Inpatient Status or Observation Services: Why Does It Matter To Your Parents?

Be sure you know whether it's an inpatient stay or an observation services stay!Most people with aging parents eventually learn about what Medicare will and will not pay for.  One “general rule” that “everyone” learns is that if you spend 3 nights in a hospital and then are discharged to a “SNF” (a skilled nursing facility), Medicare will pay for the cost of at least part of the stay at the SNF.

Right? Well…  it depends:

  • If the hospital stay was “inpatient care”, then it’s much more likely that Medicare will pay for part or all of the stay at the SNF.
  • If the hospital stay was for “observation services”, then Medicare definitely won’t pay for any of the stay at the SNF.

You might then think, “Well, I’ll just make sure that my parent’s stay is classified as inpatient status.”  It’s not that easy, however.  In fact, in some cases hospital stays that are initially determined to be inpatient status are later retroactively assessed to be observation status!

There have been a number of complaints about this recently.  One person recently wrote:

“Have you noticed the uptick of “observation” stays in hospitals in the past year or two?  I’ve heard lots of clients complain they were in the hospital for weeks only to discover, sometimes after they went to a nursing home, that they had never technically been admitted as inpatients to the hospital. Of course, since they  did not have the requisite 3 day inpatient stay they  weren’t eligible for Medicare coverage in the nursing home….”

Another person wrote this in a different posting:

“An elder law attorney recently told me about a case here:  After dc to SNF this hospital RETROACTIVELY re-classified admission (it included 3 midnites) to observation status. SNF & patient didn’t find out until 3rd week, said she would have to private pay for the rehab stay.  Family hired the attorney, he tried to appeal it–Medicare intermediary said they had no jurisdiction because it was not an appeal for premature discharge or denial of benefits, that the hospital was within its rights to retroactively change the admission designation and that the nursing home had the right to bill the patient for services rendered.  The best the attorney could do was to negotiate the SNF daily rate down to their long-term private pay rate of $220/day instead of $375 Medicare rate, and get the therapy re-billed under Medicare part B as outpatient services, and the rxs (luckily she wasn’t on a lot) under part D.”

For more articles about this see

As usual, the government leaves it up to families to be aware of such matters and diligently check on every last detail in order to protect their loved ones’ best interests.  Be sure to ask the doctor or the hospital case manager whether your older loved one is being “admitted” on an inpatient basis, or is on “observation services” status.  A professional geriatric care manager can help by knowing about these details and helping older adults and their families navigate through these potholes in the healthcare system.

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About Tim Colling

Tim Colling is the founder and President of A Servant's Heart In-Home Care, which provided in-home caregiving services in San Diego County, and also of A Servant's Heart Geriatric Care Management, which provided
professional geriatric care management services and long term care placement services in San Diego County. Tim has more than 30 years of experience in management in a variety of industries. He held a Certified Care Manager credential from the National Academy of Certified Care Managers. Tim is also a Certified Public Accountant (retired), and received his Bachelor’s Degree in Accounting from California State University at San Diego. In addition to writing blog posts here for the Servant’s Heart blog, Tim also is a regular contributor to HealthLine.com and to FamilyAffaires.com as well as blogs of other eldercare services provider companies. Finally, Tim is also the president of A Servant's Heart Web Design and Marketing, which provides home care marketing as well as website design and online marketing for those who serve the elderly and their families.