Press Release

Embargoed Until Contact

September 26, 2012

Sue Ducat
Director of Communications
(301) 841-9962


From Health Affairs


Better Use of Dedicated Hospital Observation Units Could Save $3.1 Billion a Year


Bethesda, MD -- The rising demand for acute care has caused more crowding in emergency departments 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 study from Health Affairs created a simulation model and estimated that if a hospital added an observation unit, it would save $4.6 million per year, and the national annual savings would be $3.1 billion.


Making Greater Use Of Dedicated Hospital Observation Units For Many Short-Stay Patients Could Save $3.1 Billion A Year


By Christopher W. Baugh, Arjun K. Venkatesh, Joshua A. Hilton, Peter A. Samuel, Jeremiah D. Schuur, and J. Stephen Bohan


Baugh, Schuur, and Bohan are affiliated with Brigham and Women’s Hospital and Harvard Medical School in Boston; Venkatesh is with Yale University in New Haven; Hilton and Samuel are with Northwestern University in Chicago.


The study will also appear in the journal’s October issue.


The study first conducted a systematic literature review to find the average cost savings per observation unit visit; it used national survey data to estimate the number of hospitals with sufficient emergency department visits to justify acquiring a dedicated observation unit. The study considered the impact of specific diagnoses on its cost-saving estimates. The lead author, Christopher Baugh from Brigham and Women’s Hospital, concludes that “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.”

About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.

The full text of each Health Affairs Web First paper is available free of charge to all Web-site visitors for a two-week period following posting, after which it switches to pay-per-view for nonsubscribers. Web First papers are supported in part by a grant from The Commonwealth Fund.