The Right Observation Rate – I Have the Numbers, Sort of…

Dr. Ronald HirschAugust 16, 2023

If you have heard me speak or have read my articles you know that one of the questions most asked is “what is the target/benchmark/right observation rate?”


It was seven years ago, in June 2016, that I published my article in Compliance Today, describing for the first time “Hirsch’s Law” to determine a hospital’s correct observation rate for Medicare patients. For those unfamiliar, Hirsch’s Law states that if every patient requiring the use of a hospital bed is reviewed by case management for proper admission status, with the use of a secondary physician review as appropriate, and every patient is placed in the right status, and observation services are only ordered for the patients where observation services are appropriate per regulations, and every patient goes home as soon as their need for hospital care has finished, and every patient who requires a second midnight stay is admitted as an inpatient, then your observation rate is at your benchmark.


When written, Hirsch’s Law only applied to traditional Medicare patients as Medicare Advantage (MA) plans, along with all the other payer types, made up their own arbitrary, ever-changing rules on the use of observation. That will change in 2024 when the MA plans will be required to follow 42 CFR 412.3 and can no longer require patients to linger as outpatient receiving observation services for days on end.


Despite my repeated pleas to stop looking for that elusive target observation rate, hospital administrators still compare observation rates and urge their staff to strive for a lower rate. To that end, I sought to not define a benchmark rate but to determine the actual observation rate for almost every hospital in the country. That way I could state “There is no benchmark rate but here is the national average rate,” hoping that would either appease, anger, or delight those who ask, depending on how that average rate compares to their hospital’s rate.


But obtaining this data was no easy task.


Read the full article here.

Author Bio: Dr. Ronald Hirsch is Vice President of the Regulations and Education Group at R1 RCM Inc. Dr. Hirsch was a general internist and HIV specialist and practiced at Signature Medical Associates, a multispecialty practice located in Elgin, IL. He was Medical Director of Case Management at Sherman Hospital in Elgin, IL from 2006 to 2012, where he was Chairman of the Medical Records Committee from 1995 to 2012, and also served on the Medical Executive Committee. Dr. Hirsch is certified in Health Care Quality and Management by the American Board of Quality Assurance and Utilization Review Physicians, certified in Revenue Integrity by the National Association of Healthcare Revenue Integrity, and on the Advisory Board of the American College of Physician Advisors. He is on the editorial board of He is the co-author of The Hospital Guide to Contemporary Utilization Review, with the third edition published in 2021.

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