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Publication Briefs

Study Shows VA Hospital Observation Stays Increasing

When acutely ill patients present to the emergency department (ED) and neither inpatient admission nor ED treatment followed by discharge is clearly indicated, physicians are likely to place the patients in the hospital under "observation" status. Over the past decade, observation status – which some consider a more efficient and cost-effective alternative to short-stay hospitalization – has become increasingly common, particularly among Medicare patients for whom hospitals may have financial incentives to avoid hospitalizations. However, some argue that observation services shift the burden of cost onto Medicare patients and may compromise quality of care. This study sought to identify trends and variations in observation rates across 21 VISNs and 128 VA hospitals nationwide. Using VA data for fiscal years 2005 through 2013, investigators identified all acute hospital admissions and observation stays during the study period, as well as the primary diagnosis. Non-acute admissions for long-term, rehabilitation, or psychiatric care were not included.


  • Of the 4,423,010 hospital admissions in this study, 392,939 (9%) were initiated in medical observation status.
  • From 2005 through 2013, observation rates across VA hospitals more than doubled, with substantial variation across both hospitals and VISNs. There were 451,229 acute admissions in the first year (2005), of which 29,119 (6.5%) initiated in observation status compared to 517,248 acute admissions in the last year (2013), of which 71,124 (13.8%) initiated in observation status.
  • While most hospitals in this study increased their observation rate, some reduced their rate. Overall, changes in the use of observation ranged from a 27 percentage-point decrease to a 43 percentage-point increase, with the average change being an increase of 7.1 percentage points.
  • The most prevalent diagnoses (cardiac related) accounted for an increasing share of observation stays over time (9% in FY05 vs. 20% in FY13).


  • Findings suggest that trends in the use of observation stays are similar in VA and Medicare patients despite differing payment structures and financial incentives in the two systems. VA policymakers, like their Medicare counterparts, will need to examine the impact of the growing number of observation stays on patient outcomes and costs.
  • One major difference in VA is that Veterans face lower out of pocket costs with VA observation stays than inpatient admissions, whereas the opposite may be true for Medicare patients. However, the authors stress that it is not yet known how the increasing trend in observation stays will affect patient outcomes or total costs for hospitals or patients.


  • Because investigators relied on VA administrative data, they could not determine whether the use of observation was warranted or whether patient outcomes were better or worse as a result.
  • While analyses were conducted separately for high-risk diagnoses, no formal risk adjustment was done in analyzing trends or inter-hospital differences.
  • Due to a lack of access to cost data, any additional costs or savings associated with the increase in the observation rate over the study period could not be examined.

PubMed Logo Wright B, O’Shea A, Ayyagari P, Ugwi P, Kaboli P, and Vaughan Sarrazin M. Observation Rates at Veterans’ Hospitals More than Doubled During 2005-13, Similar to Medicare Trends. Health Affairs. October 2015;34(10):1730-1737.

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What are HSR Publication Briefs?

HSR requires notification by HSR-funded investigators about all articles accepted for publication. These journal articles are reviewed by HSR and publication briefs or summaries are written for a select number of articles that are then forwarded to VHA Central Office leadership to keep them informed about important findings or information. Articles to be summarized are selected by HSR based on timeliness of the findings, interest of leadership, or potential impact on the organization. Publication briefs are written for only a small number of HSR published articles. Visit the HSR citations database for a complete listing of HSR articles and presentations.

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