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Outpatient Observation FAQ

  1. What is outpatient observation?

    Observation is a service which permits patients who have problems (which normally do not qualify for a hospital in-patient stay) to be allowed to stay in the hospital for a "specified amount of time".
  2. What is the difference in billing?

    An Observation stay is billed under outpatient services (under Medicare this would be under Part B) while inpatient admission is billed under inpatient services (under Medicare this would be billed under Part A). Private Insurances may vary but most permit only 23 hours in observation.
  3. What kind of problems do people have that would make observation appropriate?

    Problems that can be treated in 24-48 hours or conditions for which the cause has not yet been determined.
  4. What are some examples of these problems?

    Some examples are dehydration requiring IV hydration, and some types of chest pain.
  5. What is meant by a "specified amount of time?"

    Different insurance payors have different amounts of time that are covered in observation. These services are paid differently than in-patient services.
    • Medicare-observation services cannot exceed 48 hours. Typically a decision to release or admit is made within 24 hours.
    • Medicaid allows up to 24 hours.
  6. What happens at the end of the "specified amount of time?"

    Your physician will decide whether to release you from the hospital or to admit you as an inpatient.
  7. What if my physician decides my condition requires inpatient care?

    Your physician must then write an order to convert your outpatient observation stay to an inpatient admission.
  8. What if my physician decides that I do not require an inpatient care?

    If your physician decides that your care can be performed outside of the hospital you will be released, possibly with home health care services if necessary.
  9. What about "self administered drugs" and other services not covered by my insurance?

    • According to the billing rules for Medicare and Medicaid these charges will have to be billed to the patient.
    • Medicare and Medicaid will not pay for your pills or tablets and even some injectable drugs that fall under the category of self-administered. Please refer to the online version of the National Medicare Handbook at or call 1-800-633-4227 if you need more information.

A complete list of deductibles/services covered by observation/outpatient status is in your Medicare and You handbook.

If you would like to speak to someone regarding your financial responsibility as a result of this hospitalization, please feel free to contact our Business Office at 432-639-3416.