Making Sense of the Medicare Observation Stay

Posted at May 13, 2014 | 116 Comments

Medicare Observation Stay


Dear Sandy,

A friend that I work with is a caregiver for her father. She shared with me yesterday that he was recently hospitalized under the Medicare Observation Stay. Even though he stayed at the hospital two nights, he wasn’t considered inpatient so his Medicare Part A didn’t cover the stay. My friend is pretty upset about all of the unexpected costs her father has incurred because of that status. As a caregiver for my mother, I thought I should probably learn more about this. Can you help?

Donna in Gladwin, Michigan

Dear Donna:

This topic has been a hot one over the past few years. As hospitals work to control their costs and reduce their readmission rates, they are using the Medicare Observation Stay more and more. Here are a few quick highlights to help you understand this rule:

  • Medicare Part A pays for all inpatient hospital costs (less your deductible) for the first 60 days of a hospital stay.
  • Medicare Part B covers outpatient services. This could include the various physicians that treated a patient, lab tests, radiologists who read x-rays or scans, and more. Each of these services will likely have its own individual deductible. While outpatient service costs cannot add up to more than an inpatient stay would have cost, the deductibles can and might be greater.
  • If a Medicare patient is held in observation status and not admitted to the hospital, it is important to know that those observation days do not count toward the Medicare 3-day stay rule required for coverage in a skilled nursing and rehabilitation center. So if the patient transfers to a nursing home to receive therapy, the stay will not be paid for by Medicare.

I hope this information helps you, Donna! If you would like to learn more about what services Medicare does cover, this Outpatient Care summary on their website might help.



Photo Credit

Developed by RCP Marketing