Observation Units Could Reap $3 Billion in Savings for Hospitals
Major Finding: Dedicated observation units for emergency department patients deemed unsafe to discharge could result in savings of more than $3 billion nationally or $4.6 million per hospital thanks to avoided admissions.
Data Source: A literature review analyzed 16 studies (2 randomized trials) plus national admission survey data.
Disclosures: Dr. Baugh and his colleagues’ study received no outside funding, and none of its authors reported conflicts of interest.
The use of observation units for patients who cannot safely be discharged following emergency room visits is highly cost effective, compared with inpatient admissions, according to a new study, yet only about one-third of U.S. hospitals currently make use of such units.
Observation units are dedicated spaces, most with about 10 beds and located close to or within the emergency department, where patients typically receive care for up to 24 hours. The study, published in the October 2012 issue of Health Affairs (doi:10.1377/hlthaff.2011.0926), found that maintaining an observation unit saved hospitals an average of $1,572 per patient who would have otherwise be admitted to an inpatient service.
"If all hospitals with sufficient emergency department volume created an observation unit and ran it at benchmark levels of efficiency, more than $3 billion in avoidable health care costs could be saved every year," wrote the study’s investigators, led by Dr. Christopher W. Baugh of Harvard Medical School and Brigham and Women’s Hospital, both in Boston.
While use of observation units has risen in recent years, from 0.6% of emergency visits in 2001 to 1.9% in 2008 (PLoS One 2011;6:[9] [doi:10.1371/journal.pone.0024326]), Dr. Baugh said in an e-mail interview that while the Centers for Medicare and Medicaid Services have warmed to observation in recent years, now allowing it for any diagnosis, "in practice, observation services occupy a gray area between the outpatient and inpatient settings. This unique feature of observation care, combined with dynamic payer policy, has created some barriers to its wider adoption," he said.
While most payers increasingly recognize observation care as valuable, "they do not require any specific setting for its delivery," Dr. Baugh said. "As a result, patients in inpatient areas can be classified as observation patients. Many of the cost advantages disappear when it is used there." Payers, he said, "need to show that they recognize the value of observation care by adopting a consistent and fair policy, both for the providers and patients."
For their research, Dr. Baugh and his colleagues conducted a literature review of studies comparing the costs of observation unit care with standard inpatient admission; 16 studies were ultimately included, all comparing observation with inpatient admission at single sites. The investigators also used data from the National Hospital Ambulatory Medical Care survey to estimate the percentage of observation unit visits nationwide that were actually avoided inpatient admissions.
Dr. Baugh and his colleagues used modeling to determine that inflation-adjusted cost savings would be $1,572/observation unit visit (standard deviation, plus or minus $812), compared with an inpatient admission, and that the annual national cost savings would be $3.1 billion (SD, plus or minus $1.9 billion) if observation unit use were universal among hospitals with sufficient emergency department volume.
These savings would result from the avoidance of about 2.4 million (SD, plus or minus 490,000) annual inpatient admissions. For hospitals with the volume to justify an observation unit, annual cost savings would be $4.6 million (SD, plus or minus $2.9 million) from maximum use, resulting from about 3,600 (SD, plus or minus 740) inpatient admissions avoided each year.
The investigators noted several limitations to their study, including that it did not account for the costs of creating an observation unit and that no distinctions were made between units run out of the emergency department and those managed by other departments. Also, chest pain studies made up a substantial portion of the analyzed literature, which, they acknowledged, "may not reflect the true spectrum of observation unit care." They further noted that single-center studies used different costing methods.
They also pointed out some potential indirect benefits from the units not captured in their study, such as fewer complications associated with inpatient hospitalization, a decrease in interdepartmental handoff errors, potential reduction of falls and hospital-acquired infections, and the creation of inpatient capacity.
Dr. Baugh and his colleagues’ study received no outside funding, and none of its authors reported conflicts of interest.