Your legal rights: know your hospital status


Lori Swanson
Minnesota Attorney General

From the office of Attorney General Lori Swanson

When you are admitted to a hospital, it is only natural to believe that you have been admitted  as a regular patient, or an “inpatient” to that hospital. Yet, a concept known as “observation status” can affect the amount you pay if you are on Medicare. “Observation status” is a term sometimes used by hospitals and Medicare. Technically, it means that the hospital is caring for you while deciding whether to admit you or discharge you. Hospitals sometimes treat patients overnight for serious injuries or illnesses under the category of observation status. That could cost hundreds or thousands of dollars more than if the hospital classified you as an inpatient.

Medicare recipients can be financially impacted by observation status in at least three ways. First, if a patient requires care at a skilled nursing facility following the hospital stay, he or she must be an inpatient for at least three days before Medicare will pay for any costs at the skilled nursing facility. Second, Medicare will not cover the cost of drugs during that period. Third, Medicare covers these stays at hospitals under Medicare Part B, which charges higher copays than Medicare Part A.

Here’s an example. “Jane” was taken to the hospital after a fall. A doctor reviewed her x-rays and said she had a sprained knee. She was not able to stand with a brace, so she was sent to a hospital room. Another doctor wanted to take a CT scan of her knee, but she asked to wait until the next morning because she was in pain. The next day, the CT scan showed that she had a fracture. Jane assumed that she had been admitted as an inpatient. No one told her that she was coded as “observation status.” After spending three nights in the hospital, Jane was discharged to a skilled nursing facility for rehabilitation. Medicare Part A did not cover the costs of her stay at either the hospital or the nursing facility, so she was billed more than $27,000.

For patients under observation status, Medicare does not pay for many routine drugs that hospital patients may need for chronic conditions such as diabetes, high blood pressure or high cholesterol. Hospitals frequently bill patients steep prices for even generic drugs, so that patients who take even small amounts of drugs may be billed hundreds of dollars.

For example, “Linda” stayed at the hospital for a few days for rotator cuff surgery. Medicare did not cover the costs of the prescription drugs she took while at the hospital.

Higher co-pays under Medicare Part B. Generally, patients will only pay a one-time deductible for all in-hospital services for the first 60 days in the hospital. But with observation status, the patient is responsible for paying 20 percent of the Medicare-approved amount for doctor services after paying the Part B deductible.

Beware of status changes made without your knowledge. For example, “Ruth” went to a hospital after episodes of severe dizziness, palpitations, and shortness of breath. She was admitted as an inpatient, but the hospital changed her status overnight to “observation status” without informing her of the change until the next day. Ruth could not get the hospital to change her status back to inpatient despite her protests. As a result, she could not afford further tests due to the higher co-pays under Medicare Part B.


• If you’re in the hospital for more than a few hours, ask whether you’re an inpatient or an outpatient. Although a hospital is supposed to immediately inform each patient of any change in status, this does not always happen. Additionally, many patients are not fully informed of the consequences of their status.

• Request to know immediately if your status changes.

• Know what you can appeal. The State Health Insurance Assistance Program helps people navigate the Medicare appeals process. The Minnesota Board on Aging operates the Senior LinkAge Line, a free statewide information and assistance program for seniors and their families. Contact Senior LinkAge Line at 1-800-333-2433 or or If you have questions about the operation of the Medicare programs, or the coverage available to you, call 1-800-633-4227 or go to

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