When is a Hospital Stay Not a Hospital Stay?

When is a Hospital Stay Not a Hospital Stay? Image

Many of you may know the answer to this question from experience, but for those of you who do not: 'observation status' is different from an 'inpatient' hospital stay. These different categories of care feel the same to the patient who is in a hospital room being treated by hospital staff, receiving tests and drugs, and staying overnight – perhaps several nights. But, when it comes to billing and after-care, the distinction is important if you are on Medicare for several reasons:  

  • Inpatient hospital care is paid under Medicare Part A which covers all expenses.
  • Observation status is considered outpatient care and is covered under Medicare Part B so your out-of-pocket coinsurance and charges for X-rays, drugs and lab tests are higher.
  • More importantly, observation care does not count as a stay in the hospital when it comes to qualifying for skilled nursing care at the time of discharge. Without three inpatient days, you do not qualify for coverage.


First, it's important to understand that you are receiving outpatient care when you are being treated in the emergency department, getting outpatient surgery, lab tests, X-rays or other hospital services including observation status, even if you spend one or more nights in the hospital.  

An inpatient admission is generally appropriate when you’re expected to need two or more midnights of medically necessary hospital care. But, your doctor must write an order to have you admitted and the hospital must formally admit you for you to become an inpatient. It’s important to understand that you can spend several nights in the hospital and never actually be admitted, AND the hospital can overrule your doctor's orders, even retroactively. 

Observation services are typically ordered for conditions that can be treated in 48 hours or less, or when the cause for your symptoms has not yet been determined. Some examples are nausea, vomiting, weakness, stomach pain, headache, kidney stones, fever, some breathing problems and some types of chest pain. 

In many hospitals, there is no wing or section for patients on 'observation status' so you cannot tell that you are not considered an inpatient unless you ask or unless the hospital has a policy to tell you. The patient in the next bed may be an inpatient-status patient while you are an observation-status patient and your care may be exactly the same. 

What can you do about your status?

  • Ask about your status and request that it be changed if you are on observation status.  If the hospital refuses, ask your doctor to have you admitted, especially if he says you are too sick to go home. However, even if your doctor does that, you can be switched back to observation status during your hospital stay, so ask every day. 
  • Ask the hospital to waive any charges on your bill for your routine medications which are not covered when you are in observation status. 
  • If it looks like you will need rehab or another kind of continuing care after discharge but learn that Medicare won't cover your stay in a skilled nursing facility, ask your doctor whether you qualify for similar care at home through Medicare's home health care benefit, or for Medicarecovered care in a rehabilitation hospital.


Recent studies have shown that hospitals are placing more Medicare patients on observation status than in the past for several reasons: hospitals face financial penalties for unnecessary admissions and for readmitting patients within 30 days for the same condition. Also, if a patient is admitted and does not meet Medicare's strict criteria for admission, Medicare won't pay the hospital at all.   

These rules are intended to cut rising health-care costs.