When a Medicare beneficiary is admitted to a hospital as an inpatient most of the cost of the stay is paid under Part A, which covers the cost of a hospital stay. In 2017, the only cost the beneficiary must pay for stays of 60 days or fewer is the $1,316 deductible.
Most beneficiaries do not realize that they can also be admitted to a hospital as an outpatient. Your status as an outpatient has nothing to do with where you receive care or the type of care received. You may not even be aware of your status. You can be admitted to the hospital, be assigned a room and receive services as if you were an inpatient, all the while having been admitted as an outpatient by your doctor. Observation status gives the doctor time to decide if he or she should write an order to admit you into the hospital as an inpatient.