Are you being admitted or observed?

How do you know if you are truly admitted to a hospital?

This sounds like a dumb question, but not knowing the answer can cost you a great deal of money if you are a Medicare recipient. A person can be admitted on an inpatient basis which is what is assumed by most of us – or a person can be admitted on an observation basis. The statuses look the same on the surface in that patients in both categories may stay for many days receiving medical and nursing care and tests and treatment.

A person’s hospital admission status is determined by the admitting physician. In many cases it will be observation, rather than inpatient, to get a sense of how the patient is doing and to protect the hospital against being financially penalized by Medicare for unnecessary admissions and readmissions. For example, if persons who were originally in the hospital under observation are readmitted to the hospital, they are not counted as readmissions. In recent years the number of patients many hospitals admit and retain under observation has more than doubled.

It is at the time of discharge when the difference between admitted/inpatient and observation/outpatient status becomes dramatically clear. Medicare Part A (hospital insurance) covers the first 48 hours of an observation admission and all of the care of a person who subsequently becomes an inpatient. Coverage for a patient who continues on observation after 48 hours is switched to Medicare Part B which usually only covers doctors’ services and outpatient care. This results in co-pays of some 20 percent for the doctors’ and outpatient services with no cap on hospital services and high prices for medications which will be billed by the hospital. Spending time in the hospital on observation also does not count toward the three consecutive days of hospitalization needed to qualify for Medicare-covered skilled nursing facility services if needed. All of these costs will have to be assumed by the patient or family.

Case managers in a hospital have been trained to advocate for their patients, coordinate patient care, increase patient adherence to their treatment plans and ultimately, improve patient outcomes. However, today they are being asked to wear two hats that may be in direct conflict between advocating for their patients and adhering to recommendations of their hospital’s utilization review process which might require that a patient remain in

observation/outpatient status or go from inpatient to observation status. Patients and families are often not fully informed of the status and financial ramifications of a patient’s ongoing care status.

So what can you do to assure adequate Medicare coverage?

  • ASK what the status is of the Medicare recipient’s admission – and get it in writing. If it is observation, wait 24-48 hours and ask if the patient has been changed to admitted/inpatient status (unless the person has been discharged). If the change does not occur, you can (1) ask the patient’s physician if observation status is justified, explaining how this status will affect the patient financially; (2) ask the patient’s hospitalist to reconsider the observation decision; and/or (3) refer the case to the hospital committee that decides status. Status can be changed at any time so it should be checked every day.
  • Reduce medication expenses. If the patient or family member is billed for medications upon discharge, appeal and use the patient’s Medicare D prescription card to offset costs itemized on the hospital bill.
  • Investigate using Medicare’s skilled home care benefit if rehabilitation is needed and will not be covered by Medicare in a facility.
  • Appeal Medicare’s decision not to cover rehabilitation facility expenses once a person has been admitted. Ask the nursing home for a “demand bill” to Medicare. When it is rejected, appeal using the Center for Medicare Advocacy’s website for a Self-Help Packet for Medicare “Observation Status” (see
  • Contact your U.S. Representative in Washington and tell the person to support the Improving Access to Medicare Coverage Act of 2013 (H.R. 1197 and S 569). This bill requires that observation hospital stays count as part of the three hospital days required for nursing home coverage by Medicare. Tell national and state legislators if you have been, or know someone who has been, adversely effected by observation stays.

The Advocates for Senior Issues have published an informational brochure to inform patients about this important issue.  Please contact us to get more information or a copy of this brochure.