"He was admitted to the hospital for observation." You’ve heard that phrase plenty of times. But what does it really mean?

It turns out that "observation" has a specific connotation in the world of medical insurance. If you’re in the hospital for observation, you might be in a bed in what appears to be a regular room, but you actually were never officially admitted.

The "observation" category occupies a sort of halfway world between inpatient and outpatient care, which sometimes creates confusion over whether it’s covered by insurance.

"We use observation to determine whether the patient needs an inpatient admission. But sometimes the third-party payer views it differently," said Veran Smith, director of case management for Northeast Georgia Medical Center.

"If we don’t agree with the insurance company’s opinion, we get the doctor involved. It’s all driven by the physician’s assessment of the patient’s condition."

There are basically two scenarios in which observation might be used. One is that the patient comes to the hospital’s emergency room, and the doctor isn’t sure if their condition is serious enough to warrant hospitalization.

"Often, it can be difficult to quickly determine if symptoms a patient is experiencing are dangerous or not," said Dr. Scott Sheldon, an internal medicine physician who sometimes admits patients to Habersham Medical Center. "Observation allows us to move someone out of the ER for a more lengthy evaluation."

Two of the most common symptoms that may require observation are chest pain and shortness of breath. The patient may need to undergo a number of tests before a diagnosis is reached, and, in the meantime, they need to be monitored to make sure their condition isn’t getting worse.

The burden is on the doctor to prove that the patient’s needs couldn’t be met in an outpatient setting. If the physician fails to document this, insurance or Medicare may refuse to cover an observation stay.

In some cases, patients have been stuck with paying the bill when insurance rejected the claim. At the medical center in Gainesville, Smith said the hospital tries to absorb the cost.

One reason for this is that patients often are not aware of their special status. There is no unit at the medical center designated for observation.

"Primarily they go from the ER to inpatient beds," said Smith. "Once they get upstairs, the care looks the same."

Medical center spokeswoman Cathy Bowers said the hospital doesn’t keep records on how many patients receive observation care.

Observation patients get all the services that inpatients receive, including meals. But they don’t pay the same amount.

"Observation is an outpatient claim," said Smith. "Under Medicare, there’s a co-pay for outpatient services. But for inpatient care, if you have Medicare Part A, you pay a deductible instead."

In January, Medicare issued new rules clarifying the circumstances under which observation is warranted. The classification only lasts until a decision is made on whether to discharge the patient or formally admit them to the hospital.

Smith said it’s a misconception that patients can’t stay for observation longer than 24 hours.

"Medicare generally feels that 24 hours is enough time for the physician to make a determination," she said. "But they will give him another 24 hours if he can justify it in the patient record. If after 48 hours the patient doesn’t meet the criteria for inpatient admission, we might look at alternative methods such as home health care."

The patient can also choose to stay in the hospital even if Medicare has denied coverage, but they are asked to sign a form acknowledging that they might be held responsible for payment.

Private insurance plans are similar to Medicare in their approach to observation. Roger Rollman, spokesman for United Healthcare in Georgia, said all of the company’s plans include observation coverage.

"(It) is typically viewed as an outpatient service, which would require the patient to pay less out of pocket versus the cost of being admitted to the hospital," he said. "Medical guidelines support the fact that certain conditions may be appropriately treated in observation care, (including) chest pain, pneumonia, asthma attacks and renal stones."

The other circumstance in which observation may be used is after so-called "same-day" surgery. Most patients are ready to go home soon after recovering from the anesthesia, but some experience complications and need to be monitored. A doctor may also order observation care in advance if he knows the patient is at high risk for complications.

To convert a patient from observation to inpatient status, the doctor has to follow strict guidelines.

"Certain diagnoses (such as a heart attack) automatically qualify as inpatient admissions," said Smith. "And if there is no diagnosis yet, we also have certain criteria based on the patient’s clinical needs, their level of severity and the intensity of the care they need.

"For example, you wouldn’t admit a patient just to give them medications by mouth, because that’s something you could do at home."