Inpatient vs. outpatient care - What's the difference?

To navigate the healthcare industry successfully and secure the proper medical treatment, it’s important to know common terminology such as inpatient and outpatient. Knowing the difference between these terms will help you understand where to receive care and what to expect. Understanding these two types of care and how much each will cost can also give you an advantage when choosing a health plan and estimating out-of-pocket medical expenses.

In this blog post, we’ll walk you through the difference between inpatient and outpatient care, what factors determine each one’s costs, and what health benefits can help you cover your treatment.

Takeaways from this blog post:

• Inpatient care is for patients who require close medical supervision that involves admission to a hospital or facility, while outpatient care is for minor or routine services that don’t require hospitalization.
• The cost of inpatient care tends to be significantly higher than outpatient care, with the type of medical procedure, length of stay, and facility fees impacting the overall cost. Outpatient care is typically more affordable, but routine care can be up to 58% more expensive at a hospital than at a doctor's office.
• Traditional health insurance plans cover a range of inpatient and outpatient costs. However, how much you’ll pay depends mainly on your plan’s deductible, coinsurance, and out-of-pocket maximum. A health reimbursement arrangement (HRA) or health stipend from your employer can help you pay for the out-of-pocket expenses your health plan doesn’t cover.

What is inpatient care?

Inpatient care is for patients with serious medical conditions who need close supervision of a physician within a hospital or inpatient facility. Typically, inpatient care involves a hospital stay of at least 24 hours, but that may vary in some specific cases. Patients will receive a treatment plan, meals, medication, and other comprehensive services their doctor recommends during their stay.

Depending on the length of their hospital stay and their medical condition, a patient may interact with several healthcare providers. This can include physicians, nurse practitioners, lab technicians, surgeons, anesthesiologists, radiologists, and pharmacists.

Patients receiving inpatient care can return home once they’re discharged by medical staff. In most cases, their doctor will provide them with discharge notes detailing contact information, medication, and outpatient care they may need to recover fully.

What types of services does inpatient care cover?

Inpatient medical procedures can range from a simple surgery to an extended hospital admission. Therefore, it’s good to prepare yourself before heading in for treatment so you know what you expect in advance.

Inpatient services can include the following:

• Serious illnesses or medical issues, such as seizures, strokes, heart attacks, or infections
• A major surgery, like an organ transplant, hysterectomy, gallbladder removal, or heart bypass surgery.
• Severe burns or a similar type of traumatic injury
• Serious mental health disorders
• Chronic diseases like cancer and chronic obstructive pulmonary disease (COPD) which require specialized treatment and ongoing care
• Extensive cosmetic surgery
• Complex surgeries
• Childbirth
• Rehabilitation services
• Cholecystectomy
• Arthroplasty
• Severe substance use disorders

How much does inpatient care cost?

The cost of inpatient hospital care varies based on the type of procedure, treatment, medication, length of stay, and whether or not you need to see a specialist. There will also be inpatient facility costs for receiving treatment at a hospital, such as room charges.

Your state can also determine your costs. For example, in 2022, a day of inpatient care in South Dakota cost $1,719 on average, whereas in California, the price was $4,337¹.

Inpatient procedures are typically significantly more expensive than outpatient care. According to HealthCare.gov, a three-day hospital stay can cost $30,000². To offset these costs, it’s best to have health insurance coverage or other health benefits so you’re not stuck paying a costly medical bill entirely out-of-pocket.

What is outpatient care?

Outpatient care, also called ambulatory care, is any medical service or treatment that doesn’t require a stay at a hospital or inpatient care facility. You can receive outpatient services at various medical facilities like a hospital, walk-in clinic, emergency room, urgent care facility, private practice, or doctor’s office. After you receive treatment at your chosen location, you can go home, provided you don’t have any complications or comprehensive care that may require inpatient treatment.

Outpatient medical staff include dermatologists, family practitioners, physician assistants, pediatricians, cardiologists, and primary care physicians. But, depending on your treatment options and required services, you may meet other medical professionals. Most outpatient providers also perform inpatient care.

Most individuals receive regular outpatient care because it’s essential to staying healthy long-term. A minor condition can develop into a chronic illness without regular exams and preventive services, which can result in hospitalization.

What types of services does outpatient care cover?

Most people receive ambulatory care every year. However, only some know what services qualify as outpatient treatment.

The following are a few types of outpatient care you may receive:

• Medical screenings, like mammograms, colonoscopies, MRIs, X-rays, imaging scans, and endoscopies
• Oral surgeries, like tonsillectomies
• Minor procedures that don’t require intensive care
• Certain treatments for chronic illnesses and other long-term medical issues
• Bloodwork, specimen collections, and other lab tests
• Chemotherapy and radiation treatment
• Consultations with a specialist doctor
• Minor emergency care that doesn’t require admittance into a hospital for treatment
• Rehabilitation, occupational, and physical therapy
• Routine physical exams
• Same-day treatment at an urgent care facility
• Vasectomies

How much does outpatient care cost?

Outpatient care costs are a combination of doctor fees, necessary treatment for your medical condition, and any testing you receive. Like inpatient care, your location and where you’ve chosen to receive care, such as an urgent care center or hospital, can also determine your potential cost. A Blue Cross Blue Shield study found that routine medical care can be up to 58% more expensive at a hospital than at a doctor’s office³.

Your health insurance plan will also affect your price. If you have a gold or platinum health plan, you will pay a higher monthly premium but have lower out-of-pocket costs thanks to lower deductibles.

The Affordable Care Act (ACA) also requires all major medical plans to cover essential health benefits, like hospitalization, emergency services, and laboratory testing. While some of these benefits have varying out-of-pocket costs, most types of health plans fully cover other benefits, like preventive care, even before you meet your deductible. Once you reach your annual out-of-pocket limit, your plan will cover 100% of essential benefits.

What health benefits cover inpatient and outpatient care costs?

The basic difference between inpatient and outpatient care is that inpatient care requires a hospital stay, and outpatient care doesn’t. But both come with out-of-pocket costs.

Let’s explore three popular health benefits that can cover a wide range of inpatient and outpatient costs.

Traditional health insurance

Whether you have a group health plan through your employer or an individual plan purchased on a public or private exchange, having a health insurance plan is the best way to curb out-of-pocket costs relating to inpatient and outpatient medical services.

In all cases, you’ll pay a premium to keep your health plan active, generally monthly or annually. Many factors, such as age, location, plan type, family status, and tobacco use, determine your premium cost. Most plans also have a set deductible, copayment, coinsurance, and an annual out-of-pocket maximum.

What your insurer considers a covered service and how much you’ll pay out-of-pocket will depend on your individual health plan. You’ll pay for your medical care—whether inpatient or outpatient—until you meet your deductible. Once you meet it, your insurer will share costs with you in the form of coinsurance. If you hit your out-of-pocket maximum, your insurance company will pay 100% of your medical expenses until the plan year's end.

If you’re expecting to use a lot of medical care, compare health plans to determine your covered services in addition to your deductible, copay, coinsurance, and out-of-pocket maximum amounts to help you choose the right one for your needs and budget.

Health reimbursement arrangements (HRAs)

Another health benefit your employer may offer is a health reimbursement arrangement (HRA). An HRA is a formal health benefit that allows you to receive tax-free reimbursements from your employer for qualified out-of-pocket medical costs.

Qualified expenses relating to inpatient and outpatient care include chiropractic care, prescription drugs, doctor visits, surgeries, physical and mental health therapy sessions, test kits, wound care, and more. Depending on the HRA you have, your individual health insurance premiums are eligible for reimbursement.

HRAs are easy to understand. Your employer gives you a monthly allowance to pay for medical expenses. Only employers can contribute to an HRA, so you’re not responsible for funding it. Once you make an approved purchase, you submit documentation proving you paid for the service or item, and your employer reimburses you up to your allowance.

With a stand-alone HRA, you choose the individual health plan that best works for you and your family. Your reimbursements will be tax-free if your health plan has minimum essential coverage (MEC).

With PeopleKeep, unused funds don’t roll over annually. However, funds do accumulate by rolling over from month to month.

The following are three types of HRAs that your employer can offer with PeopleKeep:

• The qualified small employer HRA (QSEHRA): A QSEHRA is a stand-alone HRA for organizations with fewer than 50 full-time equivalent employees (FTEs). The IRS sets maximum annual contribution limits; however, there are no minimum limits. Full-time W-2 employees are automatically eligible to participate in a QSEHRA. Your employer can reimburse you for only insurance premiums or premiums plus other out-of-pocket expenses.
• The individual coverage HRA (ICHRA): An ICHRA is another stand-alone HRA, but it’s available to employers of all sizes. Unlike the QSEHRA, the ICHRA has no maximum contribution limits. You can opt in or out of an ICHRA, depending on affordability. But, if you opt-in, you must have a qualifying form of individual health coverage to participate.
• The group coverage HRA (GCHRA), or integrated HRA: If your employer offers a group health plan, they can supplement it with a GCHRA. Only employees enrolled in their employer’s group plan can participate in this HRA. With a GCHRA, your employer can reimburse you for out-of-pocket expenses your group plan doesn’t fully cover, like deductibles, coinsurance, and other items. But you can’t receive reimbursements for premiums. Like an ICHRA, GCHRAs have no maximum contribution limits.

Using an HRA, you have better control over your inpatient and outpatient out-of-pocket costs and more flexibility and authority over your healthcare.

Health and wellness stipends

A health stipend is another option your employer may add to your health benefits package. Health stipends work similarly to an HRA but with fewer regulations. Essentially, your employer offers you a set amount of money to spend on medical services and items, including insurance premiums.

Stipends are taxable for employees. But, they have no minimum or maximum contribution limits, so they’re valuable if you need financial assistance to pay for healthcare. Better yet, stipends can work alongside other health benefits, including traditional group plans, individual plans, and HRAs, and every type of employee is eligible to participate.

The expenses a health stipend can cover are endless. Some examples are over-the-counter medication, ambulance and emergency services, birth control, health-related cosmetic surgery, insurance premiums, dental and vision costs, and much more.

Your employer also has the option of offering you a wellness stipend. Unlike a health stipend, wellness stipends typically don’t cover insurance premiums or out-of-pocket healthcare costs. Instead, you can use a wellness stipend to pay for various services and programs encouraging healthy living, like meditation programs, gym membership, home exercise equipment, and wearable fitness trackers.

Conclusion

Healthcare in the U.S. can be expensive. To avoid surprise bills and potential debt, knowing the difference between inpatient and outpatient care can help you choose the right health plan, prepare for medical treatment, and budget for out-of-pocket healthcare costs.

With an HRA or stipend, an employer can help you better afford your medical expenses, including inpatient and outpatient care costs. If you're an employer looking to provide your employees with health benefits, PeopleKeep can help.

1. https://www.kff.org/health-costs/state-indicator/expenses-per-inpatient-day/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

2. https://www.healthcare.gov/why-coverage-is-important/protection-from-high-medical-costs/

3. https://www.bcbs.com/press-releases/costs-for-common-health-care-procedures-significantly-higher-when-performed-in-hospital-outpatient-departments