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For Medicare beneficiaries, the designation of “inpatient” or “outpatient” during a hospital stay can have significant financial consequences. Specifically, this designation will affect patient responsibility for hospital services, and will also determine whether Medicare will cover post-hospitalization rehabilitation in a skilled nursing facility. Thus, it is of the utmost importance that a patient know whether they have been admitted as an “inpatient,” or are considered an “outpatient.”

A person is an “inpatient” when they have been formally admitted to a hospital under a doctor’s order. A person is an “outpatient” when a doctor has not issued an order to admit as an inpatient. A person can still be an outpatient even if they have completed admission paperwork; have been given a room in the hospital; have been undergoing tests and receiving treatment; and have been brought meals. Typically, this is because the patient has been placed on “observation status” or receiving “observation services.”

Observation services are outpatient services given to a patient in a hospital in order to help the doctor decide whether to admit the patient as an “inpatient” or discharge. These services are medically necessary and may include X-rays and lab tests.

For patients that are discharged directly from a 3 day stay in the hospital to a skilled nursing facility for rehabilitation, knowing whether an inpatient admission occurred is crucial. If there was no admission, but rather an outpatient observational status, the patient will not be entitled to Medicare coverage of any portion of their stay in the skilled nursing facility. An admitted patient will be entitled to full Medicare coverage of the first 20 days (with up to 80 days of an additional coverage with co-payment of $152/day, that may be covered by the patient’s medigap policy).

Medicare Part A covers inpatient hospital services. For those patients that only have Part A, an observation status designation will leave them responsible for their entire hospital bill.

Knowing your status in the hospital can protect you from large hospital bills, and can afford you the opportunity to put asset preservation planning in place if you know that a discharge to a nursing home is in your future. Make sure to ask the doctor whether you’re in, or your out before it’s too late.

If you have any questions about an “inpatient” or “outpatient” hospital stay or about any other Medicare or elder law issue, contact one of our knowledgeable attorneys.

About the Author: Beth L. Barnhard is an attorney with Meyerson, Fox, Mancinelli & Conte, P.A. in Montvale, New Jersey.  A Certified Elder Law Attorney as recognized by the National Elder Law Foundation (NELF), Beth concentrates her practice on representing elder law clients with Medicaid applications and administrative Fair Hearings, asset preservation planning, guardianships, protective arrangements, estate planning, estate administration, and estate litigation.