Identifying Observation Stays for Those Beneficiaries Admitted to the Hospital

Identifying Observation Stays for Those Beneficiaries Admitted to the Hospital

Current Version Date: 

Most charges for observation stays that result in an inpatient admission within 3 days of the observation period will be found in the Inpatient file. Two exceptions are described in the CMS Medicare Claims Processing Manual, section 40.3.B. These include critical access hospitals and hospitals not subject to the Inpatient Perspective Payment Sysem (IPPS). If the hospital is not subject to IPPS, observation stay charges are only rolled into the inpatient charges if the observation occured within one day of admission.

The observation stays that resulted in admission, and are included in the inpatient claim, are identified with revenue center code 0762 in the Inpatient claim file. Individual revenue centers are not included in the MedPAR data. The MedPAR includes charge amount variables such as accommodations, surgical supplies, etc. Each represents rolled up charges for a specific set of revenue center codes, specified in the record layout.

Prior to 2011, this revenue center was one of the many codes included in the "MedPAR Other Service Charge Amount" (OTHRAMT) which includes charge amounts for all other services (revenue center codes) that do not fit into other more specific categories.  This meant that observation stays could not be identified. In 2011 the “MedPAR Observation Switch” was added to the MedPAR, making it possible to identify observation care (billed with revenue center 0762) received immediately prior to an admission.

The Inpatient file is the only method to identify observation stays that were rolled into an inpatient admission prior to 2011. The MedPAR and Inpatient files both allow the identification of these observation stays from 2011 onward.

Medicare-paid observation stays that do not result in an inpatient admission will be found in the Medicare Outpatient file using revenue center code 0762. 


Article Number: 
This work was performed under CMS Contract Number HHSM-500-2013-00166C
Related Data File Families: 


The process and materials mentioned as part of this KnowledgeBase article are current, as of the publication date on the article, to the best of our knowledge. The examples provided are correct in the aggregate but may not apply to every subgroup or circumstance that a researcher may wish to study. It is up to the researcher to conduct analysis and confirm that the patterns described in this KnowledgeBase article apply to his/her particular study. If your research findings appear to contradict the advice provided, please contact ResDAC at