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Background and Objectives: Length of stay (LOS) is a common benchmarking measure for hospital resource use and quality. Observation status (OBS) is considered an outpatient service despite the use of the same facilities as inpatient status (IP) in most children's hospitals, and LOS calculations often exclude OBS stays. Variability in the use of OBS by hospitals may significantly impact calculated LOS. We sought to determine the impact of including OBS in calculating LOS across children's hospitals., Methods: Retrospective cohort study of hospitalized children (age <19 years) in 2017 from the Pediatric Health Information System (Children's Hospital Association, Lenexa, KS). Normal newborns, transfers, deaths, and hospitals not reporting LOS in hours were excluded. Risk-adjusted geometric mean length of stay (RA-LOS) for IP-only and IP plus OBS was calculated and each hospital was ranked by quintile., Results: In 2017, 45 hospitals and 625 032 hospitalizations met inclusion criteria (IP = 410 731 [65.7%], OBS = 214 301 [34.3%]). Across hospitals, OBS represented 0.0% to 60.3% of total discharges. The RA-LOS (SD) in hours for IP and IP plus OBS was 75.2 (2.6) and 54.3 (2.7), respectively ( P < .001). For hospitals reporting OBS, the addition of OBS to IP RA-LOS calculations resulted in a decrease in RA-LOS compared with IP encounters alone. Three-fourths of hospitals changed ≥1 quintile in LOS ranking with the inclusion of OBS., Conclusions: Children's hospitals exhibit significant variability in the assignment of OBS to hospitalized patients and inclusion of OBS significantly impacts RA-LOS calculations. Careful consideration should be given to the inclusion of OBS when determining RA-LOS for benchmarking, quality and resource use measurements., Competing Interests: POTENTIAL CONFLICT OF INTEREST: The authors have indicated they have no potential conflicts of interest to disclose., (Copyright © 2020 by the American Academy of Pediatrics.)

Background: In several states, payers penalize hospitals when an inpatient readmission follows an inpatient stay. Observation stays are typically excluded from readmission calculations. Previous studies suggest inconsistent use of observation designations across hospitals. We sought to describe variation in observation stays and examine the impact of inclusion of observation stays on readmission metrics., Methods: We conducted a retrospective cohort study of hospitalizations at 50 hospitals contributing to the Pediatric Health Information System database from January 1, 2018, to December 31, 2018. We examined prevalence of observation use across hospitals and described changes to inpatient readmission rates with higher observation use. We described 30-day inpatient-only readmission rates and ranked hospitals against peer institutions. Finally, we included observation encounters into the calculation of readmission rates and evaluated hospitals' change in readmission ranking., Results: Most hospitals ( n = 44; 88%) used observation status, with high variation in use across hospitals (0%-53%). Readmission rate after index inpatient stay (6.8%) was higher than readmission after an index observation stay (4.4%), and higher observation use by hospital was associated with higher inpatient-only readmission rates. When compared with peers, hospital readmission rank changed with observation inclusion (60% moving at least 1 quintile)., Conclusions: The use of observation status is variable among children's hospitals. Hospitals that more liberally apply observation status perform worse on the current inpatient-to-inpatient readmission metric, and inclusion of observation stays in the calculation of readmission rates significantly affected hospital performance compared with peer institutions. Consideration should be given to include all admission types for readmission rate calculation., Competing Interests: POTENTIAL CONFLICT OF INTEREST: The authors have indicated they have no potential conflicts of interest to disclose., (Copyright © 2020 by the American Academy of Pediatrics.)