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Inpatient vs. Observation FAQs

What is Observation Status?

There are two types of patient status in hospitals: Inpatient and Outpatient. Observation status is a form of outpatient status.

Observation services are provided when the physician needs additional time to determine if the patient’s condition will require inpatient admission.

Observation services generally last less than 48 hours.

How is my portion of payment responsibility different with Observation (Outpatient) status?

Outpatient status affects what the patient has to pay for the visit and may affect coverage of services. This is based on insurance rules.

Medicare patients typically pay a co-payment for outpatient hospital services. For Medicare-approved physician services, the patient typically pays 20% after the part B deductible.

In most cases, the Medicare co-payment for outpatient hospital services is not more than the inpatient hospital deductible.

The total co-payment for all outpatient services (hospital and physician services) may be more than the inpatient hospital deductible.

Coverage of costs is determined by the individual insurance plan. Medicare Advantage plans, other Medicare Part C plans, and commercial insurance plans vary on their coverage.

It is recommended that patients contact the insurance company to determine costs and coverage.

Generally, prescription, over-the-counter and medications considered self-administered (such as insulin) are not covered by Part B when a patient is an outpatient (Observation).

If the patient has Part D (prescription drug plan), some of the medications administered while in the hospital may be covered.

For safety reasons, we do not allow patients to administer their own medications brought in from home.

Is skilled nursing facility coverage affected by Observation (Outpatient) status?

If the patient needs skilled nursing facility (SNF) care after leaving the hospital, Medicare Part A will only cover SNF care if the patient has 3 consecutive days. This does not count the day of discharge in a medically-necessary inpatient status. This is a Medicare rule.

If the patient has Medicaid, a Medicare Advantage (managed Medicare) plan or a commercial plan, the requirements for a SNF stay will depend on the insurance company and specific plan.

Observation days do not count as part of a qualifying inpatient stay for skilled nursing facility admissions.

For more information regarding nursing home placement directly from home, please contact the facility of your choice, your health care provider or 812-996-6338.

What if the patient condition changes and the physician changes status to Inpatient?

If it becomes necessary to change a patient from outpatient to inpatient status, generally Medicare Part A will cover the inpatient services.

A stay longer than 48 hours does not automatically qualify the patient for an inpatient stay.

Medicare (or your particular insurance plan) has certain criteria that determines when inpatient status is appropriate.

Most of the time, the patient will pay a one-time deductible for all of the inpatient hospital services for the first 60 days in the hospital.

Medicare Part B covers most of the physician services during an inpatient stay. The patient may have to pay 20% of the Medicare-approved amount for physician services after paying the Part B deductible.

Again, it is best to check with the insurance company to find out what is covered by your specific plan.