Observation status

What it means

A person can spend several days and nights in a hospital, on a ward, under a doctor's care, and never be an inpatient. Observation is an outpatient service. The bed, the food and the nursing look identical from the corridor; the billing category is different.

Two consequences follow. Observation is paid under Part B rather than Part A, so the cost-sharing is different and medications given in the hospital may be billed separately. And Medicare requires three consecutive inpatient days before it will pay for a skilled nursing facility afterwards — days under observation do not count toward them, and neither does the day of discharge.

Hospitals must give written notice when somebody has been under observation for more than 24 hours, and no later than 36 hours after it began. If the hospital changes an inpatient's status to observation, a separate notice has to be given, and it carries an expedited appeal that is decided while the patient is still in the hospital. Both notices are easy to miss among the rest of the paperwork and both are the most useful pages in it.

Medicare Advantage plans apply their own rules and some waive the prior-stay requirement altogether, so the answer for one patient is not the answer for another in the next bed.

Why it matters

It decides whether the rehabilitation stay that follows is covered or is paid privately, and the amounts involved are large.

Families are almost never told at the time, and by the time it becomes relevant the stay is over.

There is a window in which it can be challenged, and it closes when the patient leaves. That is the part the ordinary explanation of this leaves out.

When you are likely to meet it

• When somebody has been in the hospital for days and the family is planning for a rehabilitation stay.
• When a written notice about observation, or about a change of status, arrives during a hospital stay.
• When a skilled nursing facility says the stay will not be covered.

Inpatient and observation

The same bed, the same ward, and a different answer to what happens next.

Ask which one it is, in those words, and ask on the first day. A Medicare Advantage plan may apply a different rule again.

Related terms

• Benefit periodThe unit Medicare counts hospital and rehabilitation days in — and it is not a calendar year.
• Custodial careHelp with everyday living rather than medical treatment — bathing, dressing, eating, moving about. It is what most long-term care actually is.
• Discharge plannerThe hospital staff member responsible for what happens after a stay ends.
• MedicareThe federal health insurance program for people aged sixty-five and over, and for some younger people with disabilities. It does not pay for long-term care.
• Medicare AdvantageMedicare delivered by a private insurance plan instead of directly by the government. It is also called Part C.
• Qualifying hospital stayThe three consecutive inpatient days Medicare requires before it will pay for rehabilitation in a nursing facility.
• Quality Improvement OrganizationThe independent body that reviews a Medicare discharge or a termination of cover, free and fast, at the patient's request.
• Skilled nursing facilityA facility providing nursing and rehabilitation care that has to be delivered by licensed clinical staff — not the same thing as a nursing home in the everyday sense.

Official sources

The authority this page describes, at the agency that publishes it. Sahvelo does not restate a rule from a secondary source.

• Medicare — skilled nursing facility care and what qualifies for it (opens in a new tab)

Sahvelo guidance that uses this

• Medicare