Observation vs Inpatient

Observation vs Inpatient: Who foots the bill for rehabilitation services? You may know that Medicare covers certain services in a skilled nursing facility (SNF) for up to 100 days, but do you know the requirement for Medicare to pay? If you do not, it could cost you thousands of dollars.

So what’s the secret? In order for Medicare to pay for rehabilitation in a SNF, you must be admitted as an inpatient to a hospital for no less than three days. Seems simple enough, right? This is where we need to look further into the different statuses for a hospital stay.

Observation vs Inpatient

First, let’s look to CMS to help us define “inpatient” – “An inpatient is a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. Generally, a patient is considered an inpatient if formally admitted as inpatient with the expectation that he or she will remain at least overnight and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight.” – CMS, IOMs, Publication 100-02, Chapter 1, Section 10

And how is “observation” defined? - “The use of a bed for physician periodic monitoring and active monitoring by the hospital's nursing or other ancillary staff, for the patient care which are reasonable and necessary to evaluate an outpatient's condition or determine the need for an inpatient admission. ” – Novitas, Local Coverage Determination (LCD) L27548

Based on the above definitions, inpatient and observation admission may look exactly the same to the patient. It is important for you to ask how your stay is being classified so you are not surprised later if Medicare does not cover your rehabilitation. If you are under observation, it is possible for them to change your admission to an inpatient while you are in the hospital. Once you have been discharged, it is too late for them to make the change.

We hope this Observation vs Inpatient example helps you understand how this is covered.

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