February 4, 2018

Observation Medicine Innovations in Free Standing Emergency Medicine and Integrated Health Systems

As integrated healthcare systems continue to evolve, the existing and potential roles of observation units should be considered, due to their key strategic position at the outpatient-inpatient interface. Further, while the hospital campus-based emergency department (ED) is traditionally considered the ‘front door’ of the hospital, increasingly other methods of entry to the hospital are being utilized, which invariably pass through the observation unit. For example, free-standing ED’s (FSED) have undergone explosive growth in recent years and are a cost-effective way for health care systems to extend healthcare to areas in need of emergency care, but which may otherwise not have the market to support a full-scale hospital.1 These FSED patient encounters will result in some patients requiring observation care. Patient-centered workflows can be developed and utilized that transfer these patients from the FSED directly to the observation unit, rather than through the crowded ED at the main hospital campus (similar workflows can be used when healthcare systems integrate urgent care centers). Alternatively, FSEDs can be equipped to provide observation care in a FSED observation unit to augment outpatient care, keep patients local, and reduce unnecessary cost of transport and hospitalization at the ‘main campus’.2 This is consistent with principles of population health management, reducing medical cost growth, and reducing the need for acute care hospitalization. At the same time, this would provide additional hospital beds at the main campus for higher revenue-generating inpatient admissions. 

Ultimately, observation units in larger, more integrated systems could find themselves in a central, strategic role. In a hub-and-spoke model, a single free-standing observation center could serve as a central, specialized, low-cost center to receive patients in need of observation care within a health system. This resembles the concept of a micro-hospital, which operates at a fraction of the cost of a full-service, multi-million-dollar acute care hospital.3 Principles of observation medicine support the fact that the vast majority of patients could be cared for without the need for an inpatient bed at a lower cost than traditional hospitalization.

With limited resources and ongoing healthcare needs, this type of innovation allows healthcare systems to excel in a volatile and uncertain policy climate. Considering the proven value of dedicated observation units and the ability to address a variety of healthcare needs using this care, one must ask why this healthcare delivery model should be limited to just those patients classified as observation status. The future should explore expanding the use of this healthcare delivery model to meet the needs of all our patients, including inpatients.


  1. Harish N, Wiler JL, Zane R. How the freestanding emergency department boom can help patients.  N Engl J M Catalyst. Learn More. October 24, 2016.
  2. The Abaris Group. Freestanding Emergency Departments: Do They Have a Role in California? California HealthCare Foundation, Issue Brief. http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/PDF%20F/PDF%20FreestandingEmergencyDepartmentsIB.pdf  July, 2009.
  3. Royse D. Who needs beds? New ambulatory centers offer everything except inpatient care. Mod Healthc. 2015 Sep 14;45(37):20-2.

Christopher Caspers, MD
Chief, Observation Medicine
NYU Langone Health System
Associate Chief of Service
Ronald O. Perelman Department of Emergency Medicine
Assistant Professor, NYU School of Medicine