Pediatrics
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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. ⋯ 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.