Emergency-department (ED)-based observation-unit treatment has been shown to reduce inpatient admissions, hospital bed-hours, and costs without adversely affecting outcomes for several conditions. A sequential group design study compared risk-matched, acute decompensated heart failure patients admitted directly to the inpatient setting with those admitted to an ED observation unit for up to 23 hours before ED disposition. Outcomes were 30-day readmissions or repeat ED visits for heart failure or 30-day mortality. Estimates of bed-hours and charges between the groups were compared. Sixty-four patients were enrolled with 36 inpatient admissions and 28 observation unit patients. No patients died within 30 days. Observation unit patients had no significant difference in outcomes, a decrease in time from ED triage to discharge, a saving in mean bed-hours, and less total charges. This pilot trial provides preliminary data that suggest admitted, low-risk heart failure patients may be safely and cost-effectively managed in an ED-based observation unit. These findings need to be further evaluated in a randomized clinical trial.