Phase II level of care and extended observation are two separate and distinct entities. Phase II level of care is characterized by the nurse focusing on preparing the patient for care in the home, extended observation, or an extended care environment. Observation or extended care is defined as the time when it is anticipated that the patient’s condition will rapidly improve or require treatment or further evaluation, which can only be provided within a 24 to 48-hour period. If it is not anticipated that the patient’s condition will rapidly improve, the patient is admitted as an inpatient. Observation allows time to determine if the inpatient admission is necessary.