Patient Care

Observation Status Designation in Pediatric Hospitals Is Costly


Clinical question: What are the costs associated with observation-status hospital stays compared to inpatient-status stays in pediatric hospitals?

Background: Observation status is a designation for hospitalizations that are typically shorter than 48 hours and do not meet criteria for inpatient status. It is considered to be outpatient for evaluation and management (E/M) coding. A designation of observation status for a hospital stay can have significant effects on out-of-pocket costs for patients and reimbursements to physicians and hospitals. It also can affect readmission and length-of-stay data, as observation-status hospital stays are often excluded from a hospital’s inpatient data.

Study design: Multicenter retrospective cohort study.

Setting: Thirty-three freestanding children’s hospitals.

Synopsis: Researchers reviewed data obtained from the Pediatric Health Information System (PHIS), which contains demographic and resource utilization date from 43 freestanding children’s hospitals in the U.S. Resource utilization data were reviewed from 33 of 43 hospitals in PHIS that reported data regarding observation- versus inpatient-status stays. Data were then limited to observation-status stays £2 days, which made up 97.8% of all observation-status stays. These were then compared to a corresponding cohort of inpatient-status stays of £2 days (47.5% of inpatient-status stays), excluding any patient who had spent time in an ICU.

Hospitalization costs were analyzed and separated into room and nonroom costs, as well as in aggregate. These were further subdivided into costs for four common diagnoses (asthma, gastroenteritis, bronchiolitis, and seizure) and were risk-adjusted.

Observation status was used variably between hospitals (2% to 45%) and within hospitals. There was significant overlap in costs of observation-status and inpatient-status stays, which persisted when accounting for nonroom costs and within the diagnosis subgroups. Although average severity-adjusted costs for observation-status stays were consistently less than those for inpatient-status stays, the dollar amounts were small.

Bottom line: Observation-status designation is used inconsistently in pediatric hospitals, and their costs overlap substantially with inpatient-status stays.

Citation: Fieldston ES, Shah SS, Hall M. Resource utilization for observation-status stays at children’s hospitals. Pediatrics. 2013;131;1050-1058.

Reviewed by Pediatric Editor Weijen Chang, MD, SFHM, FACP, associate clinical professor of medicine and pediatrics at the University of California at San Diego School of Medicine, and a hospitalist at both UCSD Medical Center and Rady Children’s Hospital.

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