Innovations in Healthcare

Hospitalist-Run Observation Unit Demonstrates Financial Viability


A hospital observation unit run by hospitalists rather than the more typical model led by ED physicians can be financially viable, suggests an abstract presented at HM12 in April in San Diego. One such unit generated $915,000 in facility fee charges, and during a three-month audit posted net revenue of $49,000; the unit also reduced patients’ length of stay (LOS) on observation status by 25%, according to lead author Mary Maher, MD, a hospitalist at Denver Health Medical Center.1

Previously, Denver Health’s ED had informally operated a small observation unit, primarily for patients with such diagnoses as low-risk chest pain. But due to increasing numbers of observation admissions and the need to manage their flow through the typically full safety-net teaching hospital, the hospitalist department was asked in 2011 to develop a new, hospitalist-run unit, Dr. Maher explains.

In its first six months of operation, the five-bed observation unit cared for 648 patients, with 12% admitted to the hospital. A single hospitalist and mid-level practitioner cover each shift, with additional responsibilities for managing patient flow and new hospital admissions. Dr. Maher says specialized nursing staffers are now familiar with the hospital’s admission criteria and care pathways for common diagnoses. A typical observation patient has chest pain and a history of coronary artery disease but negative clinical markers. Other common diagnoses, with established clinical pathways and discharge criteria, include asthma, syncope, COPD, and gastrointestinal illness.

“Hospitalists are primed to take care of patients who are in this observation status,” Dr. Maher says. “They are a little more complex than patients typically seen in emergency department units. The challenge for hospitalists is to understand the hospital’s admission guidelines and to work collaboratively with utilization management staff.”

Denver Health uses the Milliman Care Guidelines to guide inpatient admissions, but these can be difficult to translate into clinical practice and require some study by physicians, she adds.2 For more information about the poster and the unit, email


  1. Maher M, Mascolo M, Mancini D, et al. Creation of a financially viable hospitalist-run observation unit in a safety net hospital. Paper presented at Hospital Medicine 2012, April 1-4, 2012, San Diego.
  2. Milliman Inc. Milliman Care Guidelines. Milliman Inc. website. Available at: Accessed July 8, 2012.

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