Short answer: Under Medicare, a patient is an inpatient only from the moment a doctor writes an order formally admitting them; until then, emergency room and observation care are outpatient services billed to Part B, even if the person spends one or more nights in a regular hospital bed.
Observation services are outpatient hospital services given while the doctor decides whether to admit the patient or send them home. Medicare’s own guidance is that a patient can be an outpatient “even if you spend the night in the hospital.” Inpatient status starts with the doctor’s admission order; the day before discharge is the last inpatient day.
Status changes the bill. As an inpatient, Part A covers the stay after the Part A deductible ($1,736 per benefit period in 2026). As an outpatient, Part B coinsurance applies to each service; Medicare caps the copayment for any single outpatient service at the inpatient deductible, but the total for all outpatient services can be higher. Status also decides whether a later skilled nursing facility stay is covered, because Medicare requires a 3-day inpatient stay first.
Practical advice for families: ask the hospital, the doctor or a hospital social worker every day, “Is my parent an inpatient or an outpatient?” A Medicare Advantage plan may cost-share differently, so check the plan’s evidence of coverage.