In a hospital setting, you may have heard someone being treated as in “observation status” rather than having been admitted. There is no immediate difference in their care at the time, but it has a big impact on their ultimate out-of-pocket costs!

What’s the difference?

The difference between observation status and inpatient really comes down to whether or not you are fully admitted to the hospital. Before being admitted you are treated as an outpatient, whether you are receiving care or are under observation. Doctors may intend to observe your condition for a short period of time, but it can be extended. Observation would be considered outpatient even if it goes for days. While you are considered outpatient, tests may be run and medicine may be administered just like for an admitted patient. You are treated as inpatient while fully admitted, not including the morning of discharge. However, care prior to that admission is still outpatient. Also, classification one way or another can change during a hospital stay and can even change retroactively. To the patient, the terms may appear to be meaningless labels, but they can have serious financial implications. 

Medicare coverage of inpatient vs outpatient hospital stay

Being designated inpatient versus outpatient affects your out-of-pocket expenses. After the deductible, Medicare Part A covers inpatient hospital services, but not outpatient. Medicare Part B covers outpatient hospital services, but requires a copay for each individual service. However, Medicare part B covers most doctor services for both inpatient and outpatient. After the deductible, you’d pay 20% of approved doctor services. Part B won’t cover outpatient medication, but Part D prescription plans might reimburse these expenses. Medicare Advantage Plans vary also. Checking plans for specific coverage information is always recommended. You may end up ultimately noticing a big difference in the costs, especially if you do not have a Medicare supplement plan.

It’s not just about your hospital bill

The difference in Medicare coverage goes beyond the hospital stay. The bigger issue for many patients is whether or not Medicare will pay for care at a skilled nursing facility (SNF) after being discharged from the hospital. The approval is largely dependent on whether there were 3 qualified days of inpatient hospital care. If the three days (actually, technically three “overnights”) are there, Medicare will cover 20 days of rehabilitation in a SNF at 100%, and charge a copay (but still pick up most of the tab) for days 21-100 if the person still needs the rehabilitation services. So, imagine going to the ER at night. In the morning you are admitted and you spend 2 nights upstairs. Then the next morning you are discharged, expecting to need a few weeks at a SNF. You didn’t have 3 qualified days, so your SNF stay could be quite expensive!

What can you do?

Get familiar with your particular coverage restrictions. When hospitalized, make sure you stay informed about your status as an admitted patient. Since your status can change it is a good idea to ask each day. And if you aren’t yet admitted, ask your doctor if you should be and ask about SNF coverage. If you do not have a qualified inpatient stay for SNF, you may need to explore other options for post-hospital care, such as at-home care. Also, you may review other forms of possible coverage, such as Medicaid or VA programs. If you have questions or need help with care planning, Archer Law Office can help. Call us at 609-842-9200.