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The Difference Between Being Classified as an Observation Patient or Inpatient

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The Difference Between Being Classified as an Observation Patient or Inpatient

Patients receiving treatment from health care professionals at a hospital are generally classified under one of two categories, inpatient or observation patient. While the level of care an individual will receive is often the same, inpatient and observation patients are treated very differently when the time comes to pay the bill.

Who is Considered an Inpatient?

An inpatient is an individual who has been formally admitted to the hospital for care. These individuals are generally in the hospital for a lengthy period of time and are being treated for an illness or condition that requires a high level of attention.

Inpatients are:

  • Formally admitted to the hospital
  • Generally requiring a stay greater than 24 hours
  • Being treated for an illness or condition requiring a high level of medical attention

Who is Considered an Observation Patient?

Observation patients are individuals who are not formally admitted to the hospital, yet require a lengthy stay greater than a few hours. Patients are typically placed into observation status following an emergency situation. The observation period is used to monitor a patient’s condition and determine their eligibility for formal admission or release from care. This observation period generally lasts no longer than 24 hours, however some patients have been known to be under observation for several days.

Observation patients are:

  • Not formally admitted to the hospital
  • Typically held for up to 24 hours to determine their formal admission or release
  • Usually placed in observation status following a medical emergency

How are Inpatients and Observation Patients Treated Differently?

Both classifications of patients will receive the necessary medical treatment they require, regardless of their status. However, these classifications are treated very differently by Medicare and insurance companies.

Patients under observation status are typically charged co-pays for doctor and hospital services. Medicare patients who are classified as inpatients are covered under Medicare Part A (Hospital Insurance). Those who are classified as observation patients are partially covered under Medicare Part B (Medical Insurance). While there is coverage for both classifications, the billing process is much different. Inpatients will only have one deductible payment for all the services they receive, while observation patients will have a co-pay for each individual service. Additionally, many hospitals do not allow patients to take prescription medications that they bring from home. These drugs will be administered by the hospital and the patient will be charged for them.

If a Medicare patient requires an additional stay in a nursing or rehab facility, his or her status while in the hospital determines Medicare payment for this stay. Under current rules, Medicare pays the entire bill for the first 20 days in such a facility. However, this only occurs if a patient is admitted to a hospital for three days, not including the day of their discharge. If a patient is under observation status for all or part of this time, he or she will have to pay the bill out of pocket.

Determination of admission status is not always provided to a patient during their stay. Patients who spend more than a few hours receiving care at a hospital are advised to inquire about their admission status to avoid being surprised by unexpectedly high medical bills following their stay.

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