For Family Caregivers

Hospital Admission or Observation Status?

Just because your family member is in a hospital bed, on a hospital unit, eating hospital food, and undergoing hospital tests does not automatically mean that he or she has been admitted to a hospital. Sometimes doctors want to watch a patient for a few hours or a day to see whether there is really a need to be admitted to the hospital. This is called “observation.”  More patients are now in hospitals being observed rather than admitted.  This is largely because of Medicare’s efforts to reduce expensive hospital admissions and possible readmissions.

Does it matter if your family member is admitted to the hospital or is just being observed? Yes, because Medicare pays for hospital admissions and observation differently.  As a result, your family member’s part of the bill is likely to be higher if he or she is only being observed than if he or she were actually admitted.

Admission vs. Observation

• Hospital admissions are covered under Medicare Part A. Under Medicare Part A, after a one-time deductible fee, all hospital costs are covered when a person is admitted as an inpatient.
• Observation status and emergency room care (without admission) are considered outpatient care, and are covered only by Medicare Part B. Medicare Part B treats each lab test, X-ray, and other service as individual items, each with a copay.  Prescription drugs are not covered and may be a separate charge.

There’s more. To be eligible for Medicare-covered skilled nursing facility services, your family member must have been a hospital inpatient for at least three days. The observation days do not count. 

The result? After 72 hours of observation, your family member will have a higher hospital bill and will not be eligible for Medicare-paid rehabilitation services in a skilled nursing facility.  Note that these rules apply to regular (that is, fee-for-service) Medicare; if your family member belongs to a Medicare Advantage (HMO) plan, check with the plan for its requirements.

What can you do? 

• In addition to all your other questions, ask repeatedly, “Has my family member been officially admitted to the hospital, or is he or she under observation status?” Your family member’s primary care doctor will probably not be involved in this decision.
• Make a note of each staff person’s response, including the name and date.
• The hospital can retroactively (after the fact) change the patient’s status from inpatient to outpatient. This change is supposed to be made while the patient is still in the hospital, with a written notification to the patient.

If you do not receive this notification, or if you want to appeal the decision, you can contact the Beneficiary and Patient Centered Care-Quality Improvement Office (BFCC-QIO).

Medicare has issued a brochure that explains observation status. (In English and Spanish) 

Also see the Center for Medicare Advocacy.