The rising demand for acute care has caused more crowding in emergency departments (EDs) in US hospitals. Because hospital care accounted for more than 30 percent of total 2009 health care expenditures, alternative solutions are badly needed to bring costs under control. A hospital observation unit—a dedicated space usually near or within an emergency department, which about one-third of hospitals have—can be a viable alternative to an inpatient admission for many patients who cannot be safely discharged to their homes following an emergency department visit.

In what is believed to be the first attempt to quantify the potential financial impact of observation unit expansion, a new Web First study from Health Affairs estimates that, on average, adding an observation unit could save a hospital with sufficient ED volume $4.6 million per year. If all hospitals with adequate ED volume that do not have such units added them and ran them at benchmark levels of efficiency, the nation could save $3.1 billion in health costs annually.

Christopher Baugh from Brigham and Women’s Hospital and coauthors conducted a systematic literature review to find the average cost savings per observation unit visit; they used national survey data to estimate the number of hospitals with sufficient ED visits to justify acquiring a dedicated observation unit. “The wider use of observation units may create cost savings and should be a model for acute care redesign to increase value in the US health care system,” the authors conclude.