Hospital Observation Status vs Inpatient

[MBSC]

Ask your doctor or other hospital officials if you are in the hospital for observation or as a regular inpatient. If you are an observation patient, ask why. Even if you are admitted as an inpatient, the hospital can switch you to observation status; in that case, the hospital is required to notify you.

If you do not have three consecutive days of hospitalization as an inpatient -- excluding the day of discharge -- Medicare will not cover a subsequent stay in a nursing home.

Source: http://www.washingtonpost.com/wp-dyn/content/article/2010/09/03/AR2010090305171.html

Part B + Medigap will cover the hospital observation. However, a related SNF stay afterwards would not be covered since you were not an inpatient for 3 days.