Emergency department observation units: A clinical and financial benefit for hospitals

Health Care Manage Rev. 2011 Jan-Mar;36(1):28-37. doi: 10.1097/HMR.0b013e3181f3c035.


Introduction: There are nearly 120 million visits to emergency departments each year, one for every three people in the United States. Fifty percent of all hospital admissions come from this group, a marked change from the mid-1990s when the emergency department was a source of only a third of admissions. As the population increases and ages, the growth rate for emergency department visits and the resulting admissions will exceed historical trends creating a surge in demand for inpatient beds.

Background: Current health care reform efforts are highlighting deficiencies in access, cost, and quality of care in the United States. The need for more inpatient capacity brings attention to short-stay admissions and whether they are necessary. Emergency department observation units provide a suitable alternate venue for many such patients at lower cost without adversely affecting access or quality.

Methods: This article serves as a literature synthesis in support of observation units, with special emphasis on the clinical and financial aspects of their use. The observation medicine literature was reviewed using PubMed, and selected sources were used to summarize the current state of practice. In addition, the authors introduce a novel conceptual framework around measures of observation unit efficiency.

Findings and practice implications: Observation units provide high-quality and efficient care to patients with common complaints seen in the emergency department. More frequent use of observation can increase patient safety and satisfaction while decreasing unnecessary inpatient admissions and improving fiscal performance for both emergency departments and the hospitals in which they operate. For institutions with the volume to justify the fixed costs of operating an observation unit, the dominant strategy for all stakeholders is to create one.

Publication types

  • Review

MeSH terms

  • Cost Savings / methods
  • Cost-Benefit Analysis
  • Efficiency, Organizational
  • Emergency Service, Hospital / economics*
  • Financial Management, Hospital*
  • Health Care Reform
  • Hospital Departments* / economics
  • Hospital Units / statistics & numerical data*
  • Humans
  • United States