Insights
the blog of Porter HillsHospital Observation Versus Inpatient Admission

Jessica Mays, RN
Porter Hills Home Care
Clinical Manager
Click here to watch the WZZ13 Senior Wellness segment on this topic.
What is observation?
Did you know that even if you stay in a hospital overnight, you might still be considered outpatient? Observation services are hospital outpatient services given to help the doctor decide if the patient needs to be admitted as an inpatient or can be discharged home. Observation services may be given in the emergency department or another area of the hospital. It can also affect whether Medicare will pay for rehabilitation in a skilled nursing facility after your hospitalization.
Number of Observation Stays on the Rise
More Medicare beneficiaries are entering hospitals as observation patients every year. The number has doubled since 2006 to nearly 1.9 million in 2014 – while Medicare enrollment rose only 5%. Medicare has strict criteria for admission as inpatient and usually won’t pay anything for a patient that should have been in observation. The response to increased enforcement of these criteria has led to hospitals placing more patients in observation.
Costs
If you are an inpatient, your Medicare part A will cover the costs after you pay a deductible. If you are admitted under observation, considered outpatient, your Medicare part B will be in effect and you will have co-pays for your doctors’ fees and all hospital services. No one co-pay can be higher than your Part A deductible but the total of all your co-payments could be higher than your deductible.
Medicare will also not cover the cost of your maintenance drugs that you take at home during an observation stay. Some hospitals will allow you to bring your medications from home. If you’re covered under a separate Medicare Part D drug plan, it will be up to the insurer if they will cover your maintenance drugs. If they do agree to cover the costs during your hospital stay, it will only pay prices negotiated with the plan, drug companies and in-network pharmacies. Most hospital pharmacies are out-of-network, leaving you paying most of the bill. However, you can ask if the hospital will waive the charges.
Skilled Nursing Facility
If your stay in the hospital is expected to be more than 48 hours and your medical record supports that, you should be admitted as an inpatient. If you are under observation and need to go to short term rehabilitation, Medicare will not pay for the cost. Under traditional Medicare, the cost of short term rehabilitation is covered only if the patient was admitted as an inpatient for 3 midnights, observation days do not count toward the 3 midnight rule.
If you are already at a rehabilitation center and learn you have not had a qualifying stay at the hospital you have 2 options. You can stay and pay privately while seeking coverage through a Medicare appeal or you can leave.
What’s Being Done?
Congress recently passed the Notice Act. This states that the hospital must provide written and oral notice if your observation stay is over 24 hours. The notice must explain the reason the patient is an outpatient and describe the implications of that status both for cost-sharing in the hospital and for subsequent “eligibility coverage” in a skilled nursing facility. There is also a bipartisan bill called The Improving Access to Medicare Coverage Act (S. 843) which will allow observation days to count toward the 3 midnight rule.
The best way to know what your admission status is, is to ask. You can change from observation to inpatient or from inpatient to observation during the same stay. Ask the hospital staff daily if you are inpatient or observation.
Are You a Hospital Inpatient or Outpatient? If You Have Medicare – Ask!
FAQ: Hospital Observation Care Can Be Costly For Medicare Patients