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What Is the Difference Between Inpatient and Observation Status?

If you are in a hospital bed, are you “admitted” to the hospital and covered under your Medicare Part A? The answer might be surprising and costly. Don’t assume. Ask.

When you go to the hospital, knowing whether you’ve been admitted as an inpatient or put on observation status is highly important to you financially. Here’s why.

Inpatient vs. Observation Status

Your hospital status (whether the hospital considers you an inpatient or outpatient) can affect you in 2 ways:

  • How much you pay for hospital services (like X-rays, lab tests, etc.), and
  • If Medicare will cover care in a skilled nursing facility following your hospital stay

Your hospital status (admitted inpatient vs. observation care) is a medical decision based on your doctor’s judgment. Your need for medical care also impacts your hospital status.

Inpatient Status

You’re an inpatient when a hospital formally admits you with a doctor’s order.

As an inpatient, Medicare Part A (Hospital Insurance) covers your hospital stay and some services. Under Medicare Part A, you are responsible for a one-time “benefit period” deductible for your hospital stay during the first 60 days you are in the hospital.

Medicare Part B (Medical Insurance) covers most of your doctor and non-nursing care medical services when you’re an inpatient.

Having Medicare Supplement insurance can help cover those out-of-pocket costs. If you have a Medicare Supplement, the amount you pay (or lack thereof) for doctor services will depend on which plan type you have. If you do not have a Medicare Supplement, you’ll pay 20% of the Medicare-approved amount after you pay the Part A and B deductibles.

Observation Status

You’re in observation (outpatient) status if you’re getting emergency department services, observation services, outpatient surgery, lab tests, X-rays, or any other hospital services, and the doctor has not written an order to admit you to a hospital as an inpatient. Observation services are hospital outpatient services given to help the doctor decide if they should admit or discharge a patient.

As surprising as it may seem, you might still be considered an outpatient under observation status even though you may stay in the hospital for several days and receive treatment in a hospital bed.

Medicare Part B covers your outpatient (observation status) hospital services. Generally, this means you pay a copayment for each outpatient hospital service. Part B also covers most of your doctor services when you’re a hospital outpatient. If you do not have a Medicare Supplement, you’ll pay 20% of the Medicare-approved amount after you pay the Part B deductible. If you do have a Medicare Supplement, the amount you pay (or lack thereof) for doctor services will depend on which plan type you have.

What Hospital Status Means for You

Medicare will only cover care you get in a skilled nursing facility if you have had a “qualifying inpatient hospital stay,” meaning you’ve been a hospital inpatient for at least three days in a row (counting the day they admit you, but not counting the day of discharge). Observation outpatient stays, regardless of length, do not count toward Medicare’s requirement.

In light of this, it is essential that a hospital admits you for a minimum of three consecutive nights if you or a doctor feel you might need to go to a skilled nursing facility following your time in the hospital. Medicare will not cover your rehabilitative care in the skilled nursing facility if you have not been a qualified inpatient in the hospital for three consecutive nights.

Tips to Avoid Big Bills

If you or a loved one is in the hospital, be sure to ask the following questions upon entry and each day while in the hospital:

  • Is the patient’s hospital status inpatient or outpatient?
  • How long will the patient’s hospital stay be?
  • Will there be a need for specialized skilled care or rehabilitative care after the hospital discharges the patient?

The answers to these questions can help you potentially avoid expensive and unexpected medical and rehabilitative bills. Medicare Part A, Medicare Part B, and your Medicare Supplement could otherwise cover these expenses.

Nothing on this website should ever be used as a substitute for professional medical advice. You should always consult with your medical provider regarding diagnosis or treatment for a health condition, including decisions about the correct medication for your condition, as well as prior to undertaking any specific exercise or dietary routine.

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