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Outpatient Hospital Status Can Cost You

Robert J. Schwab

Krista R. Pleviak

March 3, 2014

In recent years, hospitals are increasingly treating patients without officially admitting them to the hospital. For Medicare recipients, being classified as “under observation” rather than “admitted” can have serious financial consequences.

A patient’s hospital status affects how much Medicare pays for services. If a patient has been admitted as an inpatient, the hospital stay is covered under Medicare Part A. However, if the patient is not formally admitted, even if the patient stays in a hospital bed for multiple days, the patient is considered an outpatient, and services are covered under Medicare Part B, leaving the patient responsible for more out-of-pocket expenses.

A patient who requires skilled nursing facility services after discharge from a hospital will only have Medicare coverage if he or she had an inpatient hospital stay of at least three consecutive days, not counting the date of discharge. In other words, if a patient’s hospital stay is classified as observation, Medicare will not pay for any post-hospital extended care services.

Medicare does not require hospitals to tell patients whether they are admitted or merely being observed. Many patients do not find out that they were not formally admitted to the hospital until they are discharged from the hospital, seek skilled nursing care, and are informed that their nursing care will not be covered by Medicare.

Medicare recipients should ask their doctors and hospital staff whether they are classified as admitted or under observation, and, because admission status can change each day, they should continue to ask each day that they remain in the hospital. If patients discover that their hospital stays are classified as observation status, they should immediately ask their doctors to reconsider the decision and advocate for a change in status. If this does not result in a formal hospital admission, patients should request that the hospital committee that decides status review the matter.

In the event all of these attempts are unsuccessful, patients can use Medicare’s appeals process to attempt to change their admission status. However, the appeals process can be complicated and time consuming and generally requires patients to pay up front for services while seeking reimbursement from Medicare. Therefore, Medicare recipients should make every effort to secure admission status prior to their discharge from the hospital.

If you have any questions about how the information in this article may affect you or your business, please contact Bob Schwab at rschwab@stroudlaw.com or (608) 257‑2281 or your Stroud attorney.


DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.