When a patient is put into the hospital, they’re assigned a status. Inpatient status and observation status are the two most common.
While inpatient status is what we typically think of when we hear of someone being admitted to the hospital, people assigned to observation status can spend several days and nights getting treatment in the hospital also. In fact, they might be in the very same type of hospital bed, right next door to an inpatient.
Observation used to be a way to keep someone in the hospital for a short while as doctors tried to decide if he or she was sick enough to need inpatient treatment. But, now observation patients can be kept in the hospital for days.
If you’re put in the hospital in observation status, it’s important to understand that you’re not actually admitted to the hospital as an inpatient. You’re technically an outpatient.
This means that your health insurance company or Medicare won’t pay for your hospital stay as it would have paid had you been hospitalized as an inpatient. Instead, they’ll pay for that stay as an outpatient service.
Your share of cost, or coinsurance, for outpatient services like observation status is usually larger than your share of cost, or copayment, for inpatient hospitalization. Usually, patients admitted to observation status end up with higher out-of-pocket costs than they would have had if they’d been an inpatient.
Although complex and confusing, there are rules, or at least guidelines, your doctor and hospital will follow when deciding whether to assign you observation status or inpatient status.
To better understand the difference between observation status and inpatient status, as well as understand how the observation guidelines work and why hospitals are assigning patients to observation status, read Hospitalized in Observation Status? You’ll Pay More: Inpatient v. Observation Status and How Observation Guidelines Work.
Mr. Smith comes to the emergency room with chest pain. Unable to tell for sure whether or not Mr. Smith is having a heart attack, the cardiologist, Dr. Jones, puts Mr. Smith into the hospital on observation status.
Mr. Smith spends the night in a hospital room attached to a heart monitor. Throughout the night, nurses check on him regularly. He gets oxygen and has blood tests drawn every few hours. Dr Jones may even have ordered more extensive tests to determine the condition of Mr. Smith's heart.
Late the next evening, after two days and one night in the hospital, Dr. Jones has enough information to determine that Mr. Smith didn't have a heart attack. Mr. Smith is sent home.
Mr. Smith's health insurance company pays for part of his hospital stay charges under Mr. Smith's outpatient services benefit coverage. (If Mr. Smith has Medicare, Medicare Part B will cover part of Mr. Smith's hospital observation charges.) Since Mr. Smith's health insurance policy has a 25% coinsurance for outpatient services, Mr. Smith pays for 25% of the charge for of every blood test and X-Ray. He also pays 25% of the charge for oxygen, of the charge for heart monitoring, and of the hospital's hourly charges for outpatient observation services.