NCPA - National Center for Policy Analysis

Keeping Patients in Dedicated Observation Units Could Save Millions

December 13, 2013

Keeping patients under observation in dedicated hospital observation units could lead to $950 million in national cost savings, according to a new study in Health Affairs.

After trips to the emergency room, many patients are not well enough to be completely discharged, yet not sick enough to be admitted as full hospital patients. These are the types of patients who receive outpatient care and observation.  Hospitals tend to use four basic types of observation services. Some of these services have dedicated observation units within the hospital and defined protocols, while others do not.

The study found that the best outcomes resulted when patients were cared for in dedicated observation units with clear and defined protocols:

  • Those patients had a 23 to 38 percent shorter length of stay.
  • There was a 17 to 44 percent lower probability of subsequent inpatient admission.
  • These types of observation services could save $950 million nationally, every year.

Moreover, the study determined that 11.7 percent of short-stay inpatients nationwide could actually be treated through these dedicated observation services instead, potentially saving $5.5 billion to $8.5 billion annually.

Source: Michael A. Ross et al., "Protocol-Driven Emergency Department Observation Units Offer Savings, Shorter Stays, And Reduced Admissions," Health Affairs, December 2013.


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