HealthDay News — Among commercially insured patients, the cost of observation care has increased, but it is still lower than spending for short-stay hospitalizations, according to a report published in Health Affairs.

Emily R. Adrion, PhD, from the University of Edinburgh in the United Kingdom, and colleagues examined use of and spending associated with observation care among commercially insured populations. Using multipayer commercial claims for 2009-2013, the authors assessed utilization and spending among patients admitted for 6 conditions commonly managed with observation care or short-stay hospitalizations.

The researchers found that the use of observation care increased relative to that of short-stay hospitalizations during the study period. For observation care, total and out-of-pocket spending were substantially lower, although both increased rapidly over the study period, at rates much higher than spending in the inpatient setting. Despite this increase, it is unlikely that spending on observation care would exceed spending for short-stay hospitalizations.

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“As observation care attracts greater attention, policy makers should be aware that Medicare policies that disincentivize observation may have unintended financial impacts on non-Medicare populations, where observation care may be cost saving,” the authors write.


Adrion ER, Kocher KE, Nallamothu BK, Ryan AM. Rising use of observation care among the commercially insured may lead to total and out-of-pocket cost savings. Health Affairs (Millwood). 2017;36(12):2102-2109.