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

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, and estimated in-hospital mortality, and 30- and 90-day post-discharge mortality, return 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 percentage points more likely than whites, rural 5.4 percentage 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 non-clinical factors.