Dedicated Hospital Observation Units Could Save $3.1 Billion

Steven Fox

September 28, 2012

September 28, 2012 — Maximizing the potential use of dedicated hospital observation units could save billions of dollars in healthcare resources annually, according to results from a study published online September 26 and in the October issue of Health Affairs.

Observation units (OUs) in hospitals provide an alternative to admitting patients who have received care in emergency departments but cannot yet be sent home safely. OUs are most often dedicated spaces, within or adjacent to emergency departments, where patients receive care, usually for less than 24 hours.

"Observation unit care is an established and well-studied health care delivery model that is more cost-efficient than inpatient care for specific patient populations," Christopher W. Baugh, MD, from the Brigham and Women's Hospital Department of Emergency Medicine, Boston, Massachusetts, and colleagues write. The researchers note that previous studies have compared only single-site costs of observational care with routine inpatient care. "However, we are unaware of any prior attempts to quantify the potential financial impact of observation unit expansion," they write.

"Our objective was to quantify the potential cost savings from a decrease in avoidable inpatient admissions that would result from increasing the use of observation units in eligible hospitals," they add.

The researchers first conducted a literature review and then coupled that with national survey data to pinpoint how much money OU care saves per patient visit. The researchers used a Monte Carlo simulation to quantify the gap between current use of OUs and potential maximum use of such units.

According to their analysis, OUs saved about $1572 ± $812 per hospital visit, compared with inpatient care.

Using the Monte Carlo simulation model to extrapolate those savings out to the national level, the authors estimated that if all hospitals nationwide set up OUs, the cost savings would be $3.1 billion ± $1.9 billion.

The researchers also estimate that setting up OUs would help avoid about 2.4 million ± 490,000 inpatient admissions each year.

"For an average hospital with the visit volume to justify operating an observation unit, the annual direct cost savings would be $4.6 million (standard deviation: ±$2.9 million) from maximum use, resulting from about 3,600 (standard deviation: ±740) inpatient admissions avoided each year," they write.

The researchers emphasize that their study focused on use of OUs that provide limited lengths of stay (usually less than 24 hours), rather than OUs that keep patients longer. "Patients are at much lower risk for excessive out-of-pocket costs when observation is used in this way," they note.

In conclusion, they write, "Observation units represent a feasible care innovation worthy of further evaluation. The wider use of observation units may create cost savings and should be a model for acute care redesign to increase value in the US health care system."

The researchers disclosed no relevant financial relationships.

Health Aff. Published online September 26, 2012. Full text