Evidence of Racial and Geographic Disparities in the Use of Medicare Observation Stays and Subsequent Patient Outcomes Relative to Short-Stay Hospitalizations

Abstract

Purpose: To examine racial and geographic disparities in the use of—and outcomes associated with—Medicare observation stays versus short-stay hospitalizations. Methods: We used 2007–2010 fee-for-service Medicare claims, including 3,555,994 observation and short-stay hospitalizations for individuals over age 65. We estimated linear probability models with hospital fixed effects to identify within-facility disparities in observation stay use, estimated in-hospital mortality, 30- and 90-day postdischarge mortality, return emergency department (ED) visits, and hospital readmissions as a function of placement in observation using linear probability models, propensity-score matching, and interaction terms. Results: We identified racial and geographic disparities in the likelihood of observation stay use within hospitals (blacks 3.9% points more likely than whites, rural 5.4% points less likely than urban). Observation is associated with an increased likelihood of returning to the ED within 30 or 90 days and a decreased likelihood of readmission or mortality, but there are racial and geographic disparities in these outcomes. Conclusion: While observation generally results in improved outcomes, disparities in these outcomes and the use of observation stays within hospitals are concerning and may be driven by clinical and nonclinical factors.