Author: James Allen, MD

Can I afford to buy a new car this year? How much can I afford to put into my 401(k) each month? In order to answer these questions, every person or family needs to have an annual budget so that they can estimate what their basic living expenses will be, how much they can save for retirement, and how much they have for discretionary spending. Every company and every hospital does this when creating its annual budget for the next fiscal year. But we are often less diligent about making our personal budgets than we are making our hospital or corporate budgets. In theory, making a budget for yourself sounds easy – just estimate how much income you anticipate and how much expenses you anticipate. But budgeting is deceptively difficult and you can be misled depending on what sources you use for income and expense calculations. Here is an accurate way to create your annual budget.

Where to start: total income

The first step is to estimate your income for the upcoming year. If all of your income comes from your wages from your employer, then this is simple – just look at last year’s income and add in the amount of any raises or bonuses you expect next year. However, most people also have additional income from dividends, capital gains, and interest from investments. Or maybe a side gig from consulting, speaking honoraria, or rental income. These extra sources of income are often variable from year to year and it can be difficult to predict what the amount of these other income sources will be next year. So, you will need to gather data from multiple sources:

Do Use:

• Final annual payslip. This will have your total gross pay which is the amount that you earned from salary and bonuses last year before any tax deductibles are subtracted out. Gross pay is what you want to use when preparing your budget. Your final payslip will also show the amount you paid for employer-sponsored health insurance, 401k/403b/457 contributions, pension contributions, etc.
• 1099 forms. These will contain additional income from consulting (or other outside employment), dividends, interest, and capital gains.
• Records from other income. This can include cash payments you receive for gig work, income from rental property, etc. These will often be reported on Schedule C of your federal income tax returns so the Schedule C form from last year can serve as a useful source for this information.

Don’t Use:

• W-2 forms. The income reported on various lines on your  W-2 forms will be adjusted for tax deductions, such as employer-sponsored health insurance premiums, 401k/403b/457 pre-tax contributions, etc.
• IRS 1040 forms. The various entries on the 1040 form come from your W-2 forms and will have similar adjustments with the result that your income on the 1040 form will be less than the final gross pay that appears on your final annual payslip.

By adding up all of the income from all of these various sources, you can determine what your total gross income was last year.

Where to start: total expenses

Most of us do not do a very good job of tracking where all of our money goes each year. Some expenses are taken out pre-tax by our employer and we never even see that money. We pay for stuff with checks, credit cards, and cash. Families may have multiple checking accounts and several different credit cards.

I recommend staring with your checking account. The reason for that is that most people use their checking account as the central hub of their personal finances. We usually deposit our monthly paychecks as well as other income from consulting etc. into our checking accounts. We also draw from those checking accounts for paying expenses directly (by writing checks), taking cash from ATMs, and paying off our monthly credit card balances. Your monthly credit card statement will list your total deposits and total withdrawals as well as the details for each specific transaction.

• Add up all of your monthly checking total withdrawals. Do this for each checking account that you and your spouse have.
• Subtract out any expenses that you pay but that you later get reimbursed for. For example, work-related travel if you pay for your hotel and airfare but then get reimbursed for those expenses by your employer after the travel. You will need to go through all of your individual checking account withdrawals and credit card charges to find these expenses.
• Subtract out withdrawals from your checking account that were for transfers to your other checking accounts. This can happen if you have checking accounts at two different banks or if you move money to a spouse’s checking account.
• Transfers to children’s checking accounts are different and I recommend not subtracting out these withdrawals and instead including them as part of your basic living expenses in order to keep the budgeting process as simple as possible.
• Account for transfers to savings accounts and money market accounts. You should always keep a pre-determined amount of money in these accounts as your emergency fund. But many people also use these accounts for short-term savings, with the intention of spending money in these accounts in the next few months. In this situation, you need to determine if you pay expenses directly from those savings and money market accounts or whether you “park” money there temporarily and then transfer it back to your checking account to pay expenses. To avoid double counting, do not include transfers from checking to savings accounts or checking to money market accounts in your total expense withdrawal calculations. But do include any expenses you pay directly from savings or money market accounts in your total annual expense withdrawals.

By adding up all of these withdrawals, you will have the total amount that you spend each year from your take-home pay. It takes a moderate amount of time to go through all of your monthly checking account statements but they are generally available through your on-line banking account website so the process goes fairly quickly.

Categorize your expenses

This can get very complicated so I recommend just using very general, broad categories to make the process as simple as possible:

1. Income taxes
2. Retirement savings
3. Non-retirement investments
4. Education expenses
5. Insurance
6. Discretionary spending
7. Basic living expenses

You will need to go to various sources to assemble all of the data you need to stratify expenses into these various categories. For income taxes, the easiest way to determine your total taxes from your federal, state, and local income tax forms from the previous year. Be sure that you have included both your regular federal income tax plus your Social Security/Medicare tax.

For the retirement savings category, start with your end-of-the-year payslip. This will contain information about your 401k/403b/457 contributions and pension plan contributions. Do not include any employer contributions to those plans, only your own contributions. Next, look at your checking accounts and credit card statements to pick out transfers into other retirement accounts such as an annual IRA contribution, SEP contribution, or backdoor Roth contribution.

For the non-retirement investment category, pick out any withdrawals from checking, savings, money market, or credit card accounts that went into purchasing stocks, bonds, mutual funds, certificates of deposit, etc. Alternatively, if all of your non-retirement investments go through an investment company (such as Vanguard, T. Rowe Price, or Fidelity), you can look up your annual investment purchases on your annual statement from the investment company.

For educational expenses, include money that you transferred into 529 college savings accounts and money paid directly from your checking accounts to schools for tuition, etc. If you use other accounts to save for your children’s college education (such as uniform gifts to minors accounts), then include these as well.

For insurance expenses, start with your end-of-the-year payslip for premiums you pay for employer-sponsored health, vision, dental, disability, and life insurance premiums. These will generally appear as pre-tax or tax-deductible expenses on your payslip. Once again, do not include any insurance that your employer pays for, only include your own contributions to insurance premiums. Add in payments from your checking, savings, or credit card accounts for other insurance premiums such as homeowner’s, car, life, and umbrella insurance.

Discretionary spending is more complex and depends on what you define as being discretionary vs. basic living expenses. It is better to over-simplify your definition of “discretionary” to avoid the expense accounting process from getting to onerous. I recommend only including “big ticket items”, like vacations and new car purchases, since those are fairly easy to track. Add in other high-cost but non-essential items such as new TVs, computers, appliance upgrades, season sports tickets, and elective home renovations. Many credit card companies and banks will have “money manager” apps on your on-line credit card and checking accounts that will automatically group credit card charges or checks into categories like travel, entertainment, etc. and you can alternatively use these apps to calculate discretionary spending.

Basic living expenses are everything that is left over. It can be argued that things like movie theater tickets, new clothes, and wine purchases are better characterized as discretionary expenses but for most of us, it would take hours and hours to group each of these small expenses as being either basic living or discretionary expenses. It is easier to put them in the basic living expense category but then realize that in a financial emergency, you could cut back somewhat on the amount that you have historically spent on basic living expenses. Because everyone should have an emergency fund of at least 3 (and preferably 6) months of basic living expenses, this number is useful to help guide you about the minimum amount of money that you should keep at all times in your combined checking, savings, and money market accounts. A lot of different types of expenses will be lumped into basic living expenses including housing, food, utilities, property tax, transportation, license fees, annual dues, and loan payments.

Putting the budget together

Once you have all of the financial information and have categorized your previous year’s expenses, you can plan for next year. Start with your projected income. For most people, this will be similar to their previous year’s income plus the amount of any raises that are expected in the coming year. If your income is similar to the previous year’s, then your taxes will also be similar, unless you are moving to a different city or state. The current federal income tax rates are set to increase after 2025 (unless there is congressional legislation to continue the current rates) so your budgeting for 2025 and beyond will need to take into account any changes in tax rates. For most people, insurance premiums will also be same or just slightly higher, unless they anticipate a change in marital status or change in spousal coverage by health insurance. Health insurance premiums are the biggest insurance expense and by January, you should know what your premiums will be for the upcoming year. For basic living expenses and discretionary spending, you should account for the effect of inflation. No one can predict with certainty what the inflation rate will be 12 months from now so a reasonable estimate can be made by using the rolling 12-month inflation rate from the previous month. So, for example, the 12-month inflation rate in December 2022 was 6.5%. Therefore, increase your expected 2023 basic living and discretionary spending amounts by 6.5%. Next, factor in any large expenses that you know will occur in the next 12 months, such as a wedding, a new car, or a down payment for a new house. Add these one-time expenses into next year’s discretionary expenses. Use last year’s values for retirement savings and for educational expenses as a starting point for next year’s budget.

At this point, you will have accounted for your anticipated income as well as most of your planned expenses for the upcoming year. If the difference between income and expenses is a positive number, great news! – you can afford to put additional money into investments, retirement savings, educational expenses, or discretionary spending. On the other hand, if this is a negative number, you will need to look hard at your discretionary spending or investment spending to see if there are expenses in those categories that you can cut out. Although you could also reduce contributions to retirement savings or educational savings, I would caution against this unless you are desperate since those expenses are really paying for your future annual income in the case of retirement savings, or for future unavoidable expenses in the case of education saving.

January is the best time to do your annual budget. By January, you should have your year-end payslip from the previous year and will have at least started preparing your income tax returns. Beginning in January 2023, there is a $2,000 increase in the annual contribution limits to 401k/403b/457 plans so January is a good time to increase the amount of your monthly contributions to those plans. Although you could wait until December to do one massive contribution to your 401k/403b/457 or to your child’s 529 account, it is better to spread those contributions out to take advantage of “dollar-cost averaging” and also to let those contributions start to grow in your retirement account or 529 account investments over the course of the upcoming year.

Everyone needs a budget

Many people with relatively high incomes (such as physicians), often neglect doing an annual budget, believing that their income is high enough that they won’t run out of money by the end of the year. In reality, everyone needs to create an annual budget and people with high-incomes can spend more than they earn as easily as those with lower incomes. It is particularly important to go through the budget process if you anticipate a major change in your life in the upcoming year – a new job, marriage, new child, etc. Creating a budget is somewhat a skill – the first year you do it, the budget process takes a moderate amount of effort. But each year, it gets progressively easier to create your annual budget as you get more experience with the process.

Once you have that budget, stick to it and use it as a roadmap for your monthly expenditures. This is the best way to be sure that you are able to pay off all of your credit cards every month, make all of your monthly loan payments, stick to your retirement contributions, and ensure your children’s college future. Your annual budget today is your insurance that you will be able to afford to retire when you want to retire.

We cannot predict the future national or global economy but we can control our own future personal economy. Controlling it starts with your annual budget.

January 29, 2023

Supplemental oxygen is one of the most commonly prescribed treatments in the hospital. Patients with acute or chronic lung disease depend on supplemental oxygen to stay alive. As a natural and necessary substance, oxygen would seem like a safe thing to prescribe for patients that need it. But sometimes too much of a necessary thing can be harmful. So, when is too much oxygen bad for patients? We can take a lesson from vitamins.

The supplemental vitamin industry is based on the tenet that if our bodies need a small amount of a vitamin to live, then it must follow that by supplementing larger and larger amounts of that vitamin, our bodies will function better and better. Americans love this concept and we spend $30 billion every year on supplements. But frequently, too much of a good thing turns out to be a bad thing. Take Vitamin A – it is necessary for normal health and without vitamin A, we can lose night vision and become immunocompromised. A small amount of vitamin A in our diet keeps our bodies functioning normally. But if a person ingests too much vitamin A from supplements or from a dietary source that is high in it (such as polar bear liver), death can result from vitamin A toxicity. The same is true for water: drinking too little and a person dies of dehydration but drink too much and a person dies of hyponatremia. For decades, we thought oxygen was somehow different and that it was always better to err on the side of prescribing too much oxygen than risk prescribing too little. It turns out that we were wrong.

There are a lot of different oxygen delivery options: home concentrators, portable concentrators, compressed oxygen gas tanks, liquid oxygen, etc. In the hospital, oxygen is usually delivered through a medical gas panel that will have outlets for medical grade oxygen, regular air, and wall suction. The oxygen that comes out of these outlets is generally at a maximum pressure of 55 PSI. Conventional oxygen delivery devices (nasal cannulas and simple face masks) in the hospital usually are capped at a maximum flow rate of 15 liters per minute. Heated high flow nasal cannulas can deliver very high oxygen flow rates of up to 60 liters per minute. Mechanical ventilators can blend pure oxygen with room air to achieve anywhere from 21% to 100% inhaled oxygen concentrations (FiO2). As a result, physicians can adjust the amount of supplemental oxygen that a patient receives from a very small amount to a very large amount.

In the past, when EMS personnel would bring a patient with shortness of breath to the emergency department, they would put a mask on that patient and turn the oxygen up to a 15-liter flow rate to achieve close to 100% inhaled oxygen. In the hospitals, doctors would prescribe a high flow of oxygen and then not decrease that flow rate until a patient’s condition was improving and it was time to wean the oxygen down. In our emergency departments, ICUs, operating rooms, and hospital wards, we would give the patient as much oxygen as it took to raise their blood oxygen saturation to 100% and leave the oxygen at that flow rate for hours or days. But it turns out that we were probably harming patients by doing so.

In the past several years, there have been studies showing that prescribing excessively high oxygen flow rates can worsen patient outcomes in adults with lung disease. A study published in this week’s JAMA extended those findings to children. This study looked at 1,567 children, ages 1 – 4 years old, at 14 hospitals in Australia and New Zealand who had respiratory failure. The children were randomly assigned to receive either standard oxygen therapy or high-flow oxygen therapy. The high-flow group received as high as 40 liters per minute, depending on body weight. The standard-flow group received up to 2 liters per minute that was titrated to keep the blood oxygen saturation above 92%. The children receiving high-flow oxygen had a significantly longer length of hospital stay (1.77 vs. 1.50 days), longer duration of time on oxygen (1.07 vs 0.75 days), and higher rate of admission to the ICU (12.5% vs 6.9%).

Other studies have shown that excessive supplemental oxygen can be harmful in adults. A study of 429 patients given supplemental oxygen after resuscitation for cardiac arrest found that 40.7% of those receiving a conservative oxygen flow rate died but 50% of those receiving a liberal (i.e., higher) oxygen flow rate died. A meta-analysis study of 16,037 critically ill patients treated with conservative vs. liberal oxygen therapy found that those treated with liberal oxygen therapy (higher flow rates) had a higher mortality than those treated with conservative oxygen therapy (lower flow rates). A 2022 study of inpatients receiving supplemental oxygen during COPD exacerbations found that those who had arterial oxygen saturations of 88 – 92% had the lowest mortality rate and those patients given greater amounts of supplemental oxygen to maintain arterial oxygen saturation > 92% had significantly higher mortality rates.

For patients having out-of-hospital cardiac arrest, the conservative oxygen approach may be risky, however, A 2022 study from Australia found that cardiac arrest patients treated by EMS personnel with a conservative oxygen strategy (targeting a blood oxygen saturation of 90 – 94%) had a higher mortality rate than those patients treated with a liberal oxygen strategy (targeting a blood oxygen saturation of 98 – 100%). Because there was a tendency to frequently undershoot the oxygen saturation in conservative oxygen therapy group, it is possible that even brief periods of low oxygen saturations can be harmful in patients immediately after a cardiac arrest which may have resulted in the higher mortality rate.

Adverse effects of too much oxygen

So, if oxygen is so necessary for us, how can it harm us? There are several effects of excessive oxygen that can result in harm:

• Oxygen toxicity. High oxygen concentrations can damage lung cells by oxidant injury resulting from the production of substances such as superoxide anion, hydroxyl radical, and hydrogen peroxide. We sometimes see this in the intensive care unit in respiratory failure patients who require 100% oxygen concentrations for long periods of time who get into a vicious cycle of pneumonia requiring supplemental oxygen and then the high oxygen concentrations cause further lung damage resulting in the patients needing even higher oxygen concentrations in order to get enough oxygen into the blood stream to keep the body’s organs alive. These patients can end up with permanent lung scarring and never get off of the mechanical ventilator. Lung damage depends on how long a person is exposed to high concentrations of oxygen – brief periods are less harmful than breathing very high concentrations of oxygen for longer periods of time. This mainly applies to those patients in the ICU left on 60% – 100% inhaled oxygen for several days.
• Drug-induced lung disease. Many drugs can cause damage to the lung resulting in inflammation and scar in the lungs (interstitial lung disease). Certain drugs are particularly likely to do this when combined with high concentrations of inhaled oxygen. The two biggest offenders are bleomycin (used in cancer chemotherapy) and amiodarone (used in heart rhythm disorders). When a patient is breathing room air, these drugs are usually safe but when breathing high concentrations of oxygen, these drugs can become very toxic. Bleomycin is particularly notable because the risk of pulmonary toxicity from breathing high oxygen concentrations can persist for many years after the patient was given bleomycin.
• Radiation-induced lung disease. Excessively high amounts of radiation to the chest can cause interstitial lung disease but moderate amounts can be used safely to treat lung cancer. However, when a patient is using high oxygen concentrations, those moderate amounts of radiation can cause interstitial lung disease. Thus, like amiodarone and bleomycin, oxygen therapy can increase the risk of radiation-induced pulmonary fibrosis.
• Adsorptive atelectasis. Room air contains about 21% oxygen and 78% nitrogen. Oxygen readily passes from the alveoli of the lungs (air sacks) into the blood stream but nitrogen does not cross as easily. Because of this, nitrogen in the air helps keep the alveoli of the lungs propped open, similar to using PEEP (positive end-expiratory pressure) on a mechanical ventilator, thus preventing atelectasis. When a person breathes very high concentrations of oxygen, the nitrogen in the alveoli gets “washed out” and as a result, the lungs are more prone to developing atelectasis that can in turn worsen oxygenation. Once again, the patient can get into a vicious cycle of worsened blood oxygen levels leading to the doctor increasing the supplemental oxygen concentration leading to worsened atelectasis leading back to worsened blood oxygen levels.
• Carbon dioxide retention. Our breathing rate is determined by the blood oxygen level (PO2) and carbon dioxide level (PCO2). Patients with COPD are sometimes less sensitive to rising carbon dioxide levels and more dependent on the blood oxygen level to determine respiratory rates. In this setting, by giving too much supplemental oxygen, the patient can lose their respiratory drive and begin to hypoventilate, resulting in a high blood carbon dioxide level. Although this effect on PCO2 levels is usually small, it can be important when combined with other things that can suppress the respiratory drive centers, such as sedatives and opioids.
• Longer oxygen weaning times. When a patient with acute respiratory failure in the hospital begins to improve, the doctor will generally order the respiratory therapist to wean the oxygen off (or back down to the patient’s normal home supplemental oxygen flow rate). The respiratory therapist will then reduce the oxygen flow rate by 1-2 liters per minute, wait a couple of hours, recheck the blood oxygen saturation, reduce the flow rate by another 1-2 liters, etc. It takes less time to wean oxygen off if a patient is on less oxygen to begin with than if they are receiving higher flow rates of oxygen. The doctors generally wait until the oxygen is completely off (or down to the normal flow rate the patient uses at home) before the patient is allowed to be discharged. As a result, longer oxygen weaning times can sometimes lengthen the patient’s hospital stay.

So, what is the right amount of supplemental oxygen?

Our bodies require oxygen to live. If we don’t get enough oxygen, our tissues become damaged. On the other hand, too much oxygen is also bad for our bodies. Here is what we can do in our hospitals to draw the right balance between not enough and too much:

1. In emergencies, it is better to give too much than to give too little. In settings such as cardiac arrest, myocardial infarction, and stroke, brief periods of low blood oxygen levels can worsen clinical outcomes. If too much emphasis is placed on using the least amount of supplemental oxygen, there is a greater risk of undershooting the oxygen flow rate and causing low blood oxygen levels for seconds or minutes. Situations where this applies include during transport of cardiac arrest or stroke patients by emergency squads, during CPR for cardiopulmonary arrest, and during the first hours of a myocardial infarction or stroke.
2. Target a blood oxygen saturation of 88 – 92%. After the initial resuscitation, titrate the supplemental oxygen flow rate (or the FiO2 on the mechanical ventilator) to the least amount necessary to keep the oxygen saturation between 88 – 92%. For years, physicians have written orders to “Wean supplemental oxygen to maintain oxygen saturation > 92%”. This is probably too high and our default oxygen weaning orders in our electronic medical records need to be revised.
3. In the ICU, use other measures to improve oxygenation when patients need more than 60% FiO2. This could include increasing the PEEP on the ventilator, using prone ventilation, giving sedatives, controlling fever, or using neuromuscular blockade.
4. Avoid unnecessary use of 100% FiO2 during surgery. In the past, anesthesiologists would sometimes leave patients on 100% FiO2 throughout surgical operations so that there would be no risk of the patient desaturating during surgery. Not only can this increase the risk of post-operative absorptive atelectasis, but it can be particularly harmful if patients have previously received sensitizing drugs or radiation. One of my colleagues was a physician who had been treated with bleomycin years previously for lymphoma. He underwent an elective gall bladder surgery and was left on 100% FiO2 during the procedure. He developed acute lung injury post-operatively and died from bleomycin-induced acute oxygen toxicity.
5. We need pharmacologic 2,3-DPG. 2,3-Disphosphoglycerate (2,3-DPG) is a chemical in red blood cells that helps hemoglobin molecules release oxygen. Physiologically, this can result in a  shift in the oxy-hemoglobin dissociation curve to the right. This means that oxygen can pop off of hemoglobin easier, allowing the red blood cells to release more of their oxygen to tissues that need it. In other words, 2,3-DPG allows the tissues to get by when there is less oxygen in the blood. Normally, red blood cells release about 30% of their oxygen when they pass through tissues; 2,3-DPG allows them to release more than 30%. What is important to our bodies is not the amount of oxygen in the blood but rather the amount of oxygen that our tissues get. 2,3-DPG allows our tissues to function normally when the blood oxygen saturation is lower. If we could increase red blood cell 2,3-DPG levels pharmacologically, we could use lower amounts of supplemental oxygen in patients with acute respiratory failure.
6. Not everyone with a low oxygen saturation needs supplemental oxygen. Insurance will not pay for supplemental oxygen unless a patient has an oxygen saturation of < 89%, either at rest, during exercise, or during sleep. But that does not mean that every patient with brief oxygen saturations < 89% needs supplemental oxygen. The LOTT study showed that COPD patients with oxygen saturations 89 – 92% at rest that desaturated to 80 – 90% with exercise had no benefit from supplemental oxygen, including death rates, hospitalization rates, COPD exacerbations, and quality of life. In my own clinical practice, I have also been hesitant to prescribe oxygen in hyperemic patients who are at fire risk, including those who smoke, have smokers in the home, or use gas cooking stoves. These patients are often more likely to be injured or die from fire caused by supplemental oxygen than they are to die from hypoxemia without supplemental oxygen.

It’s time for auto-titrating oxygen delivery devices

Auto-titrating oxygen devices adjust the oxygen flow rate based on a patient’s oxygen saturation. A 2019 meta-analysis showed that compared to manual oxygen titration, these devices shortened hospital length of stay by shortening oxygen weaning times. A 2020 study of outpatients found that by using auto-titrating oxygen devices, patients had improved 6-minute walk distances and improved dyspnea. It is not surprising that these devices are effective in the hospital – a respiratory therapist cannot be in a patient’s hospital room 24 hours a day to constantly adjust the supplement oxygen flow rate but the auto-titrating oxygen delivery device can. Not only can these devices reduce excessive supplemental oxygen flow rates in hospitalized patients, but they can also reduce excessive oxygen flow rates in outpatients.

The cost to hospitals to buy and implement auto-titrating oxygen delivery devices would be considerable. However, these costs could potentially be off-set by shortened hospital length of stays and by reduction in utilization of respiratory therapists. These devices would also take some of the guesswork out of ordering oxygen flow rates for hospitalized patients resulting in a more standardized and consistent use of supplemental oxygen by hospitalists and intensivists. In addition, there is a potential for a reduction in hospital mortality rates by avoiding excessively high amounts of supplemental oxygen.

There is both an art of medicine and a science of medicine. It is time to harness science to guide the use of supplemental oxygen.

January 26, 2023

“Observation status” was originally conceived of as a way to watch patients presenting to the emergency department for a few hours in order to determine whether or not they needed to be admitted to the hospital. The purpose was to reduce unnecessary inpatient hospitalizations and thus reduce overall healthcare costs. But there has been a creep in the use of observation status as well as the healthcare bureaucracy to administrate it. The result is that observation status has now increased overall healthcare costs. It is time to consider eliminating observation status in the United States.

How did we get here?

Prior to 1960, emergency departments were staffed by residents and general practitioners. The doctor who saw you in the ER was generally the same doctor who took care of you in the hospital. Emergency medicine became a specialty in 1968 with the creation of the American College of Emergency Medicine. The first emergency medicine resident began training in 1970 and the first board examination in emergency medicine was offered in 1980. The result was that the doctor that took care of a patient in the ER was no longer the same doctor who took care of them once they were admitted to the hospital. In 1983, DRGs were first used to determine the amount of money that Medicare would pay hospitals for inpatient admissions for any given diagnosis. After the introduction of DRGs, it became immediately clear that there needed to be some way of determining which patients were sick enough to warrant admission to the hospital from the emergency room, otherwise, the hospitals would be incentivized to admit as many people as possible, even if they were not very sick.

Initially, that determination was left to the emergency room physician. But that ER doctor needed to find an inpatient physician who would agree to admit the patient. During my residency, we had a designated “medical admitting resident” each day who would make the decision about which patients were sick enough to require admission. Some residents got the reputation of being “sieves”, meaning that they would admit everyone that the ER physician called them about whereas other residents got the reputation of being “walls”, meaning that they would block admissions from the ER unless the patients were at death’s door. You always wanted to be on-call at night with a resident who was a “wall” because that meant you would have to do fewer history and physical exams, your inpatient service census would be lower, and you might actually get a few hours of sleep that night.

In order to provide some rules for which patients warranted inpatient admission, Medicare directed that patients who could be sent home within 24 hours should be observed in the ER rather than admitted to the hospital. However, keeping a lot of patients in ER beds for 24 hours was impractical so hospitals started putting those observation patients in regular hospital beds to avoid congestion in the emergency department. The unintended consequence was that this simply led to keeping patients in the hospital for longer than 24 hours, just so they could be classified as inpatients. This was especially a problem with outpatient procedures when many hospitals kept patients overnight for procedural recovery and then billed Medicare for both the outpatient procedure plus an inpatient hospital admission. Medicare countered in 2002 by agreeing to pay hospitals specifically for observation stays in order to provide an alternative to inpatient admission for those patients who were only mildly ill or who needed extra time to recover from an outpatient procedure. Initially, the only diagnoses that could be billed as observation stays were heart failure, chest pain, and asthma. In 2008, Medicare began paying for observation stays for all diagnoses.

In parallel with the development of reimbursement policies for observation stays, Medicare began policing hospital admissions by using the RAC (recovery audit contractors). RAC auditors would review the charts of patients who had been admitted to the hospital and if the auditor determined that there was not sufficient documentation in the chart to justify inpatient admission, Medicare would collect penalties from the hospital for overpayment. By 2014, the RAC program had collected $2.3 billion from hospital overpayments. One of the most common reasons by RAC auditors when denying an inpatient admission was that “…the patient could have safely and effectively been treated as an outpatient.” The auditors were often incentivized to deny admissions since more denials often led to bigger bonuses for the auditors. As a result, the denials were frequently capricious and arbitrary. 25 years ago, a coder for a commercial insurance company confided in me that her supervisors told her to randomly deny every 10th hospital admission because hospitals usually found that it was too expensive to contest denials. Fear of RAC audits resulted in physicians and hospitals increasing the use of observation status in order to avoid the risk of being penalized for an unnecessary inpatient admission.

A second strategy employed by Medicare was to create a list of surgical procedures that were classified as “Medicare Inpatient-Only Procedures”, meaning that those operations required an inpatient admission. Any surgical procedure not on the list was to be classified as an outpatient procedure unless there were extenuating circumstances that uniquely required a patient to be admitted to the hospital. Medicare pays much more if a surgery is performed as an inpatient (Medicare Part A) than if it is performed as an outpatient (Medicare Part B). Over time, the Medicare Inpatient-Only list shrank as more and more surgical procedures were reclassified as being appropriately done as outpatient and not requiring of hospital admission. Thus, knee and hip replacement surgeries were initially considered to require inpatient admission  but are now considered to be outpatient procedures.

Medicare also changed its definition of observation stays to be any condition that requires the patient to be in the hospital for “less than 2 midnights”. Although it could be argued that this gave hospitals longer than 24 hours to treat an observation status patient and send them home, the 2-midnight definition was somewhat arbitrary. For example, a patient presenting to the emergency department at 11:00 PM would spend 25 hours in the hospital before crossing 2 midnights but a patient presenting at 1:00 AM would spend 47 hours in the hospital before meeting the 2-midnight definition. However it is not how many midnights a patient actually spent in the hospital that Medicare auditors used when deciding whether to deny a hospital admission. Instead, it is whether the auditor believed that had the patient been managed appropriately, that patient could have been sent home before 2 midnights have elapsed. For example, if a patient came to the emergency department on Saturday evening with chest pain but the hospital could not do a cardiac stress test until Monday morning (2 midnights later), the auditor would still deny an inpatient admission since if the hospital offered 7-day a week stress tests, they could have sent the patient home on Sunday (after 1 midnight).

The observation vs. inpatient status bureaucracy

In order to avoid losing money from admission denials, hospitals started to go to great lengths to insure that the medical record contained sufficient documentation to justify every hospital admission. This was greatly facilitated by the development of electronic medical records that permitted realtime review of each patient’s hospital stay to ensure that the patient’s chart had appropriate documentation to meet Medicare’s requirements to bill that hospital stay as an inpatient admission. Some of the measures that hospitals now take in order to oversee their hospital admission practices include:

1. Physician training. When a patient is admitted to the hospital from the emergency room, the admitting physician has to enter an order directing that the patient is an “inpatient” or “observation” admission. This means that the physician has to estimate how long the patient will need to be in the hospital at the very beginning of the hospital stay and that estimated length of time dictates whether a patient will be inpatient or observation status. We now train residents in how to correctly estimate length of stay. For example, patients admitted for chest pain, syncope, and dehydration are generally observation status unless there are extenuating circumstances.
2. Nurse admission reviwers. Hospitals will generally hire a group of nurses or other healthcare workers to review every patient’s chart on a daily basis to determine if the medical record documentation justifies inpatient admission. These nurses get special training in the Medicare inpatient admission requirements. If the patient’s chart does not contain the proper documentation, the nurse’s first step is usually to contact the physician since frequently, all that is needed is an extra sentence or two in the medical record describing how sick the patient actually is. If that does not resolve the issue, the next step is to contact a physician admission advisor.
3. Physician admission advisors. Many times, the admitting physician is uncertain whether or not a patient’s illness justifies an inpatient admission order. Or the nurse reviewer’s determination is different from the physician’s admitting order for observation vs. inpatient status. For this reason, hospitals employ physicians whose main job is to arbitrate inpatient and observation orders. Often, this will be a private physician review company where the physician reviewers can access patient charts on a daily basis. Larger hospitals usually do this internally by hiring some of its own emergency medicine physicians or hospitalists to dedicate a certain number of hours per day reviewing admissions.
4. Hospital medical directors. When another layer of physician review of how to classify a patient’s admission is required, it then goes to the hospital medical director. Even for a small hospital, this is usually several charts to review every week. It takes about 15-20 minutes to do one of these reviews and then contact the admitting physicians to try to talk them into changing an admission order from inpatient to observation or vice-versa. Frequently, it requires the medical director to either enter an administrative note in the electronic medical record or to send the hospital utilization review office a letter so that the hospital has a documentation  paper trail in the event of a Medicare denial. More often, the medical director is sent charts for patients who had an inpatient admission order but were discharged before 2 midnights had elapsed. This is a red flag for Medicare auditors. We then have to provide written documentation for why the patient should be billed as an inpatient. Sometimes, this is easy, for example, when a patient dies from their condition in the hospital before 2 midnights elapse. But more frequently, it is because the admitting physician legitimately believed that the patient would need to be in the hospital for at least 2 midnights when that patient first arrived at the hospital. Several years ago, I attended a Medicare seminar and one of the medical administrators from Medicare told us that when this happens, we should use the phrase “The patient had an unexpectedly rapid recovery and was able to be discharged after less than 2 midnights”. Pretty much every time a patient in inpatient status was discharged before 2 midnights, one of our hospital medical directors would review that chart and send the billing office a letter using that phrase.
5. Pre-admission testing consultation. Patients who are planned to undergo a surgical procedure will frequently be sent for pre-operative medical consultation by an internist, family physician, or specially trained advance practice provider. Although designed to identify medical co-morbidities that could increase the risk of complications during surgery, these consultations are increasingly being used to determine whether or not a given patient’s surgery should be classified as an inpatient or an outpatient surgery. And most importantly, these consultations ensure that there is sufficient documentation in the electronic medical record to justify an inpatient procedure. For example, most knee replacement surgeries are now considered outpatient procedures. But if the chart documents that the patient has sleep apnea requiring CPAP, brittle diabetes, COPD requiring supplemental oxygen, and a history of vomiting after anesthesia, then that patient’s knee replacement can be done as an inpatient and the hospital gets paid considerably more. Surgeons are trained to be experts in surgery but are not trained in the nuances of co-morbid medical illnesses that they do not normally manage. Consequently, the surgeon’s outpatient notes often do not contain documentation of the significance of those medical co-morbidities and whether they are severe enough to warrant an inpatient admission for the surgery. That is why the pre-op medical consultation is so highly valued. If the surgeon admits the patient as an inpatient to do the surgery and then discharges that patient before 2 midnights pass, the chart once again gets sent to the medical director so that a letter containing the phrase “The patient had an unexpectedly rapid recovery and was able to be discharged after less than 2 midnights” is sent to the utilization review and billing offices for a documentation paper trail in the event of an admission denial by Medicare.
6. Utilization review staff. Every hospital employs a large number of personnel devoted solely to coding, billing, and utilization review. Before a bill goes out to Medicare or a commercial insurance company, these staff will do a final review to ensure that all of the proper documentation justifying an inpatient admission is present in the chart, including physician admission advisor notes and hospital medical director correspondence.There will also usually be personnel whose only job is to work denials when Medicare or an insurance company denies an inpatient admission. These personnel will then prepare and submit documentation contesting that denial in hopes of overturning the denial and getting paid for the hospital stay.
7. Attorneys and peer reviewers. When Medicare or an insurance company refuses to overturn an admission denial after the billing staff contest the denial, the next step is to turn to the legal system. This usually starts by paying an independent physician reviewer to opine whether the patient’s hospital stay should be classified as inpatient or observation. Next, hospital attorneys get involved by contacting Medicare attorneys about the denial. Sometimes, contested denials require adjudication, requiring more attorney time.
8. Medicare staff. On the other side of the bill, Medicare and commercial insurance companies employ large numbers of staff to review charts to decide whether they think that hospitalizations should be inpatient or outpatient.

So, for any given patient’s hospitalization, there is an army of Medicare nurse reviewers, physician reviewers, utilization review staff, and attorneys that face off against an army of the hospital’s  nurse reviewers, physician reviewers, utilization review staff, and attorneys. In the end, more money is sometimes spent battling an admission denial than is actually paid to the hospital for the admission. Hospitals are willing to occasionally spend the excessive cost to contest a denial since it sends Medicare or the insurance company a signal that the hospital will not go down easily for future admission denials. It is kind of like a basketball coach throwing a tantrum about a penalty call in order to try to dissuade the referee from calling future penalties.

The net result of all of this is that the United States has created an enormous bureaucracy devoted to preventing and contesting hospital admission denials.  So, why don’t hospitals just classify more patients as being in observation status and avoid all of the expense of justifying inpatient status? The reason is money.

The finances of inpatient vs. observation status

The genesis of observation status was to reduce Medicare costs by eliminating unnecessary hospital admissions. For any given diagnosis, hospitals get paid much less if a patient is designated to be in observation status than if that same patient is designated to be in inpatient status. Overall, the reimbursement is about 1/3 less for observation stays. In other words, Medicare can reduce overall Medicare costs by pressuring hospitals to put more patients in observation status. The same holds for commercial insurance companies.

Until several years ago, Medicare also paid doctors less if patients were in observation status. However, it became clear to Medicare that this was incentivizing doctors to preferentially use inpatient status rather than observation status. And since doctors are the ones who write the admission orders, Medicare realized that it could reduce inpatient admissions by removing the physician financial incentive to put patients in inpatient status. Because the physician professional fees are much, much less than the hospital fees, by paying physicians the same whether a patient was in observation or inpatient status, Medicare would pay a little more to the doctors but would pay a whole lot less to the hospitals.

But the biggest savings to Medicare in observation status is that it transfers much of the cost of the hospital stay from Medicare to individual patients. This is because Medicare considers observation stays as outpatient visits. Outpatient services are billed to Medicare Part B but inpatient services are billed to Medicare Part A. This is hugely important to patients because patients have much higher co-pays and deductibles for their Part B charges than their Part A charges.

• Medicare Part A covers inpatient admissions including a semi-private room, nursing care, medications, meals, and tests done during inpatient admissions. Part A also covers skilled nursing facility care, home health care, and hospice care. Medicare Part A is free to Americans over age 65 who have previously worked at least 10 years (or have a spouse who worked 10 years). There are no monthly premiums and no annual deductible. The amount that Medicare covers depends on the length of stay of the hospital admission:
  • $1,600 deductible per admission
  • Days 1-60: Part A covers in full
  • Days 61-90: patients are responsible for $400 per day co-pay, either by co-insurance or out of pocket if the patient lacks co-insurance
  • Days 91-lifetime reserve limit days: patients are responsible for $800 per day co-pay, either by co-insurance or out of pocket if the patient lacks co-insurance
  • After lifetime reserve limit days (total of 60 over the entire lifetime): Part A pays nothing and patients (or their co-insurance) are responsible for the entire costs
• Medicare Part B covers hospital outpatient charges and physician professional charges. Unlike Part A, there is a monthly premium for Part B of $165/month with higher premiums for those with higher incomes. There is an annual deductible amount of $226. Patients also have additional deductibles and co-pays that are either paid by secondary insurance or out of pocket if there is either no secondary insurance or the insurance policy has limited benefits:
  • 20% co-pay for all physician charges
  • 20% co-pay for hospital outpatient charges (hospital room, nursing care, meals)
  • 20% co-pay for x-rays and procedures
  • Part B does not cover medications so the patient (or their Part D insurance) is responsible for medication charges during observation stays

The net result of these differences is that the patient will have greater out of pocket expenses for an observation stay than for an inpatient admission. This is especially true for the 7.5% of Americans over age 65 who are enrolled in Medicare Part A only and do not enroll in Medicare Part B – these patients pay the entire cost of their observation stay out of pocket.

Another financial implication of observation vs. inpatient stays is in skilled nursing facility (SNF) coverage. Medicare Part A pays for 100% of SNF charges for up to 20 days (there is a $200/day co-pay for days 21-100). However, Medicare will only pay for SNF care if a person first has an inpatient hospital stay of at least 3 days. Medicare will not pay for SNF care after an observation stay. If a patient is in observation status (or has an inpatient stay of < 3 days) and gets transferred to a SNF, the patient is responsible for all of the SNF charges.

Why observation status is really, really dumb

CMS absolutely loves observation status. It reduces Medicare costs by paying the hospitals less for any given diagnosis and it also reduces Medicare costs by transferring much of the costs directly to the patient. This allows CMS officials to report to Congress that they are reducing federal spending on healthcare. Congressional representatives can then report to voters that they are reducing government spending. But there is no such thing as free healthcare… the cost of healthcare does not go away, it just gets transferred to the patient. The individual American ends up with more out of pocket costs for co-pays, medication charges, and SNF costs that would have otherwise been covered by Medicare Part A had their hospital stay been inpatient status as opposed to observation status. So, in the long run, the average American does not save any money by being in observation status.

Nationwide, 16% of all hospital stays are observation stays and 84% are inpatient stays. But this percentage can vary widely from hospital to hospital. A tertiary care referral hospital will usually have a lower percentage of observation stays since its patients tend to be sicker with more complex medical problems. On the other hand, a community hospital, especially one that cares for underserved patients, will have a higher percentage of observation stays, typically 25% or more. About the best a hospital can hope for is to break even on observation patients – most hospitals actually lose money on observation stays.

It’s bad enough that observation status does not really save money by transferring the cost of care to the individual patient rather than Medicare. The worst part about observation status is that it actually increases U.S. healthcare expenses. Not only do hospitals have to spend an enormous amount of money justifying inpatient admissions and working inpatient denials, but Medicare spends an enormous amount of money paying staff who police admissions in order to deny inpatient admission charges.

The net result is that observation status represents the epitome of U.S. healthcare dysfunction. It has led to an enormous bureaucracy devoted entirely to deciding whether Medicare or individual patients should pay for hospital care. And that bureaucracy is enormously expensive.

How can we fix this?

Americans pay way more for healthcare than people in any other country. In 2021, the average per capita healthcare cost in the U.S. was $12,914. It will undoubtedly be much higher in 2023. One of the contributors to this is too much of the healthcare costs go into trying to decide whether Medicare or the individual American will be responsible for paying for healthcare. Getting rid of the observation status designation can reduce U.S. per capita healthcare costs. Here is how to do it:

1. Create low-acuity DRGs. For conditions that are currently commonly managed by observation status (chest pain, syncope, dehydration, etc.), CMS can create inpatient DRGs that pay the hospital less, thus simulating the amount that CMS would have paid for an observation stay.
2. Require a modest Part A co-pay for hospitalization. The biggest argument against eliminating observation status is that Medicare costs would go up since co-pay costs currently paid by patients would go back to Medicare. The solution to this would be to require a small co-pay for hospitalization days 1-60. The amount to keep Medicare’s annual budget neutral could be as little as $10 or $20 per day.
3. Outpatient should mean outpatient. How in the world we ever got to the point that we define outpatient care as needing to be in the hospital for more than 2 midnights is baffling. Either a patient needs to be in the hospital or they don’t. I once had a admission denial for a patient in respiratory failure admitted from the ER to our ICU on a mechanical ventilator. The Medicare reviewer said that in his opinion, I should have been able to correct the respiratory failure, extubate the patient, and discharge her before 2 midnights passed. Really?
4. Eliminate the SNF 3-day rule. The whole idea behind the 3-day rule was that Medicare wanted to see if a patient really needed SNF care before it would pay for it. But the unintended consequence is that if one of our patients needs to go to a SNF, we have to figure out a way to admit them to the hospital for at least 3 days first. This means that we have to wait until they fall at home and break their hip or wait until they get septic from an infected decubitus ulcer if they are unable to get out of bed. For patients undergoing surgery, such as a knee replacement, we have to keep them in the hospital for 3 days after their surgery before they can go to a SNF for rehabilitation, even if they live alone and cannot walk after their operation.
5. Eliminate the observation industry. By eliminating observation status, hospitals would no longer have to spend money on nurse admission reviewers, physician admission advisors, and medical directors who laboriously review charts for inpatient justification. Hospitals could reduce their utilization management staff and Medicare could reduce its admission reviewer staff. Hospitals, patients, and Medicare would have less need for attorneys to contest admission denials. Yes, a lot of people would lose their jobs but the overall U.S. healthcare costs would drop.

Elimination of the observation status designation would make everyone happy. Patients would not be surprised by unexpectedly high hospital bills. Doctors would not have to spend time entering unnecessary documentation in their hospital notes to justify why a patient warrants an inpatient admission. Hospitals would not have to pay as much for staff to oversee admission determination. A fundamental concept of industrial engineering is that the more complex a process is, the more energy it takes to keep that process working. Observation status has created a terribly complex process. It is time to simplify the U.S. admission process.

January 22, 2023

Every year, the Centers for Medicare & Medicaid Services (CMS) penalizes hospitals with excessively high readmission rates. The monetary penalty for every U.S. hospital in 2023 was recently released by CMS. In theory, a higher penalty should indicate lower quality and vice-versa. However, the methodology used in calculating the penalties is complex and nuanced with the result that the readmission penalty may not be entirely reflective of a hospital’s overall quality of care.

Background

One of the provisions of the Affordable Care Act of 2010 (aka “Obamacare”) was to direct CMS to penalize hospitals with high rates of patients requiring readmission to a hospital within 30 days of an inpatient hospital stay. The first penalties were assessed in 2013; this is the 11th year of the penalty program. The calculations are only made for a few specific diagnoses and are based on data during 3 previous years. CMS calculates the amount of every hospital’s penalty in October or November each year and then that penalty is applied to the following year’s Medicare payments. The maximum penalty is 3%, meaning that for a hospital receiving the maximum penalty, CMS will reduce the amount that it pays that hospital for all of the Medicare services the hospital charges by 3% the next calendar year. Because many hospitals operate on razor-thin margins, even a relatively small reduction in what it gets paid by Medicare can be financially devastating. This is especially true for hospitals that operate on a July to June fiscal year, such as most academic medical centers, that can find themselves with an reduction in Medicare payments in the middle of the fiscal year. This can make it very difficult for these hospitals to accurately forecast their annual budgets since they do not know what they will get paid from Medicare services during the second half of their fiscal year.

You can look up every U.S. hospital’s readmission penalty for 2023 here. CMS uses a 4-step process to determine the amount of each hospital’s penalty.

The actual equation that CMS uses to calculate each hospital’s penalty is complex with the result that even most hospital administrators do not fully understand it:

Lurking behind the equation are a lot of subtleties that affect how the public should interpret the readmission penalty.

COVID affected the calculations

Normally, CMS looks at historical readmission data from between 2 and 5 years in the past. Thus, normally, CMS would base the 2023 readmission penalty on data from July 2018 to June 2021. This has always been a source of criticism since the penalty is based on what a hospital did 5 years ago rather than what it has done more recently in the past 2 years. Consequently, a hospital with poor readmission performance 5 years ago could have a large readmission penalty even if its readmission performance was stellar during the past 2 years.

The first 6 months of the COVID pandemic was a trying time for most hospitals. Many exceeded their maximum inpatient capacity. To care for inpatients, many had to recruit doctors and nurses who did not normally provide inpatient care. Because of this, CMS excluded all data from January 2020 to July 2020. As a result, rather than being based on 3 years of historical readmission data, this year’s penalty is based on 2.5 year of data.

A second effect of COVID was on the diagnoses used for penalty determination. Normally, CMS looks at readmission rates only for patients with one of six diagnoses: acute myocardial infarction, heart failure, pneumonia, COPD, coronary artery bypass surgery, and hip & knee replacement surgery. COVID disproportionately affected patients coded with pneumonia. As a result, CMS dropped pneumonia as one of the diagnoses used for readmission calculations. Therefore, the penalties were based on 5 diagnoses this year rather than 6.

A third effect of COVID on the readmission penalty calculation was that any patient with COVID as a primary or secondary admission diagnosis was eliminated from the hospital’s readmission calculation. Thus, a patient admitted with an acute myocardial infarction who was found to also have COVID on admission was excluded from the hospital’s data.

A fourth effect of COVID was on comorbidity determination. CMS adjusts every individual patient for that particular patient’s medical co-morbidities. So, for example, a patient with an admission for COPD who requires mechanical ventilation is expected to have a higher readmission rate than a COPD patient who does not require mechanical ventilation. Similarly, a patient undergoing knee replacement who is over age 65 and has diabetes is expected to have a higher readmission rate than a knee replacement patient who is younger than age 65 and not diabetic. This year, CMS added history of COVID within the past year as one of the co-morbidities used in the readmission calculation for all five of the readmission diagnoses. Thus, a patient admitted with COPD who had a COVID infection 8 months previously would be expected to have a higher 30-day readmission rate than a COPD patient who had never had COVID in the past.

Not all hospitals are included

CMS excludes about 40% of U.S. hospitals from the readmission penalty program. These include pediatric hospitals, Veterans Administration hospitals, psychiatric hospitals, rehabilitation hospitals, long-term acute care hospitals, and critical access hospitals. In addition, a hospital must have had more than 25 eligible patients for each of the 5 diagnoses. Thus, a hospital that only performed 24 coronary artery bypass surgeries during the 2.5 year period would not be subject for readmission penalties for CABG surgeries. CMS also excludes all hospitals in Maryland from readmission penalties because of an agreement between CMS and Maryland.

It is impossible for hospitals to monitor their readmission rates

Every autumn, hospitals await the CMS report on their readmission data with no advance knowledge of what the hospital’s readmission rate will be. These are sent to the hospital as a “Hospital Specific Report”. For most other quality metrics, hospitals can continuously monitor their performance internally. For example, any hospital should be able to determine on any given day what their mortality rate, C. difficile incidence, and emergency department wait times are. But readmission rates are unique. Medicare looks at admission to any hospital within 30 days of an inpatient discharge, not just the the hospital that the patient was originally admitted to. The original hospital will know if a patient gets admitted again to that hospital but has no way of knowing if a patient gets admitted to some other hospital. For example, if a patient is discharged from the Ohio State University Medical Center, OSU can track any readmissions to an OSU hospital. However, if that patient gets admitted to a non-OSU hospital in Cincinnati, OSU will not know about it. On the other hand, Medicare gets billed by every hospital that a patient is admitted to so Medicare will know whenever a patient is admitted to any hospital in the United States. This phenomenon has little impact on small, rural or community hospitals since a patient admitted to that hospital will likely return to that same hospital given that it is the only hospital in the region. But for tertiary care or referral hospitals, patients often live hundreds of miles away and readmissions are more likely to occur at their local community hospital rather than at the tertiary care hospital. Thus a tertiary care hospital will have no idea what its readmission rate performance is until CMS sends out the Hospital Specific Reports.

Hospitals normally institute a continuous quality improvement process for quality metrics. This requires real-time monitoring of that quality metric so that the hospital can continuously change its procedures and policies to make their quality outcomes better. This turns out to be difficult for reducing 30-day readmissions because the readmission data that Medicare gets is 2-5 years old. To make an analogy, imagine how difficult it would be for a coach to improve his or her basketball team if the coach did not know the outcome of each game until 5 years after it was played.

All hospitals are not treated the same

One of the main criticisms of the initial formula that CMS used in the first years of the readmission penalty was that hospitals that cared for a large number of poor people were disproportionately penalized compared to hospitals caring for a largely affluent patient population. Poor individuals are less likely to have insurance, less likely to be able to afford medications, less likely to have transportation for doctor office visits, and less likely to have a primary care physician. All of these factors contribute to higher hospital readmission rates but these are factors that are largely not under the hospital’s control. In response to this criticism, several years ago, CMS changed the methodology used in readmission calculation to adjust for the percentage of poor and underserved patients that each hospital cares for. The current methodology uses the percentage of “dual-proportion” patients. This is based on the percentage of Medicare patients that also have full Medicaid benefits. Medicaid is used as a marker for low-income patients. CMS divides U.S. hospitals into one of five quintiles based on the percentage of a hospital’s dual proportion patients. Quintile #1 includes hospitals with fewer than 14% of its Medicare patients having dual coverage with Medicaid. Quintile #5 includes hospitals with more than 31% of its Medicare patients having dual coverage with Medicaid.  The breakdown of hospitals based on their percentage of dual proportion is seen in the graph below:

All hospital stays are not treated the same

Medicare classifies each patient’s hospital stay as either an “inpatient” stay or an “observation” stay. The rules for how to classify any given patient are complicated but in general, a patient who is expected at the time of arrival to the hospital to be in the hospital for less than 2 midnights is considered to be in observation status. Overall in the U.S., about 84% of hospital stays are designated as inpatient and about 16% are designated as observation. The financial difference in the two types of hospital stays is very significant, both for the hospital and for the patient. An observation stay is considered an outpatient visit and is thus subject to Medicare Part B billing rather than Medicare Part A billing. This means that the patient in observation status is responsible for all medication charges and is responsible for a 20% co-pay of the cost of the hospital stay. CMS pays the hospital much less for an observation stay than for a regular inpatient stay. Observation stays are less expensive for Medicare because much of the healthcare costs are passed on to the patient.

Because observation stays are considered outpatient visits from a Medicare perspective, these hospital stays are not included in the hospital readmission calculation. For a readmission to count, both the initial hospital stay must be an inpatient stay and the second hospital stay within 30 days must also be an inpatient stay. This is also the same when CMS calculates a hospital’s mortality rate – only inpatient stays are included and deaths occurring when a patient is in observation status do not count against the hospital’s mortality rate.

Hospitals can “game the system” by putting certain patients in observation status in order to improve their readmission data and their mortality data. For example, take a patient who is admitted for a COPD exacerbation on February 1st. That patient then comes back to the hospital on February 20th after having a cardiopulmonary arrest following a drug overdose. The patient is intubated, receives mechanical ventilation, and placed in the ICU but it is clear that the patient has had severe brain and heart damage and is not expected to live beyond 24 hours. The person overseeing the hospital’s quality data will advise the ICU physician to admit the patient as an observation stay so that the hospital stay does not count as a readmission and so that the death does not count as an inpatient mortality. On the other hand, the person overseeing the hospital’s finances will advise the ICU physician to admit the patient as an inpatient stay so that the hospital gets paid more from Medicare. Whichever of the two hospital administrators is most persuasive (or most vocal) will usually win out. The result is that hospitals that more liberally designate patients as being in observation status can lower their CMS readmission penalty. The goal of Medicare auditors is to pay hospitals as little as possible so they will penalize hospitals who put patients in inpatient status who should really be in observation status. However, those auditors do not care if a hospital puts patients in observation status who should really be in inpatient status since it saves Medicare money.

This can also be an effective strategy for hospitals that have a low volume of patients with one of the five diagnoses used in the readmission calculation. For example, if a hospital has 24 heart failure inpatient admissions over a 3-year period, then putting the next heart failure patient in observation status ensures that the hospital will not have any heart failure readmission penalty since there would still be fewer than 25 heart failure inpatient admissions during that 3-year period. The cost to the hospital is that they might get paid $4,000 less by putting that patient in observation status rather in inpatient status. But by avoiding a 0.2% readmission penalty for all medicare charges for the next year, that hospital might avoid a total $80,000 penalty. That is a $76,000 net return on investment for putting that one patient in observation status rather than inpatient status!

For some hospitals, it is cheaper to pay the penalty

In the United States, the average hospital has 19.8% of revenue from Medicare, 13.1% from Medicaid, and 68.4% from private commercial insurance. The hospital with the highest annual net patient revenue in the U.S. is New York Presbyterian Hospital at $5.7 billion. However, the average U.S. hospital’s total annual patient revenue is much lower at about $200 million. Thus, the average hospital has annual Medicare revenue of about $40 million ($200 million x 19.8%). A maximum Medicare readmission penalty of 3% would therefore be about $1.2 million for that average hospital. Only 17 hospitals were fined the full 3% for 2023 and only 231 hospitals will pay more than 1% penalty. 25% of hospitals will pay no penalty at all. The average hospital penalty is 0.43%.

Given that the average hospital has $40 million in annual Medicare revenue and that the average hospital has a 0.43% Medicare penalty in 2023, that average hospital will have a $172,000 penalty. Implementing a readmission reduction program in a hospital can be very costly. It requires hiring data analysts to monitor readmissions, instituting costly discharge transition clinics, and increasing the percentage of patients in observation status. For many hospitals, the total cost to reduce readmissions sufficiently to avoid a CMS penalty can be considerably more than the expense of the penalty. In general, the larger the hospital and the higher the percentage of Medicare patients in a hospital’s payer mix, the more likely it will make financial sense for a hospital to devote a lot of money into a readmission reduction program. Furthermore, because the readmission penalty is based on the hospital’s performance between 2-5 years previously, it will take 5 years before money spent today on a readmission reduction program will fully affect the annual CMS penalty. And it is likely that CMS will continue to revise the readmission penalty formula so that the formula will look considerably different over the next 5 years.

How can the process be improved?

Medical care in the United States is more expensive than anywhere else in the world and it is essential for our economy that we reign in healthcare costs. Because hospitalizations are expensive, reducing unnecessary hospital admissions is central to controlling those healthcare costs. Readmissions to the hospital within 30 days of hospital discharge are frequently avoidable if processes are in place to ensure that patients get appropriate outpatient care. This includes filling medication prescriptions, keeping office appointments with medical providers after discharge, access to outpatient physical & occupational therapy, etc. Penalizing hospitals for excessive readmissions is one way to reduce costs by incentivizing hospitals to institute processes that reduce hospital readmissions. However, after eleven years of the CMS Hospital Readmissions Reduction Program, it is clear that the program can do better. Some specific improvements include:

1. Provide hospitals with real-time readmission data. This is probably the single most important change that CMS can make and it really should not be terribly difficult. Ideally, hospitals should know what their current readmission rates are every month so that the hospital can employ continuous improvement processes to reduce those readmissions. The current model of basing the penalty on a hospital’s readmission rates from 2-5 years in the past makes improving readmissions very difficult. Ideally, CMS should provide every hospital with its current rolling 3-year average readmission rate and this should be updated monthly.
2. Eliminate observation status hospital stays. Currently, hospitals spend an enormous amount of money to determine whether any given patient should be in observation status or inpatient status. Medicare loves observation status because CMS does not have to pay as much to hospitals for patients in observation status as opposed to inpatient status. Instead, those additional costs are passed on to the individual patient. So, the net overall cost to the country as a whole is the same, regardless of whether a patient is in observation or inpatient status. When the overhead expense of monitoring and policing observation stays is included, the overall cost of having observation status actually increases the country’s overall healthcare costs. When it comes to readmission rates, some hospitals game the system by preferentially putting readmitted patients in observation status instead of inpatient status. It is time to eliminate observation status and simply pay hospitals for patient stays, regardless of whether or not the patient’s hospital stay crosses two midnights.
3. Base the penalty on the overall readmission rate rather readmission rates for only 6 diagnoses. Every hospital is different. Not all hospitals perform coronary artery bypass graft surgery and not all hospitals perform knee & hip replacement surgery. Currently, hospitals focus their readmission rate reduction strategies on just the 6 conditions that CMS penalizes them on. Savvy hospitalists know that they can readmit patients who have had a stroke, diverticulitis, or a drug overdose every week without having to worry about any penalty. By using overall readmission rates (for all diagnoses), the quality process will be simpler for hospitals and will benefit all patients and not just those patients who have one of the 6 conditions that CMS currently uses in readmission penalty determination. However, CMS would need to determine a different method of risk-adjustment for comorbidity since the current method is by using specific comorbidities for each of the 6 eligible diagnoses.
4. Eliminate hospital exceptions. Currently, about 40% of U.S. hospitals are not subject to readmission penalties. This is understandable for pediatric hospitals (few, if any, Medicare patients) and Veterans Administration hospitals (funded by the VA and not by CMS). Psychiatric hospitals are excluded because they do not normally admit patients with the 6 conditions that CMS bases the readmission penalty on. Long-term acute care hospitals, rehabilitation hospitals, and critical access hospitals are also excluded. Ideally, CMS should use data for both Medicare and Medicaid patients since it can track readmissions for both groups. By focusing on total readmission rates rather than the 6 currently used diagnoses, many of the currently exempted hospitals can be included in the readmission reduction program. However, there may need to be different readmission rate benchmarks for psychiatric hospitals, long-term acute care hospitals, etc.

January 4, 2023

Prior to 1946, cancer was a surgical disease. If a cancer could not be completely removed during an operation, then it was incurable. But in 1946, two Yale University pharmacologists, Dr. Louis Goodman and Dr. Alfred Gilman, published their findings that by treating a patient dying of lymphoma with nitrogen mustard, the patient’s tumors shrank. The impetus for their experiment was the observation during World War I that soldiers who survived mustard gas attacks developed low white blood cell counts and were susceptible to infections. Goodman and Gilman hypothesized that the same chemical used in gas warfare could treat white blood cell malignancies. Thus, the era of cancer chemotherapy was born.

When I was a medical student 40 years ago, chemotherapy rarely cured anyone – it merely postponed dying from cancer by a few months. However, since then, the number of chemotherapy drugs has dramatically increased. Now, we also have immunotherapies, driver-directed therapies, and hormonal therapies to treat cancers. These treatments are much more effective than early chemotherapies and can not only offer the hope of long-term suppression of cancer but can also often cure cancer. And each of these treatments has its own set of short-term and long-term complications. Currently, there are 18.1 million cancer survivors in the United States and that number is expected to grow to 22.5 million over the next ten years. Of those cancer survivors, 16.3 million will live for more than 5 years. The good news is that we now have more people surviving cancer than ever before but the bad news is that we now have more people living with the side effects of cancer treatment than ever before.

Historically, oncologists were in the business of treating cancer. Once cancer was cured, the oncologist discharged the patient to the care of their primary care physician so that the oncologist could focus on their next patient with newly diagnosed cancer. But primary care physicians are largely untrained in managing the medical complications attendant to cancer treatment. As a result, we have an unfilled gap in medical care – patients in a no-man’s land of medical problems that their primary care physician is unfamiliar with and that their oncologist often places a lower priority on. This unfilled gap is cancer survivorship.

There are four major components to cancer survivorship care:

1. Surveillance. Cancer can recur and early detection of recurrence leads to early treatment of recurrence which in turn leads to the best long-term survival. However, the  surveillance monitoring guidelines frequently change and each type of cancer requires different radiographic or blood test monitoring.
2. Prevention. Cancer treatments can cause medical conditions by themselves but they can also make patients more susceptible to other medical problems. Preventive care can often avert these problems.
3. Treatment side effects. Every cancer therapy has its own set of side effects and if untreated, these side effects can often be debilitating.
4. Coordination of care. The management of cancer survivors can be complicated, often requiring multiple specialists simultaneously.

A cancer survivorship clinic should ideally incorporate all four of these components.

Surveillance

Cancer screening falls squarely in the purview of the primary care physician. Family physicians and general internists are accustomed to being responsible for ordering routine screening mammograms, pap smears, and colonoscopies. But once a patient is treated for a cancer, the guidelines for those tests change and primary care physicians are often uncertain what tests to order and how often to order them. Current guidelines include the following:

• Breast cancer. Survivors should have an office visit with history and physical examination every 3-6 months for the first three years, every 6-12 months for the next two years, and annually thereafter. A diagnostic mammogram should be performed annually for the first 3-5 years and then a screening mammogram performed annually thereafter. All women with breast cancer should be offered genetic testing and genetic counseling.
• Prostate cancer. Prostate cancer is unique among cancers because there is a wide spectrum of severity. Some prostate cancers grow so slowly that they do not require any treatment whereas others can rapidly metastasize and be fatal. The PSA (prostate-specific antigen) blood test is the mainstay of prostate cancer surveillance. For patients with localized disease, it should be tested every 6-12 months for the first 5 years and then annually thereafter. For patients with more extensive disease, it should be tested every 3-6 months.
• Colon cancer. For patients with stage I disease, a colonoscopy should be performed 1 year after surgery and then every 3 years thereafter. Patients with stage II or III disease should also have regular colonoscopy but should additionally have a history and physical examination plus a CEA blood test every 3-6 months as well as a CT scan of the chest/abdomen/pelvis every 6-12 months.
• Lung cancer. The chest CT is the mainstay of surveillance for lung cancer survivors and, along with a history & physical examination, should be performed every 6 months for the first two years and then annually thereafter. After five years, changing to a low-dose screening annual chest CT can be considered.
• Other cancers. There are different surveillance recommendations for melanoma, testicular cancer, lymphoma, thyroid cancer, and brain cancer. The surveillance for every cancer is unique and may require interval history and physical examinations, blood testing, and/or radiographic imaging.

Prevention

Preventive medicine recommendations are fairly similar for all cancer survivors. Healthy living strategies for one cancer are generally the same for other cancers. A healthy diet, weight loss if overweight, regular exercise, and appropriate vaccinations are appropriate for cancer survivors as well as for the general population. Because many cancer survivors may have lingering immunity impairment from chemotherapy, vaccinations are especially important.

Smoking cessation is an essential component of cancer survivorship. Approximately 12-15% of cancer survivors are current smokers. The patient cured of their lung cancer by lobectomy will be at increased risk of a second lung cancer if cigarette smoking continues. Smoking cessation can also help prevent laryngeal cancer, bladder cancer, pancreatic cancer, kidney cancer, esophageal cancer, and others,

As more and more cancers are found to have genetic contributions, genetic testing has become routine in oncology. Ideally, genetic testing be done after genetic counseling but with the widespread availability of gene testing, any provider can order these tests. At the least, referral to a genetic counselor should be made for all patients with abnormal cancer-related genes. Not only can this improve early diagnosis and prevention of other cancers in the patient but it can also improve cancer diagnosis and prevention in susceptible family members.

Treatment side effects

Each kind of cancer has its own specific treatment. And each treatment has its own specific side effects. As the number of cancer treatments has increased exponentially in the past decades, so have the number of treatment side effects. The result is that cancer survivorship has almost become a sub-specialty of its own. To a degree, this has been met by other subspecialties. For example, we now have “onco-nephrologists” who are kidney specialists who sub-specialize in managing the renal complications of cancer treatments. We have “onco-pulmonologists who sub-specialize in pulmonary complications of cancer treatments. Similarly with cardiology, infectious disease, and gastroenterology. But these sub-specialists are few in number and only located in large, tertiary care, academic medical centers. Moreover, their expertise is organ-specific and frequently, cancer survivors have complications affecting more than one organ or affect a part of the body that does not fall under the expertise of the nephrologist, pulmonologist, or cardiologist. Here are some of the most common medical conditions seen in cancer survivors:

• Osteoporosis. Many cancer treatments can increase the risk of osteoporosis including chemotherapy-induced premature menopause, use of aromatase inhibitors for breast cancer, use of corticosteroids, and use of anti-androgen prostate treatments. Baseline bone density tests at treatment onset followed by regular interval bone density tests should be offered to patients receiving these treatments. Early treatment of osteopenia and osteoporosis can prevent subsequent bone fragility fractures.
• Fatigue. Cancer survivors can have fatigue for many different reasons including side effects of radiation therapy, surgery, or medications. However, other common causes of fatigue should not be overlooked including thyroid dysfunction, sleep disorders, anemia, depression, and heart disease.
• Peripheral neuropathy. Many chemotherapy drugs can cause damage to the peripheral nerves. Some of the more common drugs include vincristine, cisplatin, oxaliplatin, bortezomib, and paclitaxel. These are usually “stocking-glove” distribution sensory neuropathies. However, drugs such as vincristine can cause intestinal autonomic neuropathy resulting in constipation. In addition, radiation therapy can result in peripheral neuropathy from injury to nerves within the radiation ports. Peripheral neuropathy management in cancer survivors may include physical therapy, medications (such as duloxetine), and injury prevention (such as daily foot inspections).
• Pain. Cancer-related pain is often managed by palliative medicine specialists but cancer survivors often have chronic pain, even if their cancer is cured. This often results in patients transferring care from the palliative medicine specialist to a pain management specialist. As with other causes of chronic pain, multimodality comprehensive pain management is considerably more effective than relying solely on pain medications such as opioids.
• Cardiotoxicity. Patients receiving radiation therapy to the chest region are susceptible to developing pericarditis, cardiomyopathy, coronary artery disease, and valvular heart disease. Anthracycline drugs (such as doxorubicin and daunorubicin), fluorouracil, and trastuzumab can cause heart failure and may require serial cardiac ultrasound testing. Many other chemotherapy drugs can also cause heart disease. The management of drug-induced heart failure is similar to the management of other causes of heart failure.
• Pulmonary toxicity. Chest radiation and many chemotherapy drugs can cause interstitial lung disease. Bleomycin is particularly notable because it can cause interstitial lung disease with respiratory failure years after treatment if a patient is inadvertently exposed to high oxygen concentrations, for example, while undergoing anesthesia. Driver-directed cancer treatments, such as tyrosine kinase inhibitors, can cause lung damage. Checkpoint inhibitors used as immunotherapy for cancer can also cause pneumonitis. In many cases, pulmonary toxicity can be minimized by early diagnosis and treatment with corticosteroids but patients may require bronchoscopy to exclude infection.
• Gastrointestinal toxicity. Diarrhea is common with chemotherapy. Pelvic radiation can additionally result in diarrhea or incontinence. Checkpoint inhibitors can cause hepatotoxicity and colitis. In some cases, corticosteroids can relieve symptoms but patients require microbiologic testing of the stool to first exclude infection.
• Renal toxicity. The kidney can suffer many kinds of injury from cancer treatment. Chemotherapies, checkpoint inhibitors, and driver-directed therapies can all directly cause acute kidney injury. Electrolyte disorders of potassium, sodium, phosphorus, and calcium can result from both cancer treatments or from the underlying cancer. In addition, paraneoplastic glomerular disorders, glomerular injury from tumor lysis syndrome, and glomerular injury from monoclonal gammopathies can occur.
• Sexual health needs. Sexual dysfunction can result from post-surgical changes, chemotherapy, hormonal therapy, radiation therapy, and  premature menopause. Many cancer survivors are hesitant to initiate discussion about sexual dysfunction so it is important that providers create an environment where patients are comfortable discussing sexual health.
• Fear of recurrence. About half of cancer survivors have mild to moderate fear or worry that their cancer will come back and 7% of survivors have these fears to a severe degree. This carcinophobia can be emotionally consuming. In mild cases, support groups can be helpful. More severe cases benefit by cognitive behavioral therapy. Other psychosocial issues such as depression, anxiety, and post-traumatic stress disorder are also common.
• Financial insecurity. It is expensive to have cancer. Frequent office visits, costly medications, costly tests, and unexpected surgeries can be financially devastating, even for those patients with health insurance. In addition, reduced income for both patients and caregivers results from necessary time off work. Hospital financial counselors and social service staff can often be helpful.

Coordination of care

With care simultaneously being provided by physicians from many different specialities, cancer survivors often find themselves asking: “Who is in charge of my medical care?”, especially after cancer treatment has finished. Coordination between the patient’s medical oncologist, surgeon, radiation oncologist, internal medicine specialists, social worker, psychologist, genetic counselor, and neurologist can be challenging. Although primary care physicians are adept at coordination of care for patients with chronic disease, the unique multidisciplinary care needs of cancer survivors can often be overwhelming for the primary care office. Coordination of care can be the responsibility of the medical oncologist in some situations, the primary care physician in some situations, or patient navigators in others. The important thing is that every cancer survivor knows who is coordinating their care and that all of the various providers involved in that patient’s care also know who coordinating care. This is particularly essential to ensure that recommended tests and medication changes actually get done.

Cancer survivorship clinics

So, does your hospital need a cancer survivorship clinic? And if so, who should run it? In some hospitals, cancer survivorship is the purview of the medical oncologist. But the medical needs of cancer survivors can last for years or decades after the cancer is cured and many oncologists simply do not have the bandwidth to meed these needs for dozens or hundreds of cancer survivors while still meeting the needs of patients being actively treated for their cancer. Some primary are providers are able to assume the oversight and coordination of care for cancer survivors. But cancer survivorship care has become fairly specialized with the result that many primary care providers lack the training or experience in the unique chronic care of the cancer survivor.

A solution in some communities is the dedicated cancer survivorship clinic. This could be staffed by an oncologist, a general internist with a special interest in cancer survivorship, a physical medicine specialist, or even an advanced practice provider with training in the care of cancer survivors. Although large cancer specialty hospitals have dedicated survivorship clinics, this is an unmet medical need in most community hospitals.

It is time that medical directors and hospital administrators at community hospitals take responsibility for creating cancer survivorship clinics. One out of every 17 Americans is a cancer survivor and these cancer survivors are often hiding in plain sight in every small community in the United States. A community does not need to have a tertiary care oncology practice in order to support a cancer survivorship clinic. Indeed, such a clinic can be overseen by a general internist or a family medicine physician.

As cancer treatments continue to advance, so do the needs of cancer survivors. It is time that we bring survivorship clinics to our community hospitals.

December 27, 2022

A reader recently emailed me to ask: “How do you define a hospitalist FTE?” It turns out that it is a great question with a very nuanced answer. Twenty years ago, an FTE was whatever a physician wanted it to be. Physician earnings were directly tied to physician billing and so a physician would work as much as they wanted in order to generate the income that they wanted. But over the past 2 decades, revenue from physician professional services has not changed appreciably – in 2002, Medicare reimbursed physicians at $36.20 per RVU; in 2022, an RVU was worth $34.61.

To put that in perspective, $1.00 in 2002 is worth $1.66 in 2022 whereas an RVU is now worth $1.59 less than it was in 2002! In order to keep physician incomes constant, hospitals have had to increasingly subsidize physicians. As a result, most physicians are now hospital-employed, rather than independent practitioners. This is especially true for hospitalists who rarely, if ever, are able to support their full salary on billings alone. In the past, the physicians defined what working full-time constitutes but today, it is the hospitals that define what working full-time means for a hospitalist.

Hospitals typically subsidize hospitalist groups based on the number of FTEs (full-time equivalents) that are required in order to cover the hospital’s inpatients. But defining exactly what an FTE is can be complicated and often a source of disagreement between the hospital and the hospitalist group. There are a number of equally valid ways of defining “full-time” and no one definition works best in every hospital. There are several steps to determine the best model in your hospital.

Step 1: Determine the number of patients per hospitalist per day

The number of patients each hospitalist should see per day will vary considerably from hospital to hospital and from nursing unit to nursing unit. There are 19 factors to consider when determining this number as outlined in a previous post:

• • • Case mix index
    • Residents versus no residents
    • Admitting service versus consultative service
    • Presence or absence of advance practice providers
    • ICU versus general ward patients
    • Day shift versus night shift
    • Observation status versus regular inpatient status
    • Ease of documentation
    • Shared electronic medical record with primary care physicians
    • Non-clinical duties
    • Shift duration (hours)
    • Hospitalist experience
    • Patient geographical location within the hospital
    • Average length of stay
    • Inpatient census variability
    • RVU productivity
    • Quality of case management
    • Local hospitalist employment market
    • Patient demographics

There has to be flexibility, however, and rigid adherence to a given number of patients is a recipe for dissatisfaction on both the part of the hospital and the part of the hospitalist. If the hospital inpatient census falls, then the hospital will be unhappy that each on-duty hospitalist is not seeing enough patients. On the other hand, if the inpatient census surges, then the hospitalists will be unhappy since they have to see more patients than they agreed on in their contracts. Many hospitals will have a “risk-call” hospitalist each day who is on standby to come in to work if needed when the inpatient census is higher than normal.

Step 2: Determine how the hospitalists will be scheduled

Early in the hospitalist era, scheduling was simple: a shift was 12 hours long and there were two shifts – a day shift and a night shift. Hospitalist schedules have gotten a lot more complex in recent years as outlined in a previous post. Now, hospitalists often have 8-hour short day shifts and evening swing shifts to cover ER admissions in the early evenings. As a result, scheduling hospitalists has become much more complex. Here are some of the scheduling models:

The 12-hour shift model. This was the original hospitalist scheduling model and typically will have two 12-hour shifts per day, a day shift and a night shift. The day shift is typically 6:00 AM to 6:00 PM or 7:00 AM to 7:00 PM. The night shift starts when the day shift is over. Day shifts and night shifts are treated equally but since night shifts are considered less desirable by most hospitalists, there needs to be a “shift differential” to provide extra payment for covering night shifts. Many hospitals will also provide additional pay for hospitalists who work on holidays. Because most patient care (work rounds, interdisciplinary rounds, daily charting, discharges, family meetings, etc.) occurs during the day shift, hospitals will typically have 1 night shift hospitalist for every 3 -4 day shift hospitalists. High acuity patient care areas, such as the intensive care unit, may require 1 night shift hospitalist for every 1 day shift hospitalist.

The long-shift, short-shift model. In this model, one or more hospitalists works the entire 12-hour day shift but other hospitalists leave earlier in the day, after their work is done. The short-shift hospitalists check out to one of the long-shift hospitalists when leaving. The long-shift hospitalist is then responsible for any admissions that come in later in the day. Some hospitalist groups will have the short-shift hospitalists continue to take phone calls from nurses, the lab, and consultants after they leave the hospital; other hospitalist groups will have the long-shift hospitalists cover calls. Some hospitals will have a specific check-out time for the short-shift hospitalists, for example, 3:00 PM. Other hospitals will have the short-shift hospitalists check out whenever their work is completed, whether that be 1:00 PM or 5:00 PM. An advantage of this model is that it avoids having a lot of hospitalists sitting around doing nothing in the late afternoon, after all of their work is done. In addition, this model is very attractive to hospitalists with children, since they can be home when the kids get out of school.

The swing-shift model. In most hospitals, the peak in admissions from the emergency department occurs between 3:00 PM and midnight. After midnight, the admissions slow down, the inpatients go to sleep, and the hospitalist workload drops. To optimize patient care coverage, some hospitals will create a “swing-shift” to cover the surge in admissions during the evening. Every hospital’s pattern of ER admission is different so swing-shifts could be from 3:00 to midnight, 5:00 to 10:00, etc.

The comprehensive services model. In many hospitals, the hospitalists do more than just serve as the attending physician for inpatients. For example, they may perform medical pre-operative consultation in an outpatient pre-admission testing clinic. They may provide medical consultation for surgical inpatients. They may have a designated “triage attending” to serve as a liaison between the hospitalist services and the emergency department or the outside referring hospitals. Or they may provide on-site supervision of infusion centers. In these situations (except for triage attending), the duration of a shift is determined by whenever the work is done, rather than by a specific time of day or number of hours. In general, these other services require fewer than 12 hours per day. These types of services are often attractive to hospitalists with young children since they are generally able to get home earlier than they would with a traditional 12-hour inpatient hospitalist shift.

Step 3: Determine how a 100% FTE will be defined

Once the hospital has determined how many inpatients a rounding hospitalist should cover and how the hospitalists are to be scheduled, the next step is to determine what will constitute a 100% FTE hospitalist. There are several ways of defining an FTE.

The shifts per month model. This works best when all of the hospitalists work 12-hour shifts. A full-time hospitalist is typically defined as 15 or 16 shifts per month (180 – 192 shifts per year). It generally takes about a half hour to check out at the end of every shift with the result that a 12-hour shift is really a 12.5-hour shift. This works out to about 43 – 46 hours per week on average. Some hospitals will grant additional time off for vacations and CME with the result that full-time may be fewer shifts per year, for example, 170 shifts.

The hours per month model. This model works when there there are different hospitalist shifts of varying durations. In this model, a hospitalist may be scheduled for shifts of a variety of durations up to some pre-agreed upon number of total hours per month. This results in a great deal of scheduling complexity and often requires considerable effort by the scheduler to ensure equity among the hospitalists. Many jobs define an FTE as 40 hours per week, however, most physicians work more than that. Although physician time surveys vary, most find that physicians average closer to 50 hours per week. If we extrapolate from the 15 – 16 twelve hour shifts per month model that results in 43 – 46 hours per week, then this would equate to 2,236 – 2,392 hours per year. Rigid adherence to a specific number of hours per year is difficult. Unlike other hospital employees, hospitalists do not punch in and out on a time clock. There are always some days when a hospitalist needs to stay in the hospital past the end of their shift to finish charting, complete the H&P on a late admission, or provide care for a critically ill patient. In addition, some hospitalists may check-out early to one of their peers once they complete their daily work.

The number of billed wRVUs model. If you look in the annual MGMA physician salary survey, you can find the mean, median, 25th percentile, 75th percentile, and 90th percentile of work RVUs  produced by physicians in every specialty. Using wRVUs as a general guide of FTE productivity can be useful for many specialties but as discussed in a previous post, it is inadvisable to pay individual hospitalists by the wRVU. Nor is it advisable to use wRVU targets to define an FTE. If wRUVs are used to benchmark hospitalist productivity, the RVU targets need to be for the entire hospitalist group and not for individual hospitalists. There is too much variation in RVU production intrinsic to different types of hospitalist shifts – fewer RVUs with night shifts, more with ICU shifts, and none for triage attending shifts. In other words, rather than requiring each of your 10 hospitalists to produce 4,300 wRVUs per year, instead require the entire group of hospitalists to produce 43,000 wRVUs per year.

The traditional workweek model. Most outpatient physicians define full-time as traditional office hours, working Monday through Friday, 8:00 – 5:00. With physician offices often closed on weekends, evenings, and holidays, this works fairly well for outpatient medicine. This model is harder to apply to hospitalists because illnesses requiring inpatient care are just as likely to occur on weekends and holidays as they are on weekdays. Therefore, hospitalists need to cover every day of the year. Nevertheless, some hospitals will have a core group of hospitalists who cover Monday through Friday day shifts. Part-time hospitalists or moonlighters cover weekends. And nights are either covered by home call, by inpatient advance practice providers, or by nocturnists. This model can sometimes work in smaller hospitals that care for lower acuity patients but is impractical in larger hospitals. The weekday hospitalists typically take care of their daily rounds and any admissions. They then leave the hospital in the afternoon, after their work is done. A typical full-time hospitalist in this model might work 46 weeks with 4 weeks of vacation, a week of CME, and a week for holidays. This equates to 230 working days per year.

The academic hospitalist model. In many teaching hospitals, the attending physicians on medical inpatient services are hospitalists who oversee care provided by internal medicine, family medicine, or pediatric residents. In this situation, the residents typically cover a given inpatient service for 4-week blocks. The attending hospitalist typically covers the teaching service daily for 2 weeks, although at some hospitals, the hospitalist covers the service for shorter (1 week) or longer (4 week) blocks. Because residents are in the hospital to perform H&Ps and care for any acute medical problems, the hospitalist can often leave the hospital after rounding with the resident and completing charting. This results in the hospitalist typically being in the hospital for 5 – 8 hours per day. The attending hospitalists generally provide back-up coverage to the residents at night by home call, either individually for their particular inpatient service or on a group rotational night call basis. Unlike the traditional workweek model, the academic hospitalist model generally requires both weekday and weekend coverage in order to ensure continuity of patient care and continuity of resident education. Thus, full time is considered less than 46 weeks and may be anywhere from 6 months (182 days per year) to 8 months (243 days per year) of service time.

Step 4: Determine how a part-time FTE will be defined

Once there is agreement between the hospital and the hospitalists on what will constitute a full-time FTE, it then becomes easier to assign a percent effort to part-time physicians and to determine how those part-time hospitalists will be paid.

For compensation of hospitalists who work less than 100% FTE, the easy answer is to make their base pay the same percent as their FTE. However, that can pose more cost to the employer since there are certain employer-paid expenses that are fixed, regardless of whether a hospitalist is 100% or 70% FTE. For example, the employer’s portion of health insurance premiums and life insurance premiums is the same for part-time employees as it is for full-time employees. Similarly, the employer’s cost of recruitment and credentialing is the same whether the hospitalist is 100% or 70%. In other words, it costs the employer more to have 2 hospitalists who each work 50% FTE than to have 1 hospitalist who works 100% FTE. Most hospitals are willing to cover those higher costs in order to keep high-performing hospitalists who wants to work part-time, particularly if there is a reasonable chance that the hospitalist will eventually return to 100% FTE in the future. For example, an experienced hospitalist who is a parent who wants to cut back to 70% for a few years until his/her child is older.

One size does not fit all

From the above discussion, it is clear that no one single model is best for all hospitals. Each hospital (and each hospitalist group) must examine its own unique inpatient service coverage needs in order to select the definition of “full-time” that fits best. From the hospital standpoint, it is important to be flexible and work with the hospitalists to be sure that they are happy with the model. From the hospitalist standpoint, it is important to ensure that a model that optimizes their work-life balance does not interfere with optimal patient care.

Because hospital censuses ebb and flow from year to year and because new hospitalists are hired from year to year, it is important that every hospital re-examines how full-time is defined periodically to ensure that the agreed upon model best fits the dynamic nature of inpatient medicine.

December 10, 2022

It has now been 3 years since the SARS-CoV-2 virus first infected humans in Wuhong, China in December 2019. By now, most Americans have either had a COVID-19 infection or have been vaccinated against COVID. So, what type of mask should we be wearing in the hospital and in public places?

Our two most powerful weapons against COVID are vaccination and mask-wearing but mandates for both have been been unpopular in the United States. Since the peak of the pandemic, most mask mandates in public areas have been relaxed. However, mask mandates are still in place in many hospitals. Furthermore, as of the writing of this post, there are 25,380 patients with COVID infection currently admitted in U.S. hospitals. Consequently, healthcare workers continue to have regular exposure to infected persons. So, what kind of mask should our healthcare workers wear?

Mask-wearing is not new. Surgeons and other operating room personnel have worn masks during surgeries for more than a century. However, the purpose of wearing masks in the OR is to prevent the surgeon’s respiratory secretions from infecting the patient’s incision and not to prevent the patient’s incision from infecting the surgeon. A simple surgical mask is very effective in catching respiratory droplets if the surgeon sneezes, coughs, or talks during an operation.

Before COVID, there were situations when healthcare workers did wear masks to prevent getting infected by patients, for example, when caring for patients infected with influenza (where transmission is usually by respiratory secretion droplets). A regular surgical mask is effective in preventing infection from respiratory secretion droplets but for smaller particles, an N95 mask is necessary. For 35 years, I wore N95 masks whenever I was caring for patients infected with tuberculosis or when doing bronchoscopy on patients suspected of having TB. It only takes inhaling  one tuberculosis bacteria to become infected with TB. A respiratory secretion droplet is about 5-10 μm in size whereas a tuberculosis bacteria is about 2 μm in size. A regular surgical mask will usually stop the droplets but will not stop a TB bacteria, whereas an N95 mask will.

For an N95 mask to be effective, it must have a tight seal to the face so that air cannot get between the edges of the mask and the skin. Everyone’s face is shaped a little differently and not all brands of N95 masks fit all faces equally well. Healthcare workers are normally required to be “fit-tested” to determine which N95 mask provides an acceptable seal against the face. Passing the fit test meant that all of the inhaled air went through the mask material and did not leak between the mask and the skin. At our hospital, we required healthcare workers who worked with patients with suspected tuberculosis to be fit tested every year. A number of years ago, the Occupational Safety and Health Administration (OSHA) put out a requirement stating “The employer shall not permit respirators with tight-fitting facepieces to be worn by employees who have facial hair that comes between the sealing surface of the facepiece and the face…“. In other words, men with beards were not supposed to use N95 masks.

Like influenza, the COVID virus is usually transmitted by respiratory secretion droplets. So, in theory, a surgical mask should be sufficient. However, there are certain situations when an infected patient’s respiratory secretion droplets can be broken down into smaller particles, in which case, a surgical mask could be insufficient and an N95 mask may be more effective. Such situations include performing endotracheal intubation and bronchoscopy. Having had a beard for 40 years, I had repeatedly passed my annual N95 fit tests despite having a beard but when COVID hit, I shaved it in order to be in compliance.

We now have several studies performed over the past 3 years of the pandemic to give us better guidance of what type of mask is most effective in preventing healthcare workers from becoming infected. Unfortunately, each of these studies have potential limitations and the studies have given mixed results.

A word about KN95 masks. An N95 mask is a NIOSH-approved mask that filters out at least 95% of particles that are 0.3 micons in size. In reality, a well-fitting N95 mask actually filters out 99.8% of particles that are 0.1 micons in size, which is also the size of a COVID virus particle. A KN95 mask is a mask approved by the Chinese government (and not NIOSH). A study of KN95 masks found that 70% of them did not meet the NIOSH standard for effectiveness. For hospital purposes, a KN95 mask can be considered as effective as a surgical mask but not as effective as an N95 mask

One of the earliest studies comparing surgical to N95 masks was published in JAMA in 2009 and randomized 446 nurses caring for patients with acute febrile respiratory illnesses to wear either surgical masks or N95 masks during patient care. An equal percentage of the nurses were diagnosed with influenza during the study and the conclusion was that the type of mask worn did not make a difference. Another study published 10 years later in JAMA in 2019 also found that among 1,993 healthcare workers randomized to wearing surgical or N95 masks, there was no difference in the incidence of influenza or other respiratory infections.

There have been several studies comparing masks to prevent COVID infection. A 2021 study examining the effectiveness of N95 versus surgical masks based on analysis of droplet size characteristics concluded that a surgical mask was theoretically sufficient to prevent COVID infection in low-virus environments but N95 masks would be theoretically more effective in virus-rich environments. A 2021 study comparing the fit of cloth, surgical, KN95, and N95 masks found that N95 masks had better fit factor scores than the other masks and that KN95 masks had similar fit factor scores as surgical masks. The study also concluded that fit is critical to the level of protection offered by masks. A 2021 meta-analysis of 8 studies involving N95 versus surgical masks found that N95 masks were more effective than surgical masks in preventing healthcare workers from becoming infected with a variety of respiratory viruses, including COVID. A 2022 study of 3,259 healthcare workers who were randomly assigned to use filtering facepiece class 2 masks (analogous to N95 masks) versus surgical masks found no overall effect on the incidence of COVID infection; however, those healthcare workers with > 20 contacts with COVID patients did have fewer COVID infections if they were wearing the filtering face piece class 2 masks. A 2022 MMWR report involved a retrospective review of 1,528 COVID-infected persons and 1,511 case controls and found that people who reported wearing N95 masks in public were less likely to become infected than those who wore surgical masks in public places. However, a major limitation of this study is presumably those wearing N95 masks were also more likely to take other precautions to avoid COVID than those who chose to wear a regular surgical mask.

The most recent study was published this week in Annals of Internal Medicine. 1,009 healthcare workers in Canada, Israel, Egypt, and Pakistan were randomized to use N95 or surgical masks during patient care for 10 weeks. Overall, there was no difference in the incidence of COVID infection between the two groups but it is notable that most of the subjects (71%) were in Pakistan or Egypt with only 29% in Canada or Israel. In Pakistan and Egypt, 82% of subjects had previously been infected by COVID before the study whereas in Canada and Israel, only 3% of subjects had a previous COVID infection. There was a trend for N95 masks to be more effective than surgical masks in Canada and Israel; however, because of the low number of subjects in those countries, the results did not reach statistical significance. Because past COVID infection confers some immunity to reinfection, it is possible that the failure of N95 masks to have superior protection over surgical masks was due to the very high percentage of healthcare workers with immunity from previous infection in Pakistan and Egypt.

The bottom line: What mask should you wear?

Medicine is a very dynamic science and recommendations change as new clinical studies are published. As a result, today’s medical dogma is tomorrow’s medical malpractice. Based on the available information a few general recommendations can be made:

1. In hospital areas where the prevalence of COVID infection is low, wearing regular surgical masks is sufficient to prevent healthcare workers from becoming infected. This means parts of the hospital that provide care for non-COVID patients, such as general medical and surgical floors, cafeterias, public areas, and offices.
2. In hospital areas where there is likely to be a high number of viral particles in the air breathed by a healthcare worker, N95 masks are preferable. This would include areas where the viruses are likely to be aerosolized, such as during intubation or bronchoscopy, particularly in rooms with stagnant airflow, such as those lacking sufficient number of air exchanges per hour. In locations where the virus is in respiratory droplets (as opposed to being aerosolized), surgical masks may be sufficient. Because several studies have shown that the viral loads are similar among symptomatic versus asymptomatic patients with COVID infection, the decision of whether to wear an N95 mask should not be based on the severity of the patient’s infection.
3. Wearing surgical masks by healthcare workers is sufficient to prevent workers with asymptomatic COVID infection from infecting patients. This has been a concern for the care of patients at high risk of severe COVID infection, such as those patients who are immunocompromised, obese, diabetic, or elderly. These patient are at particular risk if in contact with a maskless infected healthcare worker. Because daily testing of all healthcare workers caring for these patients is impractical, preventative mask-wearing is prudent.
4. Because viral loads are just as high in asymptomatic patients as in symptomatic patients, hospital visitors should wear surgical masks inside of the hospital as long as the prevalence of COVID infection in the community remains substantial or high. What constitutes “high” is a matter of opinion but the CDC defines “low” as up to 10 cases/100,000 population, “moderate” as between 10-50/100,000, “substantial” as 50-100/100,000 population, and “high” as greater than 100/100,000 population. Currently, the U.S. as a whole has a case rate of 91/100,000 population. However, hospitals are not like the country as a whole – currently 5.6% of all Ohio inpatients have COVID infections for an inpatient rate of 5,600/100,000. Because inpatients with COVID infection are more likely to have family and friends who are also infected (from home and workplace transmission), the probability of encountering a hospital visitor with a COVID infection is a lot higher than encountering a waiter in a restaurant with a COVID infection.
5. Healthcare workers who prefer to wear an N95 mask (but are not required) should be permitted to do so. Because of non-statistically significant trends in some studies suggesting a slight benefit of N95 over surgical masks, those healthcare workers who perceive greater safety with the N95 masks should be allowed to wear them if desired and if supplies permit.
6. Healthcare workers who are required to wear N95 masks should be fit-tested annually. Because ill-fitting N95 masks lose most of their protective benefit, there needs to be assurance that the N95 mask that the worker wears actually does what it has the potential to do. It is reasonable for hospitals to also require fit-testing for those employees who want to wear an N95 mask but are not required to wear an N95 mask, especially if the hospital is paying for the masks.
7. KN95 masks are an acceptable alternative to wearing a surgical mask but should not be used in clinical situations when N95 masks are required. Given the reduced effectiveness of KN95 masks compared to N95 masks, a KN95 mask cannot be viewed as equivalent to an N95 mask. It may, however, be better than a surgical mask.

What about outside of the hospital? At the grocery store or airport, I generally see only 5-10% of people wearing masks. At athletic events, that percentage is even lower. The risk of becoming infected in a public place is dependent on how likely you are to come in contact with someone’s exhaled viruses. That in turn depends on the prevalence of COVID infection in the community, the number of people in an enclosed space, the size of the enclosed space, the duration of time that you are in that space, the amount of singing or shouting in the space, and the ventilation of the space. Based on viral load studies, it does not matter whether an infected person in the space is symptomatic or asymptomatic. In situations when those variables indicate a higher risk of COVID, wearing a surgical mask is prudent. Those people who feel more secure wearing a KN95 mask or an N95 mask should do so.

As for me, N95 masks kept me from getting TB despite caring for patients with tuberculosis for decades. They also kept me from getting COVID infection despite intubating and performing bronchoscopy on COVID patients in our intensive care unit. My fit-tested N95 mask is sort of like a security blanket for me. So, I think I’ll keep wearing it in public areas for now. When the case rate gets below 50/100,000 population, I’ll reconsider. And when the case rate gets below 10/100,000, I’ll feel safe without any kind of mask in public.

December 2, 2022