Hospitals could save $3.1B with better use of observation units

Instead of admitting certain patients to the hospital, using dedicated observation units in hospitals can often be more efficient, result in shorter lengths-of-stay and lower costs, according to a recent study from Health Affairs.

“The wider use of observation units may create cost savings and should be a model for acute care redesign to increase value in the U.S. healthcare system,” said the study’s lead author, Christopher Baugh, MD, of Brigham and Women’s Hospital.

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Using a systematic literature review, national survey data and a simulation model, the study’s authors estimated that if hospitals without observation units had them in place, the average cost savings per patient would be $1,572, the annual hospital savings would be $4.6 million and the national cost savings would be $3.1 billion.

Currently one-third of hospitals in the country have an observation unit, which is a dedicated space usually near or within an emergency department offering an alternative to an inpatient admission for many patients who cannot be safely discharged to their homes following an emergency department visit.

“Considering the fact that hospital care accounted for more than 30 percent of national health expenditures in 2009, efforts to improve healthcare efficiency need to focus on hospital efficiency,” the authors wrote in their study.

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The authors’ 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.

"We feel we are able to send more patients home and keep patients out of inpatient care,” said Baugh of Brigham and Women’s use of observation units. “I think we have safer discharges. In the past, we were often forced to make risky decisions in sending certain people home from inpatient care, relying on their word that they'll go to follow-up appointments," he said. "Patients can get medications, stress tests, blood tests in the observation unit, and it's an outlet for patients that still need extra time before going home. It relieves the time pressure crunch that there often is in an ED."

The study's authors stressed that understanding the financial impact of increased use of observation unit care and the corresponding decrease in the use of inpatient care at the national level is important for both administrators and policy makers involved in healthcare delivery redesign. 

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