This is a tough one and I suppose the "Inpatient" v "Observation" status could be abused in some way. But as a nurse I can tell you these two statuses are very difficult to navigate. Also, as a nurse, I hate dealing with this problem. I want to focus on medical and nursing care, not billing issues.


You can be admitted as as "Observation" patient for up to two nights. This means you are too ill to be treated in clinic, but not really ill enough to be admitted into the hospital. But, you are still in the hospital and receiving full hospital care- there is no difference at all in the care. But the hospital gets paid less.


With Medicare, if you are admitted "inpatient", you pay one deductible that covers up to 60 days of hospitalization and also 20% of services.


If you are admitted as 'observation', you pay a copay for each service. The copays can exceed the "inpatient" deductible amount, and over-the-counter medications such as Tylenol are not covered at all. (No, you can't bring your own. It's against Medicare's rules.)

Because of this, "inpatient" status is often less expensive to the individual than "observation" status. To my view, it's entirely possible that "inpatient" status can be used to reduce out-of-pocket costs. Perhaps this is what is happening here- attempts to reduce out of pocket costs to individuals.


On day three of "observation", the nurses get contacted and are asked to call the Doctors and remind them that their patient will need an "admit as inpatient" order. If this gets neglected, the hospital loses any reimbursement for the days after day two.


Really, I think this "in v obs" thing is a mess. Why is there a little "no man's land" between being "in" or "out"? The medical care is not any different at all.