Know the Difference Between a Hospital Observation Stay and an Independent Stay


by Appalachian Area on Aging ADRC (Aging and Disability Resources Center) (800) 434-4036 

If you are going in the hospital, it is important to know whether you are considered to be a hospital inpatient or a hospital observation patient since your Medicare costs and coverage may differ depending on your status.

An observation stay is an outpatient hospital stay. During this stay, you receive medical services that help the hospital doctor decide whether you should be admitted to the hospital as an inpatient or discharged from the hospital. For example, observation stays may occur if you go to the emergency room and a doctor has to monitor your symptoms. While the symptoms are monitored, the doctors decide whether you should be admitted or discharged.

You are an outpatient during an observation stay even if you stay in the hospital overnight. While observation stays may seem like inpatient hospital stays, staying in the hospital overnight does not make you a hospital inpatient. You are only considered to be an inpatient if you have been formally admitted into the hospital as a hospital inpatient by a hospital doctor. If you have not been formally admitted into the hospital as an inpatient, you are considered an outpatient. In general, doctors will admit you as a hospital inpatient if they expect you will need to stay at least 2 days or overnight.

Medicare Part A (the hospital insurance part of Medicare) covers inpatient hospital stays If you get your Medicare benefits through Original Medicare. Part A covers most inpatient hospital care you receive during your stay. In general, you or your supplemental insurance plan pays a one-time deductible for your hospital stay. After you meet the deductible, you do not have to pay a co-payment for the first 60 days of your stay.

On the other hand, Medicare Part B, the medical insurance part of Medicare, covers outpatient care, such as health care services you receive while you are under observation in the hospital. If you have Original Medicare, Part B covers outpatient services you receive. If you are under observation in the hospital, you typically pay a 20% coinsurance for each medical service you receive in the hospital after you have met your yearly Part B deductible.

A coinsurance is the percentage amount you pay for care you receive, after Medicare pays for some of the care.

If you are in the hospital, you or your family member should ask the hospital staff whether you are an inpatient or an outpatient each day during your hospital stay, since this affects what you pay for hospital services. Keep in mind that whether you are an inpatient or outpatient can also affect whether you will qualify for Medicare coverage for a skilled nursing facility care. If you have Original Medicare, Medicare will pay for skilled nursing facility care only if you have been in the hospital as a hospital inpatient for three nights in a row. If you get your Medicare benefits through a Medicare Advantage Plan, also known as a Medicare Part C private health plan, different costs and rules may apply. Contact your plan directly to learn more about your plan’s coverage of the hospital care.