Patient Status Basics

By Cheryl Ericson, RN, MS, CCDS, CDIP

Director, CDI, UM/CM, Brundage Group

Hospitals require a physician order to guide hospital care. The patient status order (often referred to as “admission order”) determines if hospital care will be delivered as an outpatient or inpatient service. This is basically a billing determination as it does not affect your ability to order additional services; however, it does impact hospital reimbursement and patient financial responsibilities. It’s best to use the term “hospitalize” rather than “admit” when letting a patient know they will be staying in the hospital overnight.

Did you know the hospital is required by Medicare to officially notify patients of their hospital status?  Leave it to the utilization review experts to have that conversation with the patient.

  • The Medicare Outpatient Observation Notice (MOON) is provided to Medicare patients who receive observation services as outpatients for more than 24 hours.
  • The purpose of the MOON is to ensure patients who spend a night in the hospital receiving observation services understand that they are not currently inpatients and will be responsible for co-pays associated with their Medicare Part B benefits. 
  •  Additionally, patients receiving observation services will not meet the three-day inpatient admission requirement for Medicare Skilled Nursing Facility coverage.   

Providers who treat Medicare beneficiaries have an obligation to deliver medically reasonable and necessary care. Services are considered medically necessary if they meet the standards of good medical practice and are:

  • Proper and needed for the diagnosis or treatment of the beneficiary’s medical condition;
  • Furnished for the diagnosis, direct care and treatment of the beneficiary’s medical condition; and
  • Not mainly for the convenience of the beneficiary or provider.

Medicare expects a provider to order the appropriate type of hospital service, which is validated by hospital utilization review staff.  Unfortunately, the patent cannot request a particular patient status. The ordered hospital status must be rooted in documentation that specifies the patient’s acuity, comorbidities, specific risk if care is not provided in the hospital setting and associated treatment plan.

Providers should not automatically default to observation services for patients who qualify for inpatient services to avoid patient frustration and the associated hospital administrative burden.  According to Medicare, “Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short-term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation services are commonly ordered for patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge.”

“When a physician orders that a patient receive observation care, the patient’s status is that of an outpatient. The purpose of observation is to determine the need for further treatment or inpatient admission. Thus, a patient receiving observation services may improve and be released or be admitted as an inpatient.”

Observation services may be appropriate when:

  • Active care or further observation is needed following emergency room care to determine if the patient is stabilized.
  • Intense physician or nursing care is expected to be necessary for less than 2 midnights.
  • Further diagnostic testing and/or observation is needed to make a diagnosis and establish appropriate treatment.

Although a patient can be upgraded from observation status to inpatient status, if a provider expects the patient will need two or more nights of hospital services or their acuity is such that they need an intense level of hospital services, e.g., mechanical ventilation, intensive care service, etc., it is appropriate to order inpatient status.

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