Hospital Use of Observation Stays: Cross-sectional Study of the Impact on Readmission Rates

Background:The Centers for Medicare and Medicaid Services publicly reports hospital risk-standardized readmission rates (RSRRs) as a measure of quality and performance; mischaracterizations may occur because observation stays are not captured by current measures.Objectives:To describe variation in hospital use of observation stays, the relationship between hospitals observation stay use and RSRRs.Materials and Methods:Cross-sectional analysis of Medicare fee-for-service beneficiaries discharged after acute myocardial infarction (AMI), heart failure, or pneumonia between July 2011 and June 2012. We calculated 3 hospital-specific 30-day outcomes: (1) observation rate, the proportion of all discharges followed by an observation stay without a readmission; (2) observation proportion, the proportion of observation stays among all patients with an observation stay or readmission; and (3) RSRR.Results:For all 3 conditions, hospitals' observation rates were <2.5% and observation proportions were <12%, although there was variation across hospitals, including 28% of hospital with no observation stay use for AMI, 31% for heart failure, and 43% for pneumonia. There were statistically significant, but minimal, correlations between hospital observation rates and RSRRs: AMI (r=-0.02), heart failure (r=-0.11), and pneumonia (r=-0.02) (P<0.001). There were modest inverse correlations between hospital observation proportion and RSRR: AMI (r=-0.34), heart failure (r=-0.26), and pneumonia (r=-0.21) (P<0.001). If observation stays were included in readmission measures, <4% of top performing hospitals would be recategorized as having average performance.Conclusions:Hospitals' observation stay use in the postdischarge period is low, but varies widely. Despite modest correlation between the observation proportion and RSRR, counting observation stays in readmission measures would minimally impact public reporting of performance.