It is important to understand your patient status when receiving hospital care.

In some cases, patients may be placed under “observation” status. This decision can have significant financial and physical consequences.

Recent legislation gives Medicare beneficiaries the right to appeal their status in certain situations.

What is Patient Status?

When a Medicare patient goes to the hospital, they will typically enter through the emergency department. The doctor must choose between admitting the patient to the hospital, allow them to go home, or keep them in observation status.

A patient in observation is receiving identical care to inpatients. But they are classified as an outpatient for traditional Medicare coverage.

Observation services are less expensive than inpatient services. And it can have a significant impact on the cost and coverage of care.

The Issue with Observation Status

If a patient is classified as “observation”, they may not be eligible for certain coverage. This includes Medicare coverage for later rehabilitation services.

Medicare will not pay for rehabilitation if the patient was not classified as inpatient. For that, you need to be an inpatient for three consecutive days during their hospital stay.

This can have a significant physical and financial impact on the patient. Specially if they may not receive the care they need to fully recover.

If they decide to pursue rehabilitation services on their own, they may be left with a huge bill.

Your Rights to Appeal

Until now, “observation” patients had no right to appeal their classification. But, recent legislation has granted Medicare beneficiaries this right in certain situations.

It was a 2020 federal court decision and a later appeal in 2022. Now, some Medicare beneficiaries have the right to appeal this medical decisions. This means that if you feel that your patient status is incorrect, you can take steps to appeal the decision.

Understanding Observation Status

Being in observation can be a confusing and frustrating experience. It means that a physician has determined that the patient is too sick to go home, but not sick enough to be an inpatient.
While in the hospital, a patient in observation status may receive the same level of care as an inpatient. Observation services can include mental and physical assessments, diagnostic tests, short-term treatments, medications, and feedings.

Notice Act

In 2015, President Barack Obama signed the Notice of Observation Treatment and Implication for Care Eligibility Act. Known as the Notice Act.

This act requires hospitals to notify patients that they are in observation status. It applies if they have been receiving hospital services for more than 24 hours.

Patients must be given both written and oral notifications of their observation status. The written notice must explain why the patient is in observation status and not as an inpatient.

The notice also needs to explain how their observation status may affect the cost of their hospital care. Also, how it can impact their eligibility for later rehab coverage.

The written notice must be signed by the patient or a person acting on the patient’s behalf. If they refuse to sign the notice, then a staff member of the hospital must sign the notice.


The new right to appeal provides an important avenue of recourse for patients. It also ensures that they receive the appropriate care and coverage.

We understand that Medicare can be quite complicated. With our help, you will have in-depth health insurance knowledge of the benefits offered by basic and supplement plans.

Here at Florida Health Agency, our Medicare Experts provide FREE information and recommendations so you can choose the plan that best fits your needs, lifestyle, and pocket. Please give us a call today or click below to schedule an appointment with one of our health insurance experts.


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