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Differences Between Inpatient, Outpatient, and Under Observation

October 6, 2016

When you are a patient in the hospital, it’s important to know how your Medicare coverage applies. There are differences between inpatient and outpatient care and each status can determine which part of your Medicare plan will help pay your costs. These differences also determine whether or not you can receive coverage for a skilled nursing facility stay (SNF).

Inpatient care versus outpatient care

Inpatient care means you are admitted to the hospital on a doctor’s order. You are classified as an inpatient as soon as you are formally admitted.

For example, if you visit the Emergency Room (ER), you are initially considered an outpatient. However, if your visit results in a doctor’s order to be formally admitted to the hospital, then your status is transitioned to inpatient care. The hospital care that you receive is considered inpatient until the day you’re discharged.

Despite a hospital stay, your care may be considered outpatient services, for example if you are receiving outpatient care on the same day that you are discharged from the hospital. Even if you spend the night in the hospital, your care could be considered outpatient. If your doctor orders observation of your condition or tests to help diagnose your condition while you are in the hospital, you remain classified as an outpatient until a doctor orders inpatient hospital admission.

Outpatient care is defined as hospital or medical facility care that you receive without being admitted or for a stay of less than 24 hours (even if this stay occurs overnight). Outpatient care also includes any health care services that you receive while at the facility.

What does “under observation” mean?

Being “under observation” refers to a status where a doctor must monitor you for a time to decide whether or not you should be admitted for a hospital stay. This is a form of outpatient care. If a doctor then decides to admit you to the hospital for treatment, you transition from outpatient (on the first night when you were under observation) to inpatient (for medical treatment).

Services you could receive through outpatient care include, but are not necessarily limited to, emergency room services, medical observation, outpatient (day) surgery, lab tests, X-rays, or other services received without the doctor’s ordering admission.

Skilled nursing facility (SNF) care following an inpatient hospital stay

Medicare only covers a skilled nursing facility stay that is preceded by a qualifying inpatient hospital stay. This means you must have received inpatient hospital care for at least three straight days (beginning on the day you were first admitted as an inpatient and excluding the day you are discharged from the hospital).

Inpatient Medicare costs

Medicare Part A covers hospital services while you are receiving inpatient care. These services include semi-private rooms (usually two or three patients per room), meals, general nursing, medications necessary for your inpatient care, and any other supplies and treatments necessary to treat your condition. For an inpatient stay, you pay your Part A deductible amount for all hospital services received during the first 60 days of your stay.

Any doctor’s services that you receive during an inpatient hospital stay are covered under Medicare Part B. You pay 20% of the Medicare-approved amount for these services after paying your Part B deductible.

If you have coverage from a Medicare Advantage plan, then your inpatient hospital care is covered by it. Medicare Advantage plans are offered by Medicare-approved private insurance companies and they are required to provide the same coverage as Part A and Part B (excluding hospice care which is still covered by Part A).

Outpatient Medicare costs

Outpatient services are covered under Medicare Part B. You pay a copayment for every outpatient service received, and that amount may vary depending on the service you receive. For example, your copayment for an X-ray is likely to be different than for an emergency room visit.

Part B also covers outpatient doctor’s services. You are responsible for paying 20% of the Medicare-approved amount for these services after paying your Part B deductible.

Some screenings and preventive services are covered without cost to you because the Part B deductible does not apply. If you are enrolled in a Medicare Advantage plan, it covers your outpatient services just as Part B would.

Generally, prescription and over-the-counter drugs you receive in an outpatient setting (like an emergency department) aren’t covered by Part B. Many hospitals have policies that don’t allow patients to bring prescription or other drugs from home for safety reasons. If you have Medicare prescription drug coverage (Part D), these drugs may be covered by the Medicare Advantage Prescription Drug plan or stand-alone Medicare Part D Prescription Drug Plan under certain circumstances.