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How will my costs be affected by inpatient or observation status?
If you aren't actually admitted to a hospital – and are classified as "under observation" – your costs could change significantly.
Inpatient care is medical treatment administered to a patient whose condition requires treatment in a hospital or other health care facility, and the patient is formally admitted to the facility by a doctor.
Medicare Part A ‘hospital insurance’ – coverage of inpatient care
Medicare Part A (hospital insurance) pays for a range of inpatient care in hospitals, skilled nursing facilities, and critical-access hospitals. Part A also covers some home healthcare and hospice services.
Ancillary services are medical services provided in a hospital while a patient is an inpatient, but paid by Medicare Part B (outpatient care) when the Part A (hospitalization) claim is denied because Medicare believes that it was unreasonable or unnecessary for the person to be admitted as an inpatient. Ancillary services include things like diagnostic x-rays and lab tests, prosthetic devices, physical therapy, and various screening tests, among others.
In 2013, CMS proposed regulations (finalized in 2014) to make it easier for hospitals to rebill services to Medicare Part B if a claim to Medicare Part A is denied. So instead of just being able to obtain payment for the limited list of ancillary services that were previously eligible for Part B coverage in that situation, hospitals can now rebill most services under Part B if the Part A claim is denied.