January 13, 2023
A hospital’s classification of you as inpatient or outpatient can significantly affect Medicare’s coverage, shaping how much you pay for services and whether your coverage includes care in a skilled nursing facility.
Medicare Part A pays for inpatient hospital and post-hospital extended care, including care in a skilled nursing facility following admission to a hospital. However, it does not cover outpatient care, which typically falls under Medicare Part B.
To receive coverage for post-hospital nursing home care under Part A, you must have been an inpatient in a hospital for at least three days.
As Medicare.gov explains, individuals become inpatients after the hospital formally admits them per a doctor’s order. The day the hospital discharges them constitutes the last inpatient day.
Who Is Considered an Outpatient?
Individuals who receive care in hospitals that do not formally admit them are regarded as outpatients. People receiving emergency department services, observation services, outpatient surgeries, lab tests, or X-rays are outpatients. Even when these individuals spend the night in the hospital, Medicare still considers them outpatients.
When a hospital reclassifies you from an inpatient to an outpatient receiving observation services, you could lose Part A coverage. This is because Medicare Part A does not cover post-hospital extended care for those classified as outpatients.
If your hospital changed your status from inpatient to outpatient, you have the right to challenge the status change. Upon your appeal, Medicare must reconsider its decision and might change your status back to inpatient, allowing Medicare Part A coverage to take effect.
In the past, beneficiaries lacked the right to appeal status changes from inpatient to outpatient. The Center for Medicare Advocacy secured these appeal rights for Medicare beneficiaries in a 2020 class action lawsuit, which the federal court affirmed in January 2022.
The court required Medicare to have appeal procedures in place for hospitalized beneficiaries reclassified from inpatients to outpatients getting observation services.
Medicare.gov explains the process for appealing a reclassification and who qualifies for an appeal.
You have the due process right to appeal if you meet the following requirements:
On or after January 1, 2009, a hospital accepted you as an inpatient, then designated you as an outpatient receiving observational service.
A Medicare Outpatient Observation Notice (MOON) or a Medicare Summary Notice (MSN) notified you that Part A does not cover your observation services.
To appeal, you must also meet one of the following criteria:
At the time of your hospital stay, you were not enrolled in Medicare Part B.
Alternatively, you were enrolled in Part B, stayed at the hospital for three or more concurrent days without being an inpatient for at least three days, and entered a skilled nursing facility within 30 days after your hospital stay.
You can also appeal if it’s been less than 30 days since your hospital stay.
When Can You Appeal?
According to Medicare.gov, the appeals process for reclassifications has yet to be made available. Generally, Medicare has a five-step appeals process.
If you win your appeal, Medicare must disregard your reclassification as an outpatient. It also must consider you an inpatient to determine Part A Benefits, including coverage for your stays in a hospital and skilled nursing coverage facility.