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When a person on Medicare is in the hospital, it's critical to understand that if he is an "observed outpatient," that is very different from being admitted as an "inpatient." Even if a patient is an observed outpatient for more than 24 hours, Medicare will not cover subsequent rehabilitation and skilled nursing facility care that might be needed after the hospital stay. Medicare will only pay if the patient has been formally admitted to the hospital as an inpatient for three consecutive days.

How the Law Helps

A new law effective in October 2016 helps ensure Medicare patients understand the difference between outpatient and inpatient status, and what that means for them. The law requires hospitals to give patients specific details about their status as an observed outpatient, and educate them about what services are usually covered by Medicare.

If an outpatient is observed for longer than 24 hours, the hospital must provide an official Medicare Outpatient Observation Notice (MOON). The notice must include information about what Medicare will not pay for and must advise the patient that he will likely be charged extra for any self-administered drug taken for a chronic condition.

What Patients Can Do

The patient must be provided a MOON no later than 36 hours after observation begins. The patient must receive a physical copy of the signed acknowledgement form and hospital staff must verbally inform the patient about how Medicare will handle their observation status. At that time, the patient may want to protect himself by consulting with his doctor and requesting to be formally admitted to the hospital as an inpatient.