Here is the steps I follow:
First make sure you backup your hosted engine...then proceed as below:
on hosted engine console
# yum update -y
put host in global maintenance
# hosted-engine --set-maintenance --mode=global
run engine-setup on hosted engine
reboot hosted engine
# hosted-engine --vm-status
# hosted-engine --vm-start
turn off global maintenance
# hosted-engine --set-maintenance --mode=none
put each physical host (one at a time) in maintenance
upgrade physical host
reboot (maybe)
# hosted-engine --vm-status