“Observation Status” – What Seniors Should Know Before They Land in the Hospital

doctor examining patient in hositpal

Did you know that seniors can be hospitalized for days, undergo an extensive workup with myriad tests and procedures and receive all manner of drugs without ever officially being admitted to the hospital? Welcome to the wacky world of “observation status,” where you are essentially classified as an outpatient even though the care you’re receiving is within the four walls of a hospital. So why do hospitals put patients on observation status in the first place and why does it matter? Some advocates believe that hospitals are trying to improve their outcomes from government audits to justify that are not unnecessarily admitting patients. Observation status also conveniently supports a billing structure for hospitalizing patients that are not medically safe to be sent home, but don’t meet the technical billing guidelines and insurance requirements for being considered an inpatient. In the end, for seniors, it can mean huge unforeseen costs.

Medicare Part A covers hospital care for inpatients. However, if you are classified as an outpatient, you get covered under Part B. This classification is important. Outpatients often face higher payments for drugs and coinsurance, but where it really hurts seniors big is in the pocketbook — with costs for skilled nursing and subacute rehabilitation. After a hospital discharge, Medicare Part A pays the full cost of skilled nursing and subacute rehabilitation for the first 20 days, and a large portion of the costs up to 100 days — but only if you have been an inpatient. If you have spent less than three consecutive days in a hospital and have not been officially admitted as an inpatient (aka observation status) you will effectively be denied your Medicare Part A coverage to fund subacute rehabilitation and nursing services. So, if you are left unable to walk independently or care for yourself after your “observation status” stay and need skilled nursing care and/or subacute rehabilitation, you will have to pay privately for it at a cost starting at about $400/day in the New York metropolitan region.

Legislation has recently passed that hospitals must inform patients who are hospitalized for more than 24 hours whether they are on observation status. Within 36 hours after a patient is placed on observation services they must be informed, both verbally and in writing, “the reasons for such status.” If you or a loved one believe that observation status has been applied inappropriately, you may want to take early action. The Center for Medicare Advocacy ( has some some useful information and FAQ on Medicare eligibility and rights. You may also want to consult a knowledgeable resource such as an Aging Life Care Professional® at

Written by Anne Sansevero

Categories: Senior Health