Observation, Outpatient, or Inpatient Status Explained

If you have recently had surgery, or if you have gone to the emergency room and have been told you will be staying in the hospital for your condition, you may have questions about the difference between observation and inpatient hospital stays. 

Doctor talking to a patient before surgery
 Medioimages/Photo Disc/Getty Images

This topic is often very confusing and is a distinction that is typically made for insurance purposes, as the care is often exactly the same whether you are in the hospital for a brief observational stay or a longer (admitted) course of care.

First, let’s talk about what the terms inpatient, outpatient, being admitted and observation means. For the layperson spending the night in the hospital, they often assume they are an admitted inpatient. They are in the hospital, so this makes sense, but in many cases, this is incorrect for the purposes of insurance coverage. 

Length of Stay

The length of your stay is based upon how many midnights you will spend in the hospital. The midnight stay distinction may seem odd, but this just means that you will accrue an additional day of hospital billing if you are in your room at midnight. That doesn’t mean you should take a walk at midnight; it means that if you are in the hospital under the care of a physician at midnight, you will accrue a day of charges. 

For example, you go to the Emergency Room at noon. You are told that you will be staying overnight in the hospital. You leave the next day at noon. You were in the hospital at midnight, therefore you will be considered to be in the hospital for one midnight which means you will be billed for one day. This is an outpatient, or observation, stay.

Another example: You go to the Emergency Room at noon. You are told that you will likely be admitted to the hospital for a few days. You are taken to your room on Monday at 6 p.m. You stay on Monday night, Tuesday night and go home on Wednesday at 7 p.m. Your bill will be for two midnights, or a two-day stay, even though you were in the hospital for 49 hours. This is an inpatient stay, you were admitted to the facility.

Inpatient, Observation, Outpatient, Admitted Distinctions

  • Inpatient: A patient starting when you’re formally admitted to a hospital with a doctor’s order. The day before you’re discharged is your last inpatient day. 
  • Observation: A patient who is in the hospital with an expected length of stay of one midnight. Example: You fall and break your arm in the afternoon, you go to the emergency room and after you see the doctor you are told that you will stay in the hospital overnight, have surgery in the morning and go home late in the afternoon. 
  • Outpatient: A patient who is seen in the emergency room, a patient who receives outpatient services such as an x-ray, wound care, laboratory tests, imaging studies or surgery that does not require hospitalization during recovery. If the doctor hasn’t written an order to admit you to a hospital as an inpatient, you’re an outpatient even if you spend the night at the hospital.  
  • Admitted: A synonym for an inpatient. Patients who are expected to be in the hospital for two or more midnights. For example, you break your hip and are taken to the emergency room. You are admitted to the hospital to have surgery the next morning. You have surgery and two days later you are discharged to continue recovering at home. 

Why Inpatient Versus Outpatient Matters

In day to day conversation, “I’m being admitted to the hospital” means that you are going to be treated in the hospital, in a room with a bed and nursing care. To Medicare, and other types of insurance companies, being admitted to the hospital means that you will be staying in the hospital at least two midnights. 

For patients with Medicare, the distinction can be an important one. Outpatient services are covered as part of Medicare Part B, while inpatient services are covered under Medicare Part A. Medications may fall under Part D. There are many rules and regulations that dictate what is paid for by which type of Medicare and the copay for which you may be responsible. 

Are you confused yet? Wait, everything may change again if you are admitted as an observation patient with an expected short stay but end up staying longer and becoming an inpatient. It is also important to read information about what Medicare pays during hospitalization with a helpful guide to coverage.

It’s OK to Ask for Help!

Keep in mind that while these terms are confusing, every hospital has staff members available to help explain if you are an observation or admitted patient, what your insurance company will cover and the deductible you are likely to be required to pay. 

If you have been discharged from the facility and are confused about your bill, the billing department is accustomed to explaining the differences in types of billing and can also be of great assistance when it comes to understanding your hospital bill and what you may owe the facility.

1 Source
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  1. Medicare.gov. Are you a hospital inpatient or outpatient? Revised August 2018

Additional Reading

By Jennifer Whitlock, RN, MSN, FN
Jennifer Whitlock, RN, MSN, FNP-C, is a board-certified family nurse practitioner. She has experience in primary care and hospital medicine.