict confidentiality guidelines, and their
identity remains protected throughout the reported findings. Protocol included obtaining
permission from participants to record, transcribe, and save their interview on a secure electronic
database. Participants will have the option to read the transcribed manuscript of their interview,
and any information redacted prior to study result publication. The researcher provided a $25
Starbucks gift card in the form of a reciprocal reward for participation as recommended by
Creswell and Creswell (2018), along with a typed transcript of the interview. If requested, the
researcher made a full copy of the dissertation available.
Limitations and Delimitations
Limitations
The researcher will present the study and findings to organizational leadership for review.
The adoption of any resulting recommendations toward operational workflow are beyond the
researcher’s control. The researcher chose to abide by an ethical obligation to redact participant
requested information; therefore, some pertinent material may not be included in the study
results.
55

Delimitations
The researcher will limit the number of participants in the interview portion of the
qualitative study to a maximum of one dozen, or the number of subjects needed to achieve
saturation. Due to the limited amount of time available to conduct the study, it is impossible for
the researcher to interview every physician with privileges at Pacific Hospital.
56

Chapter Four: Results and Findings
The purpose of this study was to evaluate providers with admitting privileges to Pacific
Hospital and the KMO influences affecting the determination of patient classification selection,
which result in revenue capture for the facility. A vital concern was the participants’
understanding of matching observation service and inpatient status indicators against clinical
criteria, thereby reducing denial of claims for inappropriate allocation. The guiding questions for
the study included the following:
1. What knowledge influences affect provider medical decision-making when
determining patient status?
2. What motivational influences affect provider medical decision-making when
determining patient status?
3. What organizational influences affect provider practice when determining patient
status?
Assumed KMO influences surfaced based on a review of existing literature, along with
conversations with subject matter experts as to the workflow processes designed for providers as
they make the decision whether to admit between observation service and inpatient status. CMS
and third party payers use Milliman and InterQual criteria to determine medical necessity, and
the assumption followed that physicians required knowledge of how to identify the correct
patient classification and be able to demonstrate the medical needs through documentation.
Moreover, this would require providers to have knowledge of the criteria for observation service
or inpatient status, and distinguish the differences between the two. Assumed motivational
influences included individual physician decision-making impact and the need to maintain self-
efficacy and confidence when selecting appropriate patient assignments. Organizational
57

influences involved provider education and training about appropriate classification, along with
feedback regarding denial impact with denied cases.
Validation used a variety of qualitative research methods, including individual
interviews, work record analysis, and performance data assessment. The following chapter
presents the research findings, prefaced by research questions pertaining to KMO influences.
Stakeholders
Twelve hospitalists from both Pacific Hospital
1
and King County
2
organizations
participated in this research study, all with the privilege to admit at Pacific Hospital. A thirteenth
participant volunteered and provided an interview; however, the data was not included as the
subject was an Advanced Registered Nurse Practitioner (ARNP) and could not admit inpatients
to Pacific Hospital. For validity and reliability purposes, the researcher chose to remove these
findings. The collective experience of participants ranged from three and a half years to 20 years
as a practicing hospitalist, with an average of 7.83 years of practice at Pacific Hospital. Six of the
participants were female; six participants were male. Providers went to medical school in a
variety of locations: India (3), Philippines (1), Grenada (1), and the remaining in several different
states (CA, MA, NY, TN, and WA). While one-quarter of participants reported having had work
experience at previous facilities with dedicated observation units, only two of those were familiar
with Milliman or InterQual criteria. Only one of the twelve hospitalists interviewed understood
Milliman criteria from work at a previous facility.
Table 9 identifies the participant’s role, facility, average years at Pacific Hospital,
average years of hospitalist practice, and whether the participant had experience working in a
dedicated observation unit.
58

Table 9
Composition of Study Participants

Subject
# Role
Employed
Facility
Avg Yrs
at Pacific
Avg Yrs
in Practice
Experience
in
Dedicated
OBS Unit
1 Hospitalist @ Pacific King County 3.5 15 Y
2 Hospitalist @ Pacific King County 5 11 Y
3 Hospitalist @ Pacific King County 6 19 N
4 Hospitalist @ Pacific King County 5 5 Y
5 Hospitalist @ Pacific King County 15 15 N
6 Hospitalist @ Pacific King County 12 12 N
7 Hospitalist @ Pacific Pacific Hosp 16 16 Y
8 Hospitalist @ Pacific Pacific Hosp 5 20 Y
9 Hospitalist @ Pacific Pacific Hosp 19 19 N
10 Hospitalist @ Pacific Pacific Hosp 1.5 3.5 Y
11 Hospitalist @ Pacific Pacific Hosp 5 10 Y
12 Hospitalist @ Pacific Pacific Hosp 1 1 N
7.83 13.54

Research Question 1
The assumed knowledge influences for this study concentrated on factual and procedural
knowledge requirements and underscored the need for improved awareness, education, and
training for physicians in selecting patient status. Achieving the organizational goal of zero
medical necessity denials for inpatient stays under 48-hours will require that providers
understand the criteria, which third-party payers use to determine appropriate admission.
Qualitative interviews, work record analysis, and performance data assessments explored
existing influences. The next section outlines the research results concerning knowledge
influences sorted by each type of influence and its associated findings.
59

Knowledge Findings
Qualitative interviews and document examination provided information on provider
knowledge of medical necessity criteria and the relationship between appropriate patient
placement and resulting payer denials. The analysis disclosed that while the majority of
providers identified a knowledge gap in their understanding regarding specific conditions
concerning observation services, they had no awareness as to the magnitude of the financial
ramifications for the facility. Thus, the assessment identified a critical factual knowledge gap
related to the provider’s ability to identify appropriate medical criteria used to select between
observation service or inpatient status, along with the type of impact that has on the organization.
A second gap established the lack of provider understanding in how to use the strength of
documentation to demonstrate the need for inpatient status versus observation service rather than
depending singularly on the two-midnight timeframe. This over-simplification of eligibility
criteria has erroneously tipped the medical-decision making process in the wrong direction, such
that it does not carry as much weight as it should from a payer perspective.
Finally, while providers acknowledged that predetermined protocol navigators embedded
in the electronic medical application would offer assistance in the initial identification of patient
selection, they also cautioned that one could not replace the intellectual decision-making process
of physician assessment. Protocol development would seem to be a tool for assistance only.

60

Table 10
Validation of Factual and Procedural Knowledge Findings

Assumed Knowledge Influence

Knowledge
Type
Validation
(i.e., Asset or
Need?)

The provider needs knowledge of the difference between
a patients needing observation service versus inpatient
status.
Declarative
(Factual)

Need

The provider needs knowledge of how to demonstrate his
or her medical decision-making ability in assigning
patient status by means of thorough documentation of his
or her thought process.

Procedural

Need

The provider needs knowledge of how to use
predetermined protocol navigators in the electronic
system to guide them through a selection of appropriate
treatment care paths.

Procedural

Asset

Table 10 presents an overview of the assumed knowledge findings from the study, and
validation of these assumptions given the participants’ answers to the interview questions.
Through review of work records and performance data, formulation of outcome metrics
materialized, as discussed in detail in the following sections. Table 11 on the following page
presents a summary of the findings from the qualitative interviews related to hospitalists’
observation/inpatient selection proficiency, documentation thoroughness, and use of electronic
protocol tools.
61

Table 11
Summary of Provider Competency in Addressing Knowledge Influences

Summary of Findings

Knowledge Influence
Exhibits
knowledge of the
use of
observation
protocols to guide
placement
decision

Exhibits
knowledge of how
to select
placement based
on best practice

Exhibits
knowledge of
documentation
best practices

Identification of a patient
meeting observation
service versus inpatient
status.

“They had
predefined
criteria.”

“There was a very
strict protocol, you
know who would
qualify.”

Demonstration of his or
her medical decision-
making ability in
assigning patient status
by means of thorough
documentation of his or
her thought process.

“They had nurses
documenting based
on the InterQual
criteria whether the
person met
inpatient criteria or
not and it happened
in real-time.”

Use of predetermined
protocol navigators in
the electronic system to
guide them through a
selection of appropriate
treatment care paths.

“Predictive
analysis, once it is
built, can guide
your clinicians.”

“Based on data
from the last five
years, this patient
pool stayed for >2
days, so don’t put
them in
observation.”

Factual Knowledge
Providers indicated limited factual knowledge regarding the identification of
criteria meeting observation service versus inpatient status. The providers described their
understanding of the criteria used for the selection of patient status. Of the twelve participants,
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only two had actually worked in a facility where the providers received training in this area and
had a criteria tool in their practice. When coming to Pacific Hospital, one physician described an
instruction to use only the time element when considering patient placement.
S3: “It was being honed into us to actually use Milliman criteria to be able to correctly
put in our orders if it's observation or inpatient, but of course, there are some patients
who will not directly be in those boxes but it helps us, it guides us to make the decisions.
But for some reason, when I started working here, I don’t know if it’s a Medicare policy
or some push from the higher up, all of a sudden, I’m being given information from the
case managers or nurses that if we think the patients will be discharged in less than 48
hours it’s better to put observation. If we think the patient is going to stay more than 48
hours then it’s okay to put inpatient.”
This unfortunate misinterpretation using only time-based elements runs rampant in the
healthcare industry and is not limited to physicians, surfacing as a cultural misunderstanding of
guidelines. Healthcare organizations such as Pacific Hospital must take into account both time
and quality elements, but often only focus on the two-midnight rule of time. The following two
interviewees realized there was a set of medical necessity criteria guidelines, however, the
remaining ten participants had no knowledge of inpatient admission standard requirements
outside of the expectation to stay in the hospital for more than two midnights.
S3: “Most of the time, its observation, and when it hits that 48-hour deadline, its
inpatient. I think with Medicare there’s a rule, right?”
S8: “I wish there is some kind of checklist or criteria that would help us from the
beginning to determine who should be inpatient and who should not.”
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A pattern surfaced whereby it is assumed that physicians understand the necessary
requirements for documentation of medical necessity, when in fact, they receive absolutely no
training whatsoever on this subject, either in medical school, residency, or as employed or
independent physicians. Providers generally receive very brief onboarding, one to two hours of
training sessions when joining a new organization, which covers general basics of
documentation, including Joint Commission and CMS elements of timeliness, legibility,
completeness, clarity, unambiguity, and precision (CMS, 2018).
Cooke and Krawitt (2015) indicate the need to educate clinicians on the Two-Midnight
Rule so they understand the full definition of inpatient care requirements, which include time
and quality elements. Best practice includes an internal review of all Medicare patients admitted
as inpatients with a plan to discharge after less than two midnights (Cooke & Krawitt, 2015). The
authors indicate that although CMS enacted “The Two-Midnight Rule” on August 2, 2013, to
bring distinction between observation and inpatient admission, it has not provided clarity for
providers in making these decisions. In fact, after surveying hospitalists, The Society for
Hospital Medicine found that only 40.4% of physicians felt confident regarding patient status
determination (Cooke & Krawitt, 2015). The CMS definition of criteria meeting the two-
midnight rule are 1) the provider makes a determination that the patient is going to need
hospitalization for two midnights or more, and 2) the services the patient receives are reasonable
and necessary. It is also important, Cooke and Krawitt (2015) indicate, that clinicians be well
educated regarding the process of admission selection and be supported by a strong Utilization
Management team along with physician advisors.
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Procedural Knowledge
Providers have limited procedural knowledge related to the demonstration of
medical decision-making ability in assigning patient status by means of thorough
documentation. It is important that the physician’s documentation justify the patient’s
placement in inpatient status. When interviewed, none of the twelve participants demonstrated
confidence in their ability to document assignment of inpatient status for patients whose
condition might be tenuous.
S12: “The Utilization Management person was like, “She should be inpatient, and she’s
on IV fluids.” Okay, sure. I don’t know. I had no idea IV fluids were a criterion for
inpatients.”
S10: “I do know that over all a lot of it is for the organization to try to show that truly
sick people are in the hospital and be able to justify the higher related DRGs.”
There was also a demonstrated misunderstanding with one participant that status must be
changed rather than document the circumstances explaining an earlier than expected discharge in
under 48 hours, an acceptable exclusion.
S8: “So, for patients who initially admitted as an inpatient, and then we realize the patient
is doing much better and can be discharged early, so that person doesn’t meet inpatient
criteria anymore, and you have to change to an observation like two to three hours before
the patient leaves the hospital, so you kind of feel like okay, this patient is going to be a
revenue loss for the hospital, but I don’t have a feel for how much or how severe.”
To some extent, this is true. If within the first 48 hours of admission the physician
determines that the patient only meets observation service, a peer review with the medical
director of the Utilization Review Committee and the attending physician is required to take
65

place. If both parties agree upon a downgrade, Condition Code 44 applies to the Medicare claim.
These processes require adequate resource staffing by the organization, as the physicians may
have to review several cases a day.
Huntington et al. (2015) point out that CMS will only issue reimbursement for claims as
inpatient status if the clinical documentation indicates the need for a stay that extends over two
midnights, therefore best practice includes documenting the risks involved in not receiving
inpatient care. CMS provides a caveat for patients whose condition improves in under 48-hours
and they discharge home, whereby the case is acceptable if the provider documents the
circumstances concerning the rapid improvement. Current literature suggests that hospitals
review documentation by physicians on denied accounts as a means of pursuing appropriate
resources for ensuring payment (Murphy, 2017).
Physicians and their professional associations express concern over the fact that the
patient’s treating physician is not the final decision-maker. Hospitals often employ physicians to
serve as Medical Reviewers, and these physicians have peer-to-peer conversations with medical
directors at payer denial offices to determine the process needed for appropriate claim. Silver et
al. (2018) suggest that external third party payers may not have the best understanding of a
patient’s clinical needs. Singer and Bergthold (2001) allow that the criteria and policies guiding
medical necessity decisions are also vague and uncertain. There is much variation across
contractual definitions and coverage policies used by payers, which Singer and Bergthold (2001)
explain is a cause of unacceptable inconsistency in decision outcomes.
Providers have either limited or no predetermined protocol navigators in the
electronic health record system to guide them through a selection of appropriate treatment
care paths. One participant shared that he had experience in a prior facility that had a very strict
66

protocol for determining observation eligibility. The six participants from King County
explained that their urgent care physicians utilized a “50-page handbook” as a guide to determine
patient selection in their observation area, a small, four-bed observation unit adjacent to the
urgent care. All subjects reported that they had no electronic tools to assist in their judgment for
whether they felt the patient would need to be in the hospital for two midnights or longer.
S4: “There aren’t a lot of good resources that we use to help us make that decision.”
S2: “We don’t have specific criteria for a particular diagnosis or a particular situation.
There’s nothing of that sort.”
S3: “I would think there are some diagnoses that would fit easily in observation, right? If
chest pain most likely would be a rule out that’s less than 24 hours, then that will be
Observation. Syncope and we just need to do a workup quickly, observation. Asthma
exacerbation and we load with steroids, and see if the patient flies, observation.”
The lack of understanding of the criteria that payers use to base their reimbursement
decisions on is a source of frustration to physicians. Training included quick assessment moving
to creation of an appropriate treatment plan, not spending excessive time on one decision factor
such as status. Protocols, algorithms, and criteria are possible useful resources that would aid in
their decision-making abilities. The benefit of technology and data warehouse capabilities are
options for enhancement of current electronic tools, and all interviewed were receptive to using
new functionality for assistance.
Southerland et al. (2018) completed a study at an academic tertiary care hospital from
2015 through 2017, assessing their use of 36 different care pathways or “protocols,” each
involving their own order sets along with suggested consultations. The protocol descriptors
included the various conditions and illnesses typically dealt with in an observation unit
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environment, with the most frequently used protocols being chest pain, transient ischemic attack,
abdominal pain, and cellulitis (Southerland et al., 2018). There are also developed protocols to
guide case managers in safe transitions of care to home before the patient discharges. Protocols
provide clear guidelines to help clinicians determine if a patient is eligible for observation
services and what type of treatment plan they should receive (Ross et al., 2013).
Research Question 2
The second research question additionally focused on the assumed motivational
influences of utility value and self-efficacy, identified as necessary components in achieving
providers’ engagement in resolving the denial issue. Qualitative interviews were the primary
method of determining the level of understanding that physicians had regarding readmissions,
followed by performance data. The analysis revealed that many interviewees had an appreciation
for the negative financial consequences of retrospective payer claim denials due to inappropriate
status. However, they had little insight regarding suggestion for improvement efforts or the poor
performance signifies for them as providers. These motivational influences have a direct impact
on physicians’ medical decision-making ability to select an appropriate patient status
designation.
Motivation Findings
Utility value and self-efficacy surfaced as identified assumed motivational influences in
the parameters for this study. Qualitative interview questions focusing on the influence of utility
and self-efficacy explored the participants’ understanding of the state of patient readmissions to
Pacific Hospital within 30 days of initial hospitalization. The analysis revealed that while
physicians understand the negative repercussions of readmissions, they do not know the state of
readmissions at Pacific Hospital nor feel in control of influencing the outcomes. They did not
68

perceive a connection to themselves personally, and several expressed that they did not feel the
provider should be the decision-maker at all. These motivational influences have a direct impact
on Pacific Hospital’s ability to reduce its overall denial rate.
In the case of utility value with regard to the selection of admission status to reduce
readmissions, Elliot et al. (2017) describe how connecting this task to personal goals and sense
of self can have ties to attainment value, while self-efficacy speaks to what the subjects felt they
were capable of accomplishing in the future. Table 12 presents an overview of the assumed
motivational findings from the study, validated by the participants.

Table 12

Validation of Motivation Findings
Assumed Motivation Influence

Influence
Type
Validation
(Asset or Need)

Providers need to see the value of appropriately admitting
the patient and avoiding readmissions, which could
adversely affect the organization’s scorecard.

Utility value

Need

Providers need to feel confident in their ability to select
patient status in order for the organization to reduce
denials for inpatient stays for 48-hours or less.

Self-
efficacy

Need

69

Table 13 presents a summary of the findings from the qualitative interviews related to
physicians’ perceived proficiency in the two motivational influence areas, utility value, and self-
efficacy, as evaluated in this study.

Table 13
Summary of Provider Performance in Addressing Motivation Influences
Summary of Findings from Among 12 Participants

Motivation
Influence
Exhibits confidence in their
ability to document
assignment of inpatient status
for patients whose condition
might be considered tenuous
Exhibits awareness of
organizational goals and efforts
to reduce denials for inpatients
with stays of 48 hours or less

Appropriate
admissions and
avoidance of
readmissions could
affect their
organizational
scorecard.

“I don’t think I’m the best or the
worst at it. I think I’m about
average. Sometimes we’ll get a
little bit of feedback in terms of
what was denied.”

“I think the organizational goal is if
a patient is denied due to medical
necessity for people who stay less
than 48 hours, the goal is to get
reimbursed as much as possible and
to justify their need for that medical
necessity and attempt to explain
why this certain illness did not need
a 48-hour stay.”

Appropriate
selection of patient
status and
achievement of
organizational
denial goal of zero
denials for inpatient
stays for 48-hours
or less.

“I wish there was some kind of
checklist or criteria that would
help us from the beginning to
help us determine who should be
inpatient and who should not,
it’s almost like a gut feeling.
I’m ashamed to say that there
are no defined criteria so I can
be consistent every time. That’s
what we are lacking, the
education part to do a better
job.”

“If it varies from payer to payer,
you kind of feel like there is no
agreement in what circumstances
should qualify for observation or
not.”

70

Motivation Results
Providers need information regarding inappropriate index admissions, which could
result in a readmission within 30-days. The majority of physicians acknowledged that more
information about inappropriate admissions would be beneficial, but it was felt that they do not
exercise much, if any, control over the reasons for readmission.
S3: “Most of the Medicare patients are older, they have more comorbidities, and even if
they get admitted for pneumonia and they come back for heart failure exacerbation it’s
not the fault of the physician nor the hospital who discharged the patient. The patient is
just sick, a sicker population, and I don’t think the hospital should be penalized for that.”
S5: “Quite frankly, if somebody is readmitted, generally we want to make them
Observation, if at all possible, we want to get them out because we don’t want to be
dinged and we don’t want the hospital to be dinged for 30-day readmission which carries
enormous ramifications. I’m aware of that.”
S10: “If you have readmission and you’re on the fence and you know they were recently
in within the last 30 days, then you should just make them OBS, right? That would take
care of our readmission penalty for a lot of patients.”
Physicians recognized that having more information about the varied payer requirements
would be helpful. They are data-driven and appreciate having scientific information with which
to analyze issues. The complexity of the payer world is one that would benefit the physician to
understand at a deeper level.
S7: “Increasingly it seems you have a split developing…between Medicare and how they
look at it and commercial payers and how they look at it. That is a challenge. In many
71

ways, I try not to know the insurance side of my patients. I don’t want that to govern my
decision-making. But we are attuned to it, it’s in the mix.”
The notion that readmissions are completely out of the provider’s hands is somewhat
misleading. Accurate, well-crafted documentation helps to paint a picture of the patient’s
medical scenario, which for most patients who readmit within 30 days will be complex. Often,
this population is elderly and faces social situations that have a significant bearing on their
likelihood of avoiding readmission. While the physician is surely treating the acute medical
conditions of the patient while hospitalized, the social determinants once the patient discharges
have just as great an impact on the successful prognosis of a patient’s recovery as the quality of
care given when in the hospital.
Albritton et al. (2018) cited evidence that factors influencing determinants of readmission
are out of hospitals’ control. However, hospitals do have an incentive to create trends toward
observation status, one reason being a way to avoid readmission penalties issued through the
HRRP program. Observation status is a care classification that does not count toward
readmission and is completely appropriate in many cases. InterQual, CMS/Medicare, and
Milliman Care Guidelines are all accepted industry standards that help clinicians determine
observation status based on inclusion and exclusion criteria. Utilization reviewers and not
physicians primarily use these tools, and yet the status decision lies squarely in the hands of the
physician.
Providers need information regarding organizational denials for inpatient stays
under 48-hours. Participants could not identify whether there was a denial issue for inpatients
who stayed in the hospital for less than 48 hours.
S9: “I just don’t know because I don’t have any data or feedback.”
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S12: “I’ve never been educated on this topic. Observation status I have not been educated
at all about. I suppose I could go educate myself now that I know there are these
Milliman criteria. I didn’t even know that.”
None of the participants voiced a level of confidence in their ability to select a patient
status for those patients who they described as “in the gray area” or “on the fence.” Providers do
not feel they should be responsible for this area, which contributes to the administrative burden
of medicine and takes them away from the practice of medicine.
S7: “The assignment of status is a frustration for every hospitalist that I’ve ever met.”
S4: “What we have been told is if you’re on the fence at all, go with OBS.”
A basic psychological need is that of competence, and providers are no different. The
participants voiced a lack of understanding regarding the reasons for and extent of denials. They
also explained that they receive no feedback about the denial process, which actually creates
greater frustration because they would be willing to change their behavior if they understood
what they needed to change.
The primary driver for this motivation factor is what Elliot et al. (2017) refer to as
intrinsic motivation. Generally, physicians are some of the best students, and Beeson (2009)
makes the case that, given the necessary training, providers willingly change behavior and gain
satisfaction from positive performance. Elliot et al. (2017) also describe the personal satisfaction
derived from feeling competent and autonomous, and not dependent on the UR team to make
patient class selections.
Work Record Analysis
Business Office System (BOS) – The BOS software application integrates all Pacific
Hospital claims data, and further tracks all denial correspondence and reimbursement take-back
73

penalties. An assessment of Jan-Mar 2018 data revealed that 70 accounts denied for
inappropriate status totaling $2,332,521 in charges. These claims received total insurance
payments of $733,124, resulting in a net loss of $1,598,397 in total charges not collected due to
level of care denials. Extrapolating this quarterly cost would amount to an estimated loss of
$4,795,197 annually. This does not also factor in the labor costs involved in processing these
denials through third-party payer adjudication, which are hidden operational costs the hospital
revenue cycle must absorb (Appendix B).
Livanta Report – The third and final method of triangulation validity involved
performance data. Gathering data using the 2018 CMS-sponsored Livanta Short Stay audit, the
researcher assessed a sample size of 25 records with stays of less than two midnights during the
months of March and April 2018. Nine of the 25 accounts denied due to lack of medical
necessity, which equates to a 36% error rate and places Pacific Hospital in a “major concern”
category as displayed in Appendix C. In accordance with CMS definition, this means, “the
documentation at the time of admission did not support the reasonable expectation of a two-
midnight hospital stay, nor was there documentation of complex medical factors that would
require the patient needing inpatient care despite not meeting the two-midnight benchmark”
(Livanta, 2018). Table 14 outlines the CMS factors considered complex.

Table 14

CMS Complex Medical Factors

● Beneficiary medical history and comorbidities
● Severity signs and symptoms
● Current medical needs
● Risk of an adverse event occurring during the time period for which hospitalization is
considered

74

Knowledge/Motivation Influence Findings Summary
These findings from interviews, work record analysis, and performance data assessment
suggest that significant revenues are lost annually due to inappropriate status selection. This
aligns with the lack of training and education given to providers, leaving them ill equipped with
the knowledge to make appropriate medical necessity determinations. Providers need to
understand how to identify whether a patient meets observation service or inpatient status. They
should be able to demonstrate decision-making ability by means of thorough documentation, and
if predetermined protocols are available, use them as a guide for appropriate treatment paths.
Physicians who are actively engaged in process improvement initiatives to reduce denial rates
and improve organizational readmission scores will be more likely to see the value of
appropriately admitting patients.
Research Question 3
In addition to knowledge and motivation influences, this research study evaluated five
organizational influential areas in relation to provider competency in selecting between
observation service and inpatient status, three being cultural models and two cultural settings.
The five main factors investigated were mutual goal achievement, the information needed to
select a classification, access to education/training, adequate capacity for patient placement, and
a culture of collaboration with leadership and physicians. Qualitative interviews investigated the
assumed organizational influence findings as presented below.
Organizational Findings
When asked about the organization achieving financial goals, physicians admitted they
did not know outcomes related to denials. They agreed that information would be helpful,
especially to correct misunderstandings about the appropriateness of patient assignments. Several
75

providers asked to have more education about observation and inpatient criteria. At least three
physicians recognized that mismanagement of resources for dedicated observation services
would create even more problems. The final interview question about collaboration between
leadership and physicians in the selection of patient status gave evidence that no cohesiveness
currently exists. Table 15 presents an overview of the assumed organizational findings from the
study, discussed in detail in the following sections.
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Table 15
Validation of Organization Findings

Assumed Organization Influence

Influence
Type
Validation
(Asset or
Need)
The organization needs to ensure the achievement of the
organizational vision and goal of zero medical necessity
denials for inpatient admissions with stays of 48-hours or
less, along with progress measurements.

Cultural
Model
Need
The organization needs to provide information to providers
for understanding appropriate classification to patients to
avoid denial of claims due to lack of medical necessity.

Cultural
Model
Need
The organization needs to ensure provider access to
appropriate education and training for how to recognize and
diagnose medical conditions appropriate for observation
service.

Cultural
Setting
Need
The organization needs to ensure adequate capacity for
placement of patients in either an emergency, observation, or
inpatient setting.

Cultural
Setting
Need

The organization needs a culture of collaboration that
encourages organizational leadership and providers to support
the accurate selection of patient status.

Cultural
Model
Asset

Table 16 summarizes the findings from the qualitative interviews related to provider
competency in selecting between observation service and inpatient status across the three cultural
models and two cultural settings evaluated in this study. The summary of findings from the
qualitative interviews related to the provider's perspective of how well the organization supports
physicians in determining appropriate status: physicians cited feedback, education and training,
appropriate facility allocation, and UR resources as barriers to achieving goals.
77

Table 16
Summary of Provider Performance in Addressing Organization Influences
Organization Influence Summary of Findings
Achievement of the
organizational vision and goal
of zero medical necessity
denials for inpatient admissions
with stays of 48-hours or less,
along with progress
measurements.

Zero participants had any understanding of the current
state of denials.

S1: “Zilch.”
Information given to providers
for understanding appropriate
classification to patients to
avoid denial of claims due to
lack of medical necessity.

Zero participants reported having received feedback in
the past on denials.

S12: “The insurance company usually believes the
readmission was the fault of the physician mismanaging
the index admission. I wonder if that’s happened to some
of my patients and I have no idea. It would be helpful for
me to have that information.”

Provider access to appropriate
education and training for how
to recognize and diagnose
medical conditions appropriate
for observation service.
Three participants mentioned informal team meeting
discussions, and one participant described the initial
orientation classes provided at King regarding
observation.

S4: “When first starting with King County, we have a
one-hour block class on what it means to be observation.”

Adequate capacity for
placement of patients in either
an emergency, observation, or
inpatient setting.

All participants agreed that appropriate dedicated
observation facilities are helpful, although several
cautioned careful control of capacity management.

S2: “If you have a decently sized observation unit it does
offload. You have beds available all the time and you
have enough people staffed in the observation unit for the
fast turnover.”

Collaboration that encourages
organizational leadership and
providers to support an accurate
selection of patient status.
Half of the participants referenced the benefit of UR
when describing “collaboration with organizational
leadership.”

S7: “We typically will get messages from our UR nurses
out on the floor about certain patients.”

78

Organizational Results
Pacific Hospital needs to align its providers with organizational performance goals
of zero medical necessity denials for inpatient admissions with stays of 48-hours or less.
Study results indicate that participants have no understanding of organizational goals
surrounding inpatient stays under 48-hours, let alone how the facility performs. None of them
quantified whether Pacific Hospital had an acceptable rate of denials for inpatients admitted for
less than 48-hours, with three stating a vague awareness that it is currently not financially
profitable.
S7: “I think clearly the organization is taking a beating on this.”
S5: “Oh, I’m sure they lose a lot.”
S6: “I think there are definitely financial implications if they are taking up an observation
bed.”
One interviewee explained the difficulty of conveying the need for inpatient status to
third-party payers. CMS does have criteria used to determine status, and while most commercial
payers comply with the same conditions, they are not required to.
S8: “If it varies from payer to payer, you kind of feel like there is no agreement in what
circumstances should qualify for observation or not. I know in the past I made phone
calls to payers trying to justify inpatient (admission) for some patients. They (payers)
aren’t there, they don’t see the patient, they don’t see the comorbidities.”
Without involving physicians in a feedback mechanism for them to receive
organizational data about denials, the fact that there might be a denial problem means nothing to
them. Physician drivers are factors that influence them, and if their perception is that the
organization’s issues have nothing to do with them, they will see no utility value in attempts to
79

resolve the gap. Providers are also analytical and require credible, quantifiable data to assess a
situation. Taking care to develop a training program that indicates the personal benefits status
criteria training will offer clinicians should help to pave the way for engagement.
Beeson (2009) suggests that gaining buy-in from physicians to support organizational
goal achievement is an important step. When physician leadership is involved in developing
organizational goals based on logic and evidence, clinicians will be much more likely to
convince their colleagues to adopt strategies for change. Communicating change should occur in
such a way that physicians will understand how the effort will benefit them personally. Taking
the time to work with providers for the development of a strong message as to why the change
should be undertaken and why they should participate will pave the way for others to follow
(Beeson, 2009).
Pacific Hospital needs to provide information to providers for understanding
appropriate classification to avoid denial of claims due to lack of medical necessity.
Providers indicated a desire to have more information concerning inappropriate status selection,
with a focus on criterion education and training.
S9: “I think a lot of my colleagues don’t feel comfortable making the determination, and I
think they need a bit more education and follow-up. Like if, I hear back from someone,
saying this and that is the reason why it was not chosen as inpatient or OBS, or this
should have been chosen as OBS at this time, then you hear that one-to-one, that helps
you more than general education because you can apply that to your patient. You can try
to understand the small nuances to make the decision.”
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In this instance, a case-by-case review would be very beneficial. Using the actual medical
records to review the case between the attending physician and the UR medical director provides
an opportunity for understanding similarities that may help in future situations.
S9: “I think the one thing that would help me is if I can get more personalized feedback.
Because I feel comfortable assigning to OBS but if I’m not doing it right, I just need to
know about it. What would be really helpful is if I admit a patient as OBS or inpatient,
and it’s not appropriate, then getting back to the physician to let them know, that would
actually help me.”
Concurrently this is the work done by the UR nurses when the patient is still in the
hospital. When the nurse feels the patient does not meet the criteria for admission, whether it is
observation service or inpatient status, they notify the provider, and place an order to change the
status.
S12: “I’ve talked to other hospitalists when I first started and they were frustrated by the
fact that we know nothing about OBS status. People kind of feel like they’re not educated
about this, and there’s some sort of implications for us personally and for the
organization and we don’t really know what those are.”
The UR medical director can serve as an educator and help the medical staff understand
criteria, advocate with denials, and regularly report organizational findings.
S2: “Like we don’t know if the OBS people if they are denied.”
It is important that all service lines, including hospitalists, receive data about denial rates.
Just like any other service line such as cardiology or medical imaging, if one-half of the volume
seen denies for payment on the back end, all of the resources, time, and personal effort expended
were for naught.
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A critical gap in the healthcare industry process is that of not-for-profit and regulatory
entities assuming that physicians understand the vague criteria used by CMS and commercial
payers to approve inpatient stays under 48 hours. Not only do they not understand it, but ten out
of twelve participants also were not even aware there were criteria. To make matters worse, it is
not consistent among payers, allowing for application of different sets of rules. Physicians do not
feel these administrative decisions should necessarily be up to them, and they resent having to
spend their time worrying about status when they feel they should be treating the patient
medically.
Cadorin et al. (2014) explain how knowledge requires meaningful learning, an
experience-based process that creates behavioral change. Constructivist learning begins with an
individual experience and builds on environmental stimuli, in the case of the healthcare setting,
culture, group dynamics, and motivation. Meaningful learning is only successful when it brings
about a change in the learner and the change is sustained and long-term (Cadorin et al., 2014).
Another strategy against denials is the development of a robust denials prevention program
(Olaniyan, 2015). Gaining physician buy-in and identifying a physician champion helps
positively influence other providers to become involved.
Providers need access to appropriate education and training in how to recognize
and diagnose medical conditions appropriate for observation service. Physicians would like
more education and training to help them make appropriate determinations. Providers feel that
utilization review (UR) resources assist with these decisions and support their involvement, but
do not feel empowered or informed personally in making these selections.
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S1: “I worked at Henry Ford after I graduated, which was a place ahead of its time. They
had nurses determine based on the InterQual criteria whether the person met inpatient
criteria or not and it happened (in) real-time.”
It is important that physicians recognize the professional expertise UR nurses can bring to
the table, and avail themselves of this resource.
S7: “We typically get messages from our UR nurses out on the floor about certain
patients.”
The key to effective utilization of the UR nurse resource is expedient provider response
time. When UR nurses complete a review, they issue an order change, requiring signature by
provider before it is valid. Often UR nurses lament that physicians are difficult to contact or do
not sign the orders until after the patient discharges, and by then it is too late to change the status.
S12: “Most of my discussion about OBS status is with the UR team where they make a
recommendation and sometimes, I agree with it, or sometimes I say, “Actually, this
person is probably gonna be discharged today, we’re not gonna change their status.”
One provider described how predictive data from the organization to use as criteria would
be beneficial to physicians.
S1: “It would be tremendously helpful if there was data. I think Stanford allows its
clinicians to go into Epic and run queries on past data of the last five years. I know all
hospitals have this data. You can go back into your enterprise data warehouse, see every
patient that was admitted as observation, what was their diagnosis and what was on their
problem list, and then even make a predictor tool, based on the expected length of stay.”
Hospitals that do a good job of developing collaborative relationships between UR (also
known as care/case management) nurses and physicians are much more effective in determining
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patient status collectively. Appropriate staffing of these resources is important or the nurses are
not able to review all Medicare/Managed Medicare patients, which are the hospitalizations being
denied. The only way to avoid 100% of inpatient denials for stays under 48 hours is to review
every discharged account in this population.
CMS requires explicit risk assessment documentation in the medical record, specifically
how observation care would benefit the patient (Peacock et al, 2014). Physicians receive no
training to document the rationale as to why, in their best judgment, a patient will require a
limited amount of treatment in observation service. They also do not receive instruction on the
selection of appropriate classification of inpatients based on both time-based and clinical
elements. Peacock et al., 2014, explains that observational services are effective when patients
with appropriate conditions admit, and the provider gives thorough attention to the important
documentation of the delivery of care.
Pacific Hospital must provide adequate capacity for placement of patients in either
an emergency, observation, or inpatient setting. All participants interviewed believe there are
shortcomings with the current situation of placing observation patients among the inpatient
population on the medical units. Physicians described how observation patients became less of a
priority when roomed on an inpatient unit.
S8: “If I have 16 or 17 patients and one on observation, I only have time to go see that
person one time, so that kind of loses its effectiveness.”
S9: “It is certainly helpful to have patients separately in the OBS unit because when they
are on the floor, they don’t get the priority.”
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S11: “If it’s embedded in the entire hospital, you have social workers who are
overworked and having to prioritize long lists of people who are both inpatient and
observation.”
As described earlier in Chapter 2, the goal of the ED department is to complete the
throughput of patients within 90 minutes of arrival to discharge. Providing an appropriate
location for patients that are not well enough to discharge from the ED, but who still need
monitoring and observation before discharge is the purpose of a dedicated observation unit.
S12: “I think our ED sends a lot of people for us to admit (to inpatient) that in other
situations could be observed in the ED for 6-12 hours and they are not, they are admitted
to the hospital.”
Using a protocol for a dedicated observation unit helps to alleviate this problem. There
are standard, low acuity medical conditions managed in the observation setting that should not
take up an inpatient bed resource.
S3: “The simple ones, the chest pain rule-out patients, they don’t have to be admitted to
the hospital, they take up a bed when that can be dedicated for more sick ones. If you just
want to rule it out, check the enzymes two, three times and they’ll be out the door the
next day after an echocardiogram, why take up a bed upstairs?”
A dedicated observation unit is an appropriate way to care for patients who meet the
criteria for observation service. However, the design of the unit and appropriate staffing models
are an integral part of standing up an efficient dedicated unit.
Pacific Hospital leadership needs to collaborate with providers to support the
accurate selection of patient status. Physicians expressed conflicting opinions about the
collaboration they currently have with organizational leadership, some feel there is a partnership
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and some not, as evidenced in the following interview excerpts ranging from positive to negative
responses.
S5: “I know there is collaboration because there has to be a mutual agreement and
understanding for us to have the kind of relationship we need to successfully have, but I
don’t know to what level that occurs because it’s beyond the frontline level.”
S2: “I think it’s a work in progress because you know what the leadership encourages
you to do and where they’re coming from. You want to assume they’re taking into factor
everything, patient satisfaction, and their patient’s best interest, too. But when you’re on
the front line and they’re behind the scenes it's sometimes a little different.”
Collaboration starts with regular interaction, and it is evident from the preceding
comments that these hospitalists do not feel connected to leadership.
S3: “I think there’s some collaboration between Pacific Hospital and King County, yes. I
think it’s the leadership talking about their goals, and then basically it trickles down to us
in terms of support, like say the care managers (UR), and the utilization management
doctors who review the cases.”
This participant seems to mistake collaboration with support, which is more appropriate
for the role of UR.
S11: “Personally, I don’t think there’s much collaboration on my end. I just think that we
do the best we can in making the ascertainment and then go from there.”
The type of collaborative evidence shared seemed to be more about the work done
between the UR and physicians instead of leadership. When physician leadership is involved in
and supports initiatives to reduce denials, there is more of a chance that other providers will offer
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buy-in. One provider articulated a concern about the utilization of the research findings in this
study by the organization to make process improvements.
S1: “I hope you can convince the leaders to do the right thing.”
Beeson (2009) indicates that physician satisfaction surveys have revealed dissatisfaction
among providers regarding communication and responsiveness of hospital administrative teams.
Personal relationships between leaders and the medical staff are an important ingredient in
building collaboration. Helping physicians understand how their clinical performance has an
impact on organizational goals can engage them to focus on specific metrics that drive facility
outcomes.
Summary
Pacific Hospital has a 36% denial rate for inpatient admissions with a length of stay of 48
hours or less, as reported in the CMS-sponsored Lavinta audit from 2018 (Lavinta, 2018). In an
effort to examine the contributing factors for these undesirable outcomes, this study examines the
knowledge, motivation, and organizational influences, which have contributed to this
unsatisfactory performance. Denied claims return from third party payers with the medical
necessity denial reasons, providing data as to the lack of information needed. One of these
reasons is the “level of service not supported,” which connects directly to the caliber of physician
documentation describing why the patient required inpatient care and should not be downgraded
to an observation service. Without this documentary evidence, third-party payers are more likely
to win denial cases.
Findings from the qualitative study suggest there is a critical knowledge gap in providers’
understanding of criteria used to determine placement in observation service or admission to
inpatient status. A second knowledge gap exists in the ability of individual physicians to
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thoroughly document their medical-decision making thought process, demonstrating a need for
greater education and training for providers. The study findings also illuminated the lack of
utility value and self-efficacy motivational influences for physicians, resulting in little
understanding of the extent to which inappropriate inpatient admissions for less than 48 hours
can affect the bottom line of the hospital. Physicians reported feeling no investment of
appropriate assignment of patient classification and were not aware of any negative
repercussions as the result of denials.
Finally, the organizational influences seem to underpin most of the knowledge and
motivational factors mentioned above. Physicians reported they were unaware of the
organizational state of denials or goals regarding reductions, and received no information from
the facility as to what improvements were expected. It was unanimously felt that more education
and training is necessary, along with the resources to provide appropriate dedicated services.
Collaboration between leadership and physicians is important to achieve organizational goals,
and further recommendations for implementation follows in Chapter 5.

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Chapter Five: Recommendations
The preceding Chapter 4 presented the results and findings from data collected through
semi-structured interviews, work record analysis, and performance data assessments conducted
to answer the study’s research questions. Exploration focused on the areas of knowledge,
motivation and organizational influence as associated with the goal of reducing the healthcare
facility’s medical necessity denials for inpatient stays of less than 48 hours. Assessment of each
influence determined its validation if more than 75% of the evidence confirmed or rejected the
assumed influence. Initially, ten important influences developed from this study through a review
of literature, and seven of those influences correlated with gaps that contribute to the
organization’s ability to reduce denials to zero for inpatient accounts with a length of stays under
48 hours.
Discussion of Findings
Chapte5 identifies the recommendations based on current knowledge, motivation, and
organizational resources with the goal to reduce denials and achieve the facility goal of zero
medical necessity denials for inpatient stays under 48 hours. The recommendations discussed in
this chapter align with validated influences evaluated during data collection and analysis and are
organized and presented by knowledge, motivation, and organizational influence. Integrated
implementation and evaluation recommendations use the New World Kirkpatrick Model
framework (Kirkpatrick & Kirkpatrick, 2016) and Beeson’s (2009) recommendations for training
physicians. The recommendations, implementation, and evaluation plans work in reducing or
eliminating knowledge, motivation, and organizational influence gaps. Finally, this chapter
discusses the limitations of the study and recommendations for future research.
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Recommendations for Practice to Address KMO Influences
Two knowledge gaps, one factual and one procedural, validate data collection findings:
provider’s ability to identify whether a patient belongs in observation service or inpatient status,
and providers’ ability to demonstrate thorough documentation outlining their medical decision-
making thought process to defend against a payer denial. Two motivation gaps presented, the
provider understanding of the value of appropriate admissions to avoid subsequent readmissions
and the need for the provider’s self-efficacy in carrying out their medical decision-making
responsibilities. Two final organizational influence gaps were isolated as most important in
resolving the issue of denials for this subset of the short-stay population; the current lack of
appropriate placement for patients based on classification, and the lack of organizational
resources for training and educating hospitalists to understand and align their medical-decision
making with payer criteria for appropriate status decisions.
Knowledge Recommendations
Krathwohl (2002) outlined four knowledge types as first discussed in Chapter 2. This
study regarding the KMO influences identified two of the four knowledge categories for
analysis. Factual and procedural knowledge gaps found critical deficits in reducing the number
of medical necessity denials. The factual or declarative knowledge type specifically applies to
details and elements of medical necessity criteria, while procedural knowledge gaps related to
the techniques and methods of documentation to support the basis for medical necessity.
The recommendations listed in Table 17 provide a list of suggestions to close the
declarative and procedural gaps of providers at Pacific Hospital in determining appropriate
classification for inpatients with stays under 48 hours. The table lists the assumed knowledge
influences reviewed previously within the literature review. Analysis of findings supported a
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validated gap in the providers’ ability to select appropriate status and document medical
necessity properly. The table identifies the knowledge influence, knowledge type, assumed
influence, and recommendations suggested eliminating the gap.
Table 17
Summary of Knowledge Influences and Recommendations
Knowledge Influence Knowledge
Type
Assumed Influence Recommendation

Identification of a patient
meeting observation
service versus inpatient
status.

Declarative
(Factual)

The provider needs
knowledge of the
difference between a
patients needing
observation service
versus inpatient
status.

Pacific Hospital
provides education to
physicians regarding
medical necessity
criteria for inpatient
qualification.
Demonstration of his or
her medical decision-
making ability in
assigning patient status by
means of thorough
documentation of his or
her thought process.
Procedural The provider needs
knowledge of how to
demonstrate his or
her medical decision-
making ability in
assigning patient
status by means of
thorough
documentation of his
or her thought
process.

Pacific Hospital
provides training to
physicians on specific
documentation
needed to
demonstrate medical
necessity for an
inpatient
hospitalization, as
well as the
consequences of not
providing the level of
care.

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Factual knowledge
Providers need knowledge of the difference between patients meeting observation service
versus inpatient status. Krathwohl (2002) describes factual knowledge as the basic element
required for familiarity with an issue. Clinicians do not receive this information in their initial
educational training during medical school, nor by the organizations employing them. Despite
this lack of education, the healthcare industry has an expectation that providers understand what
the criteria are for these selections, presumably because they are members of a profession that is
highly educated to begin with.
Procedural knowledge
Providers need knowledge of how to demonstrate medical decision-making ability in
assigning patient status by means of thorough documentation of their thought processes. As with
education for appropriate criterion classification, Krathwohl (2002) also recommends
practitioners have competent knowledge of how to perform a task. Physicians receive no formal
medical documentation instruction; therefore, they are only aware of practices shared by the
person that showed them how to document while in their residency program. This is such an
important piece of the healthcare revenue cycle it behooves the organization to invest in
mandatory education and training for physicians to avoid payer denials.
Motivation Recommendations
Two types of motivational influences applied to these study participants, utility value and
self-efficacy, both identified through data collection and analysis as having validated gaps. The
gap related to utility value was providers’ general awareness of the current state of the
readmission problem for the organization. The second gap with self-efficacy demonstrates the
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lack of confidence expressed by providers in their ability to select appropriate status, which for a
physician presents a significant psychological issue.
Table 18 lists the assumed motivational influences revealed previously within the
literature review and through finding analysis as presenting a gap. The table identifies the
motivation influence, motivation type, assumed influence, and recommendations suggested
eliminating the gap.

Table 18
Summary of Motivational Influences and Recommendations
Motivational
Influence
Motivation
Type
Assumed Influence Recommendation

Appropriate admissions
and avoidance of
readmissions could affect
their organizational
scorecard.

Utility Value

The provider needs
knowledge of how to
identify a patient
meeting observation
service versus
inpatient status.

Training and
education program
implemented with all
hospitalists from
Pacific Hospital and
King County.

Appropriate selection of
patient status and
achievement of
organizational denial goal
of zero denials for
inpatient stays for 48-
hours or less.

Self-Efficacy

The provider needs
knowledge of how to
demonstrate his or
her medical decision-
making ability in
assigning patient
status by means of
thorough
documentation of his
or her thought
process.

Training and
education program
implemented with all
hospitalists from
Pacific Hospital and
King County.

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Utility value
When properly educated, providers will appreciate the value of appropriately admitting
the patient and avoid readmission, which could adversely affect the organization’s scorecard.
Beeson (2009) points out physicians are much more likely to embrace strategies for
improvement if they feel they will benefit from doing so. Presenting a logical message based on
industry evidence that aligns with the vision and goals of the organization will help providers
understand why changes are necessary (Beeson, 2009).
Self-efficacy
Providers expressed a lack of confidence in their ability to appropriately select patient
status and find this frustrating. Lazowski & Hulleman (2016) indicate that self-efficacy will
inspire participants and alter their perception that they can successfully complete a task. When a
physician believes he or she has the ability to determine patient status selection, their sense of
self-efficacy increases and they experience a greater sense of confidence and control.
Organizational Recommendations
Five organizational influences surfaced in this study, three cultural model influences and
two cultural setting influences. Data collection and analysis highlighted one gap related to
cultural models, as well as two cultural setting gaps with regard to education/training and
adequate capacity for patient placement. The findings indicate providers lack the education and
training needed to equip them with knowledge of criteria for medical necessity of inpatients, and
the ability to demonstrate such through their documentation.
The recommendations listed in Table 19 provide a list of suggestions to close the cultural
model and cultural setting gaps of providers at Pacific Hospital in determining appropriate
classification for inpatients with stays under 48 hours. The table lists the assumed organizational
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influences reviewed previously within the literature review and validated as presenting a gap
through finding analysis. The table identifies the organizational influence, organizational type,
assumed influence, and recommendations suggested eliminating the gap.

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Table 19
Summary of Organizational Influences and Recommendations
Organizational
Influence
Organization
Type
Assumed Influence Recommendation
Information given to
providers for
understanding appropriate
classification to patients
to avoid denial of claims
due to lack of medical
necessity.

Cultural
Model
The organization needs to
provide information to
providers for understanding
appropriate classification to
patients to avoid denial of
claims due to lack of
medical necessity.

Training and
education program
implemented with
all hospitalists
from Pacific
Hospital and King
County.
Provider access to
appropriate education and
training for how to
recognize and diagnose
medical conditions
appropriate for
observation service.

Cultural
Setting
The organization needs to
ensure provider access to
appropriate education and
training for how to
recognize and diagnose
medical conditions
appropriate for observation
service.

UR consultants
work with
hospitalist groups
and individually
for an agreed-upon
timeframe.

Adequate capacity for
placement of patients in
either an emergency,
observation, or inpatient
setting.

Cultural
Setting
The organization needs to
ensure adequate capacity
for placement of patients in
either an emergency,
observation, or inpatient
setting.

Establishment of a
dedicated
observation unit.

Cultural setting
The organization needs to provide adequate capacity for placement of patients in either
an emergency, observation, or inpatient setting. Without a dedicated observation unit, patients
who do not yet meet inpatient medical necessity criteria move to observation service and take up
the next available inpatient bed in the hospital. They often do not receive the prompt, immediate
time-sensitive attention needed to treat their low acuity conditions when mixed among the
inpatient population, as physicians must see an entire floor of patients and only have time to see
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the observation patient once during the shift. If an observation patient’s test results come back
within a few hours, but the physician does not round on that observation patient again until the
next day, the opportunity to discharge them within a 24-hour time period is often lost.
Cultural model
The organization needs to provide appropriate training and education for both Pacific
Hospital and King County hospitalists on how to recognize and diagnose medical conditions
appropriate for observation service to avoid denials of claims due to lack of medical necessity.
This critical finding cannot be understated. Without equipping the physicians with the
knowledge and training in how to identify appropriate patients for observation service versus
inpatient status, they will continue to “guess” or use only a time-based approach in selecting
status. Relying on only the time element does not fully account for the intent of the two-midnight
rule, which also allows for the “reasonable and necessary” perspective as described by the
physician.
Integrated Implementation and Evaluation Plan
Twelve hospitalists took part in the study, although there are approximately 60
hospitalists between the two organizations, Pacific Hospital and King County. The organization
should develop a formalized plan to ensure that all hospitalists in the program benefit from
medical necessity criteria training and education. Kirkpatrick and Kirkpatrick (2016) discuss
how the success of the training measures the improved performance as compared to the training
investment. The following integrated implementation and evaluation plan follows the New
World Kirkpatrick Model, with the specific goal of training physicians to understand medical
necessity criteria for inpatient level of admission. Once the education and training finalize,
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analysis should continue and performance metrics monitored to assess organizational outcomes
(Kirkpatrick & Kirkpatrick, 2016).
The four levels within the New World Kirkpatrick Model are Results (4), Behavior (3),
Learning (2), and Reaction (1) presented in the order in which to implement them. Level 4
delineates the business outcome resulting from training, using a leading indicator such as a
specific percentage of reduction in denials over a period. Level 3 is the degree to which the
participants apply the training as measured by consistently performed critical behaviors. Level 2
defines the extent to which participants acquired the intended knowledge, while Level 1
measures the satisfaction of participants regarding the training. The New World Kirkpatrick
Model is a framework for an implementation and evaluation plan requiring measurement of
desired outcomes to ensure successful execution.
Four-Stage Theory of Physicians’ Self-Directed Learning Model
Physicians are motivated to close gaps in general knowledge by learning skills through
either semi-structured or formal learning, as described by Slotnick (1999) in his Four-Stage
Theory of Physicians’ Self-Directed Learning model. These stages align with the New World
Kirkpatrick Model well and add further clarity as to how physicians attempt problem solving and
support organizational learning efforts. Slotnick outlines four distinct stages, which providers
manifest when participating in learning episodes:
1) Stage 0 - The physician becomes aware of the problem.
2) Stage 1 - The physician feels trepidation regarding the knowledge gap, and questions if
there is a problem let alone a potential solution. Resources are then required, and the
provider must be willing to make changes to his or her practice as required from the
learning.
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3) Stage 2 - The physician reads any appropriate literature and participates in available
coursework.
4) Stage 3 - The physician uses what he or she has learned in their practice and becomes
comfortable with the new skills and knowledge.
The study conducted by Slotnick demonstrated that providers’ acceptance of learning
varies depending upon the nature of the problem and their personal justifications for carrying
forward with learning behaviors.
Organizational Purpose, Needs, and Expectations
The purpose of this study was to evaluate providers with admitting privileges to Pacific
Hospital and the knowledge, motivation, and organizational influences affecting the
determination of patient classification selection, which result in revenue capture for the facility.
Through a review of the literature and interviews conducted with providers at Pacific Hospital,
seven assumed influences were determined as areas for improvement. The identified influences
include provider’s identification of patients meeting observation service versus inpatient status;
demonstration of provider medical decision-making ability in assigning patient status by means
of thorough documentation; appropriate admissions and avoidance of readmissions which could
impact their organizational scorecard; appropriate selection of patient status and achievement of
organizational denial goal of zero denials for inpatient stays for 48-hours or less; information
given to providers for understanding appropriate classification to patients so as to avoid denial of
claims due to lack of medical necessity; provider access to appropriate education and training for
how to recognize and diagnose medical conditions appropriate for observation service; and
adequate capacity for placement of patients in either an emergency, observation, or inpatient
setting. The solutions offered could alleviate the gaps discovered by providing the necessary
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knowledge needed for providers to execute their role in appropriately selecting patient
classification.
Level 4: Results and Leading Indicators
Table 20 identifies the desired outcome, the metric used to measure success, and the
method for collecting data to evaluate the Level 4 results of the implementation and execution
plan. Three desired outcomes that will result from the proposed training. The outcomes include
reducing the number of medical necessity denials for inpatient stays under 48 hours, increasing
provider’s proficiencies in the application of medical necessity criteria, and increasing provider’s
self-efficacy in documenting inpatient medical necessity. If the organization is successful at
meeting the three outcomes, this should allow the organization to reach its goal of zero denials
for inpatient stays under 48 hours.

Table 20
Outcomes, Metrics, and Methods for Outcomes
Outcome Metric(s) Method(s)
Reduction in number of
medical necessity denials for
inpatient stays under 48 hours

Monthly assessment of
medical necessity denials for
inpatient stay under 48 hours
Monthly review of work
records
Increase provider’s
proficiency in the application
of medical necessity criteria
Monthly assessment of
provider’s comprehension of
sample inpatient stays under
48 hours

Monthly audit of sample
accounts per provider to
measure level of proficiency
Increase provider’s self-
efficacy in documenting
inpatient medical necessity
Monthly assessment of
provider’s ability to
document inpatient medical
necessity

Monthly audit of sample
account per provider to
measure level of
documentation efficacy
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Level 3: Critical Behaviors.
The stakeholders in this study are hospitalists with admitting privileges at Pacific
Hospital. Kirkpatrick and Kirkpatrick (2016) remind us that critical behaviors consist of a small
number of specific actions. Performed consistently these tasks will pave the way to achieve
successful outcomes. The first critical behavior involves provider recognition of uncertain
inpatient medical necessity scenarios. Providers can then consult appropriate resources such as
UR. The second critical behavior is that of adequate documentation practices. Providers need
examples of good and poor documentation to understand nuances for denial prevention.
Providing them with tools such as templates and dropdown options in electronic applications
helps to utilize technology. Listed in Table 21 are the metrics, methods, and timing for each
critical behavior outcome.

Table 21
Critical Behavior, Metrics, Methods, and Timing for Evaluation
Critical Behavior Metric(s) Method(s) Timing
1) Providers must be
able to recognize
when medical
necessity is
uncertain and
request UR
review.

Does the patient’s
condition meet
medical necessity
criteria as outlined in
Milliman or
InterQual guidelines?
Develop a protocol
for physicians to
utilize and escalate
to UR when needed.
Evaluated denial data
on a monthly basis.
2) Providers must
demonstrate
adequate
documentation
practices.
Was medical
necessity criteria
demonstrated in
physician
documentation?

Monthly audit of
provider
documentation.
Evaluate provider
documentation on a
monthly basis.

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A study conducted by van de Wiel et al. (2010) provided substantiation of clinicians’
learning while “on the job.” Most specific learning activities reportedly took place while
providers were involved in direct patient care, where they benefited from direct counsel from
available sources, such as colleagues. Those surveyed felt that having colleagues with expertise,
such as UR resources, was reassuring and was tremendously helpful when they themselves had
insufficient knowledge to make a determination (van de Wiel et al, 2010).
Required drivers.
The New World Kirkpatrick Model suggests development of a strong required driver
package as a means to change critical behaviors. The critical behaviors of physician recognition
of uncertain inpatient medical necessity and physician documentation improvement will need to
be measured, monitored, and reported on to provide feedback for accountability (Kirkpatrick &
Kirkpatrick, 2016). Physicians do not have knowledge of the medical necessity criterion to
determine inpatient status, and the identified reinforcement drivers will provide the training and
education to assist them in recognizing the need to seek resources when in doubt. A feedback
mechanism is imperative, and with the establishment of monthly meetings between the denials
team and the hospitalists, review of cases brings understanding of trends and rationale. Finally,
individual or team performance incentives with the reduction of denials can tie to financial
bonuses in the physician’s annual performance package. Table 22 outlines the recommended
drivers to support critical behaviors of physicians.

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Table 22
Required Drivers to Support Critical Behaviors

Method(s)

Timing
Critical
Behaviors
Supported

Reinforcing
Breakfast training sessions to review and discuss:
● Two-midnight rule & services reasonable/necessary
● Medical necessity criterion
● Documentation requirements
● Code 44 procedure

Monthly 1, 2
Job Aids defining appropriate observation protocols Ongoing 1, 2

Encouraging
Monthly meeting with Denials Team/Hospitalists to discuss
denials
Monthly 1
Monthly meeting with hospitalist medical director and UR
leadership

Monthly 2
Rewarding
Team performance incentives in the form of financial bonus for
the achievement of an agreed-upon reduction in denials

Annually

1, 2

Organizational support
The organization must provide physicians with the necessary resources and support in
order to increase the likelihood of success in selecting patient classification. There should be the
formal establishment of an organizational expectation that providers understand, are
knowledgeable of, and can competently demonstrate the selection of patient classification. All
providers should be required to participate in training and education sessions provided by Pacific
Hospital. Sessions provided at convenient times for practicing physicians on both day and night
shifts make compliance easy to achieve.
103

Level 2: Learning goals
Providers must demonstrate specific knowledge and skill sets to complete the Level 3
critical behaviors listed in Table 22. Following the implementation of the recommended
solutions, providers will be able to:
1) Identify when a patient meets inpatient medical necessity. (Declarative)
2) Demonstrate thorough documentation practices to substantiate the care given and
treatment plan provided. (Procedural)
3) Providers become familiar with protocol tools as aids in assessment for observation
service versus inpatient service. (Procedural)
Program
The learning goals as outlined above will not only increase the knowledge and motivation
of the physicians, it will also help to accomplish the organization's financial goals. Providers
need training, job aids, and education with UR experts. Once established, the program will be
ongoing with refresher sessions, incorporating new hospitalists as they onboard. Asynchronous
training is another way to help physicians participate in annual information updates on key
concepts. Hospitalists will continue to meet monthly with the Revenue Cycle Denials team to
receive feedback on denied cases and with UR to discuss these cases for opportunities in future
scenarios.
Level 1: Reaction
All training and education programs should have an assessment tool at the conclusion,
and Kirkpatrick and Kirkpatrick (2016) recommend the use of formative and summative methods
to gauge the learning of the audience. Formative techniques such as concurrent trainer feedback,
instructor observation, or dedicated observation are a few methods, but the most common is post-
104

training evaluation using surveys. Table 23 provides suggested methods to determine provider
reactions to the training and assess what their level of engagement was during the training.

Table 23
Program Evaluation Methods
Method(s) or Tool(s) Timing

Engagement
Completion of asynchronous training modules measured
through platform analytics
Ongoing

In-person training evaluation

After training event

Relevance
Asynchronous training evaluation After training event

In-person training evaluation

After training event

Customer Satisfaction
Asynchronous training evaluation After training event

In-person training evaluation

After training event

105

Three Stages of Transition
Bridges and Mitchell (n.d.) explain the importance of allowing people to go through
transition rather than just forced change. Transition involves three distinct phases: ending the old
ways, explorations in the neutral zone, and new beginnings. Using the “4 P’s” of transition
communication, design messaging around the purpose, picture, plan, and the part they need to
play (Bridges & Mitchell, n.d.). The first stage begins with saying goodbye to how previous
processes, and moving to the second stage of transition, which is the neutral zone. Most people
instinctively want to move through this transition quickly because it is uncomfortable and
uncertain, but this is also an opportunity for creativity and innovation. Allowing enough time for
people to get through the neutral zone and then start new behaviors as they enter the final stage,
new beginnings, is important.
Evaluation Tools
After participating in the asynchronous and in-person training and education events,
providers will complete a post-survey. The survey will assess the level of provider’s satisfaction
as to whether they felt equipped with new concepts and skills after training to determine medical
necessity criteria. The survey will also evaluate provider’s levels of confidence, commitment,
and attitude after having received additional information to select a patient classification.
Data Analysis and Reporting
The preceding implementation and evaluation plan results in three outcomes. They
include reducing the number of medical necessity denials for inpatient stays under 48 hours,
increasing provider’s proficiencies in the application of medical necessity criteria, and increasing
provider’s self-efficacy in documenting inpatient medical necessity. If successful, the three
106

outcomes should allow the organization to reach its goal of zero denials for inpatient stays under
48 hours.
Strengths and Weaknesses of the Approach
A strength of the recommended approach is stronger alignment with physicians and UR
resources, partners who supplement the provider medical decision-making process with payer
medical necessity criteria requirements. However, a resulting weakness will quickly surface if
the UR department lacks adequate staffing to handle the volume of referrals from physicians
needing consultation. Currently, the UR nurses do not work in the emergency department, which
could be a consideration for future design.
Limitations and Delimitations
Limitations known to the researcher during the study include:
● Self-selection due to voluntary participation in the study may have resulted in
participation bias;
● The study took place within a short timeframe and with limited resources, which
prevented a larger sample size.
The stakeholder group for this study, hospitalists at Pacific Hospital, underwent random
selection based on interest expressed during the pre-selection recruitment phase of this study.
However, this study suffer from participation bias resulting from voluntary participation and
self-selection of participants. One participant in a senior medical director role may have provided
a deeper understanding of organizational decisions contributing to validating or invalidating
organizational influences. Finally, the researcher must acknowledge their participation in the
study as an instrument of data collection and analysis.
107

Delimitations, or boundaries established by the researcher for this study, may have
affected this study and include only hospitalists who would have admitting privileges at Pacific
Hospital.
Recommendations for the Future
This study evaluated ten assumed influences that contribute to the organization’s goal of
reducing denials to zero for inpatient stays under 48 hours. Twelve hospitalists, six of whom
represented Pacific Hospital and six representing King County, constituted only 20% of the
entire hospitalist staff. Interviews with the remaining hospitalists would further validate the
assumed influences identified in the study. A more comprehensive collection of data from the
entire medical staff who treat this patient population would serve to further enrich and inform the
intervention design. The most important piece of the implementation plan is that physicians gain
an understanding of observation protocols and inpatient medical necessity criteria foundations.
Cooke and Krawitt (2015) explain that robust organizations involve utilization review resources
upfront when making the admission decisions. These clinicians embody a team approach with
physicians, and work well with physician advisors.
Peacock et al. (2014) suggest that employing a fulltime medical director to oversee the
observation unit is the best way to be sure the area is well represented and used for inappropriate
admissions. The success of a dedicated observation unit rests on the determination of conditions
considered appropriate for the treatment pathway (Conley et al., 2017). The medical director
would be responsible for developing protocols for the emergency physicians to use, and
healthcare consultants can help with this initial implementation. Conley et al (2017) recommend
staffing a physician director, a nurse director, and an administrative operations director or
manager to work in a team approach. Healthcare consultants with specialty in emergency room
108

and/or dedicated observation unit implementation and staffing are available through many
agencies. Often existing staff have familiarity with different models from previous employment,
and it is beneficial in inquire about what staff has experienced elsewhere, good or bad.
Conclusion
The purpose of this study was to evaluate providers with admitting privileges to Pacific
Hospital and the influences affecting the determinations of patient classification selection, which
result in revenue capture for the facility. Clark and Estes (2008) provide the Gap Analysis Model
as a framework to discover knowledge, motivation, and organizational influence opportunities
for improvements in the existing workflow. Using this information together with the Kirkpatrick
and Kirkpatrick (2016) New World Model for construction of an implementation and evaluation
plan, the formulation of a fundamental tactical response is in place.
The key takeaway from this research is that providers lack any knowledge of medical
necessity criteria and have received no training in how to document reasonable and necessary
services as a means to avoid payer denials. This lack of knowledge results in a revenue loss to
Pacific Hospital of approximately $1.4M annually. Providers did not express confidence in their
ability to determine if certain patients meet medical necessity criteria. Contributing to the lack of
knowledge and lack of self-efficacy expressed by providers is a lack of organizational support.
Providers indicate the organization does not provide training or education regarding medical
necessity criteria, nor does the organization appear to expect providers to be competent with
selecting patient classification. There is also no feedback mechanism in place to provide
physicians with information about denied cases, and no forum for discussion to investigate
whether the denials are appropriate.
109

Successfully implementing the recommendations discussed in this study is a means to
achieving the organization’s goal of zero medical necessity denials for inpatient stays under 48
hours. Failure to incorporate the recommendations will likely result in continued loss of revenue
from payer denials, and decreased ability to close the knowledge, motivation, and organizational
gaps, which hinder the organization from reaching performance goals.

110

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117

FOOTNOTES
1
Pacific Hospital is a pseudonym.

2
King County is a pseudonym.

118

APPENDIX A
Interview Questions ~ (Approximately 60-90 minutes per interview)
Demographic Information
Physician role Hospitalist
Years of Experience Any Provider at Pacific Hospital with admitting
privileges
Experience working in a facility with a
dedicated OBS unit
Yes or No

1. Do you mind sharing a little information about you, such as your length of tenure here, perhaps
where you went to medical school?

2. Tell me if you have had experience in working at hospitals with dedicated observation units or if
the observation service has been integrated with the medical population.

3. Help me understand whether you feel Milliman or InterQual criteria are designed to use your
medical knowledge to determine whether a patient meets inpatient medical necessity?

4. How do you utilize observation protocols to determine observation eligibility?

5. Could you walk me through the process of determining if a patient meets inpatient medical
necessity based on your medical knowledge?

6. What is your opinion as to the effectiveness of your ability to discern medical necessity criteria
for patient classification selection?

7. How does the potential for readmission to the hospital within the next 30 days factor into your
decision to admit the patient to either observation or inpatient?

8. Dedicated observation units are said to reduce inpatient and ED crowding. How do you feel
about that statement?

9. What is your understanding of the organizational goals regarding medical necessity denials for
patients with stays of 48-hours or less?

10. Can you describe for me how the revenue gains or losses at Pacific Hospital relate to medical
necessity issues?

11. What type of collaboration do you have with organizational leadership at Pacific Hospital in
determining patient status?

12. What type of formal and informal training have you received through Pacific Hospital regarding
medical conditions generally treated in observation units?
119

APPENDIX B
The Business Office System (BOS) software
120

APPENDIX C

121

Abstract (if available)

Abstract One-third of United States hospitals have dedicated observation units, which leads to inappropriately classified inpatients who do not meet medical necessity criteria, resulting in reimbursement denials. The purpose of this study was to use a gap analysis framework (Clark & Estes, 2008) to evaluate knowledge, motivation, and organizational (KMO) influences related to the implementation of a dedicated observation unit in a 349-bed acute care hospital. Following a review of the literature, an examination of assumed KMO influences took place using a qualitative, emergent design. Validating or invalidating assumed influences through analysis of interview data, along with work record and performance data assessment. Recommendation follow for an implementation and evaluation plan following the New World Kirkpatrick Model (Kirkpatrick & Kirkpatrick, 2016). The steps offered in the recommendations chapter increase stakeholder’s knowledge and motivation and reduce gaps in organizational influences to achieve the organization’s goals.

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Asset Metadata

Creator Dennis, Cynthia Long (author)

Core Title Avoidance of inpatient medical necessity denials for short-stay admissions: an evaluative study

School Rossier School of Education

Degree Doctor of Education

Degree Program Organizational Change and Leadership (On Line)

Degree Conferral Date 2021-12

Publication Date 11/16/2021

Defense Date 09/27/2021

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag denials,inpatient,low acuity,medical necessity,OAI-PMH Harvest,observation,protocol,short-stay,two-midnight

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