The best practice observation management model requires a dedicated observation unit located near the ED. This closed unit is managed by a healthcare team, physicians, and nurses who are seasoned in observation criteria and following a standardized protocol. While this model tends to be the most expensive to maintain, it consistently delivers the best patient outcomes with the lowest length of stay, reduces inpatient admissions, and saves providers time.

In addition to considering general patient criteria, such as patient condition and expected discharge date, hospitals should create specific inclusion and exclusion criteria based on the primary diagnosis for the most common conditions for the hospital. These criteria will help determine what services are medically necessary, which patients can be safely and effectively managed in observation status, and which patients warrant care in an inpatient hospital spanning at least two midnights.

Robust documentation of medical necessity can prevent misclassification and the overuse of observation status. Physicians should clearly outline the severity of illness, intensity of services, and expected length of stay in their documentation.

Guiding hospitalized patients through necessary care events helps to transition them safely to the next level of care — whether that means inpatient care, a lower level of care in the hospital, a skilled nursing or rehab facility, or discharge. Because patients in observation care must transition more quickly than inpatients, the care team must set and work towards a common length of stay target or decision time. These targets can be as short as 18 hours, ensuring that observation care doesn’t continue longer than Medicare and other private payers' expectations.

This short, prioritized set of care team actions helps care team members proactively move patients toward safe and timely admission decisions. A successful progression plan also involves service coordination to ensure patients receive the testing and diagnostics needed to make an admission decision.

Successful observation management depends on regularly communicating the patient’s status and action plan across the care team. Team members can attend daily briefings for updates and to identify and address progression barriers. Also, real-time access to plan information via technology, such as visual boards or mobile apps, ensures team members can easily understand the patient's progression status.

Some technologies can help hospitals analyze historical trends in observation management and fix systemic statusing issues. Other technologies can give hospitals real-time insight into patient flow, progression milestones, and progression delays so frontline staff can make faster, more accurate decisions. Looking ahead, agentic Al will further simplify observation management by recommending — and potentially even selecting — patient status based on clinical data and historical outcomes.