06/09/2025
Hospital Observation Status: What Families Need to Know
When a loved one is hospitalized, families often assume Medicare will cover everything, especially if the person is staying overnight in a hospital bed.
But there’s a hidden trap that catches many Texas families off guard:
Observation status.
This hospital classification can affect your loved one’s Medicare coverage, access to nursing home care, and out-of-pocket costs — even if they’re receiving full treatment in a hospital room.
What Is Observation Status?
Observation status means your loved one is not officially admitted as an inpatient, even though they’re in the hospital for monitoring, testing, and treatment.
In Texas hospitals — including major systems like Memorial Hermann, Baylor Scott & White, Methodist, and UT Health — this is a Medicare billing category. Patients may spend hours or even days in a hospital bed without ever being "admitted" under Medicare rules.
They are technically considered outpatients, and that matters a lot when it comes to:
Medicare billing
Hospital costs
Skilled nursing facility (SNF) eligibility after discharge
Why It Matters
Medicare only covers post-hospital skilled nursing care if the patient was an inpatient for at least three consecutive days, not counting the discharge day.
In Texas, this is especially important because:
Many hospital systems default to observation status for seniors with falls, UTIs, dehydration, or mild strokes — common reasons for elder hospitalization.
Discharges to skilled nursing facilities happen quickly. Families often don’t find out until after Medicare denies coverage.
I often see this in Houston and across Texas:
A family thinks rehab is covered, then receives a $6,000–$12,000 nursing home bill because the hospital stay didn’t qualify under Medicare.
Know Your Rights: The MOON Form
Hospitals in Texas are required to give you a MOON (Medicare Outpatient Observation Notice) if your loved one has been under observation for more than 24 hours.
But this form is:
Often handed out late or without explanation
Easy to misunderstand
Not an appealable decision under current Medicare rules
Tip: If you get a MOON form, it’s a red flag. Ask questions right away.
What You Can Do-
Ask the Right Question
Say: “Is my loved one admitted as an inpatient, or are they under observation status?”
Request Documentation
If observation: ask for the MOON form and keep a copy.
Talk to the Hospital Case Manager
Texas hospitals typically have discharge planners or case managers who can explain the implications, but families often need to push for clarity.
Document Everything
Record the date/time of admission, discharge, and any staff communications.
Consult an Elder Law Attorney
Especially if skilled nursing care is needed or Medicaid planning may be required.
For assistance, see
Observation Status Appeal ResourcesMarch 20, 2025 Frequently Asked Questions about the “Observation Status” Court DecisionRecorded Webinar (Jan. 22, 2025) on Observation Status AppealsRetrospective Appeals FlowchartProspective Appeals FlowchartRequest for Retrospective Appeal of Medicare Part A ...
