Observation Units Save Money

The Centers for Medicare and Medicaid Services is reimbursing hospitals for “observation status” in lieu of hospital admission for patient observation, treatment, or diagnostic evaluation that is expected to require less than 24 hours. Patients with this status can be in regular emergency department (ED) beds, in dedicated observation units, or on traditional hospital wards with full-admission patients. A recent survey found that two thirds of U.S. hospitals did not have dedicated observation units.

These authors created a mathematical model to estimate the financial implications of establishing an observation unit in every U.S. hospital with sufficient ED volume to justify the fixed cost of such a unit. Using pooled data from prior studies,…