Patients often are readmitted to the hospital after an observation stay, according to recent research which suggests hospitals may want to target this population.

More patients are being treated under observation status rather than inpatient care because of the financial incentives from CMS and other payers, notes Kumar Dharmarajan, MD, assistant professor in the Section of Cardiovascular Medicine at Yale University School of Medicine in New Haven, CT, and an author of the study. Observation increasingly includes patients who might have been treated inpatient a few years ago, he says.

“Patients who would have been treated under inpatient status are being treated with an observation stay, and that is not the same level of care,” he says. “We are seeing more of that shift from inpatient to observation status, so as that shift continues, we are seeing an increase in readmissions from the observation status population.”

The research involved a nationally representative sample of Medicare fee-for-service beneficiaries aged 65 years or older discharged after observation stays, ED treatment-and-discharge stays, and inpatient stays from 2006 to 2011. (The full study report is available online at:

Thirty days after an observation stay, 2.9% of patients had another observation stay, 8.4% of them had an ED treatment and discharge, 11.2% had an inpatient stay, and 20.1% had any hospital revisit.

“Revisit rates of 20% after observation stays suggest that patients who are older and receiving observation services are vulnerable to major adverse outcomes after discharge and may benefit from improved transitional and post-acute care,” the study authors wrote. “To date, focus on care transitions, post-hospital outpatient care, and corresponding outcomes in the USA has largely been applied to vulnerable older adults discharged from inpatient stays and, to a smaller extent, emergency department stays. Little attention has been directed to improving outcomes after observation services.”

Given that readmission rates after observation are comparable to those of inpatients, some of the same readmission reduction strategies could be applied, Dharmarajan says, such as facilitating access to outpatient providers, early and longitudinal follow-up, timely transmittal of information from hospitals to outpatient teams, outpatient availability of care management services, multidisciplinary team-based care, and home visits.

“Those are common-sense interventions from the perspective of the patients, but historically, hospitals were not held accountable financially for readmissions after discharge,” Dharmarajan says. “That is changing now, not just because of readmission penalties, but also because of care bundles and other risk-sharing agreements. Hospitals are increasingly on the hook for post-discharge outcomes, and it is becoming clear that it is not just inpatients that are a concern in this regard. We’re seeing that observation status and discharge from the emergency department are signals of vulnerability, and many of those patients may benefit from transitions of care intervention.”

Concerns Over Observation Status

The study results confirm concerns about how hospitals are using observation status, says Mary Barton, MD, vice president for performance measurement with the National Committee for Quality Assurance (NCQA) in Washington, DC. Patients who may be better treated as inpatients may instead go to observation status.

“Observation status is a decision made by the team treating the patient, so there can be huge differences in how that decision is made from hospital to hospital. It’s not just the clinical status of that patient, but also what beds are available — all sorts of variables that come into play,” Barton says. “When you’re under pressure, the availability of an observation stay in the hospital puts a release valve on that decision-making. The theory may be that observation status is like an outpatient visit, but these study outcomes tell us that it’s really more like inpatient hospitalization.”

NCQA also has been studying observation stays and how they may apply to its all-cause readmission stays measure, Barton says.

“These data will be useful in showing why we need to include the all-cause readmission stays measure to include observation stays,” she says.