Despite what their names indicate at first glance, the difference between inpatient and outpatient care isn’t just about location. It’s, in essence, about the formal admission status and the duration of the stay.
Below, we’ll break down how these two types of care differ, and how they relate to PUREDI’s medical billing services.
Key Differences: Inpatient vs. Outpatient Care Explained
Inpatient care refers to patients being formally admitted to a hospital or facility, requiring at least one overnight stay. It’s usually indicated for situations that require constant support (such as surgery or childbirth). Inpatient admission should follow a professional’s official order, and discharge should also be carefully planned by the relevant team.
Outpatient care involves medical services that don’t require formal admission or an overnight stay. It’s often referred to as ambulatory care and spans everything from minor procedures to routine check-ups.
However, the line dictating what the difference is between inpatient and outpatient care can get blurry, even for professionals. Below, we’ll break down six key differences between the two.
1. Duration of Stay, Care Setting, and Patient Experience
The most important aspect of inpatient care is that it requires at least one overnight stay to be considered as such. Outpatient care, on the other hand, revolves around services that can be discharged on the same day.
As for care settings, inpatient care requires full-service hospitals or similar facilities that can provide continuous monitoring, nursing, meals, and constant support from specialists. Outpatient settings expand to doctors’ offices and ambulatory centers designated for same-day procedures.
The patient experience is always subjective — but as a rule of thumb, inpatient stays will be more prone to stress. This effect grows even stronger the longer the patient is required to stay. Ambulatory settings are easier to manage in this aspect, as the patient’s autonomy will inevitably play a favorable role.
2. Intensity and Type of Medical Services
Inpatient care is reserved for patients requiring specialized treatment or intensive monitoring. Examples include:
- Major surgeries
- Childbirth
- Complex interventions
- Post-operative recovery
- Advanced diagnostics
Outpatient services are, on the other hand, much less intensive or demanding. Anything from routine imaging and lab tests to diagnostic procedures and minor surgical interventions can be ambulatory.
3. Pre-Authorization and Payer Rules
Pre-authorization refers to an advance approval (usually from the patient’s insurer) before a specific service is delivered. This ensures medical necessity and coverage eligibility, and it’s required across some Medicare, Medicaid, and commercial insurance programs.
For inpatient visits, plans tend to be much more stringent with pre-authorizations. The specifics will vary according to each provider, but as an example, Medicare Advantage will almost always require prior authorization for inpatient stays.
For outpatient settings, pre-authorization rules will mostly involve services that are both relatively complex and booked ahead of time. This can include surgical interventions, expensive imaging, physical therapy, and extensive lab work, among others.
Mismanaging pre-authorizations and the related payer rules can lead to denials and compliance failures. As such, it’s crucial to always be on top of what each patient’s plan requires before any outpatient or inpatient visit.
4. Billing and Reimbursement Models
Inpatient services almost always follow a bundled reimbursement model known as the Inpatient Prospective Payment System (IPPS).
Under this model, providers receive a fixed payment based on the Medicare Severity Diagnosis-Related Groups (MS-DRGs) classification. This grouped payment encompasses everything from nursing to diagnostics, driven by the severity of the diagnosis and the discharge details.
Outpatient care is instead usually reimbursed via itemized billing. This means that each visit, test, procedure, and service is billed and reimbursed separately — in other words, it’s a fee-for-service approach.
Despite the differences in medical billing types, it’s crucial to keep clinical documentation accurate and thorough in both cases to avoid unexpected denials down the line.
5. Coding and Documentation Requirements
The coding requirements for inpatient stays revolve around ICD-10-CM (diagnoses), ICD-10-PCS (procedures), and present-on-admission (POA) indicators. Coders should capture all details related to diagnoses and procedures to correctly drive their MS-DRG assignment.
Outpatient visits also use ICD-10-CM for diagnoses but refer instead to Level I HCPCS and CPT codes for procedures and services. Other utilities, such as ambulance services or specific devices, may be found in Level II or more specific codes such as the 99204 RVU.
In both cases, documentation should follow the RVU library and correctly reflect both the medical necessity and the level of service billed. For inpatient visits, the information should be kept together — remember that only outpatient services are billed individually.
6. Compliance and Regulatory Considerations
Regulatory and compliance requirements for both inpatient and outpatient care are linked to the CMS Conditions of Participation (CoP). These guidelines cover everything from quality assessment to patient rights.
CoP noncompliance can lead to a denial of Medicare or Medicaid billing privileges and outright exclusion from the programs. As such, it’s crucial to go over specific documents such as the Medicare Benefit Policy Manual. There, you’ll find the specific definition of an inpatient stay — mislabeling will inevitably lead to problems down the line.
Quick Comparison Table: Inpatient vs. Outpatient
There’s a lot to take in when you're comparing inpatient vs. outpatient care, so here’s a simple table to help you keep track of the most important details:
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Inpatient
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Outpatient
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Duration, care type, and patient experience
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Patients stay for longer than 24 hours, usually for more complex and invasive procedures. The patient experience tends to score lower.
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Patients are discharged the same day they came in, also encompassing ambulatory centers and doctors’ offices. The patient experience tends to be better.
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Intensity of care
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Patients require specialized treatment and constant monitoring. Advanced diagnostics also fall into this category.
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Services are less intensive, spanning minor surgical interventions and diagnostic procedures, among other services.
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Pre-authorization
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Inpatient visits often require pre-authorization to ensure medical necessity. The specifics vary from plan to plan.
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Outpatient visits usually require pre-authorization for more complex services that are booked ahead of time.
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Billing and reimbursement
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Reimbursement follows a bundled model, where providers are paid a fixed amount depending on the diagnoses and discharge status.
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Fee-for-service models are the norm in outpatient settings, meaning each service is billed and reimbursed individually.
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Coding and documentation
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Coding requirements are linked to ICD-10-CM, ICD-10-PCS, and POA. Documentation should be bundled, thorough, and accurate.
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Outpatient services use ICD-CM and HCPCS and CPT Levels I and II. Documentation should also be precise and thorough.
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Compliance and regulations
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Strict adherence to the CMS CoP, including documents such as the Medicare Benefit Policy Manual.
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Strict adherence to the CMS CoP, including documents such as the Medicare Benefit Policy Manual.
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PUREDI: Accuracy Is Everything in RCM
At PUREDI, we thoroughly understand how small mistakes regarding what is considered an inpatient vs. outpatient classification can snowball into disasters in revenue cycle management (RCM). And that’s exactly why we powered our digital platform with AI: to ensure accuracy at all stages and optimize the claim submission process.
We integrate pre-authorizations, real-time edits, and payer-specific logic into one simple workflow that oversees your whole practice. In essence, this means fewer errors and a minimized administrative burden — as well as accelerated reimbursements.
Ready to experience accuracy-driven RCM? Book a demo with our team today to see how our AI platform can transform your performance.
