Virginia is the latest state to implement a law establishing new requirements around patients in observation units. Hospitals now must notify patients that they are considered by payers to be outpatients, which can have financial repercussions.

Other states that have added such laws include Connecticut, Maryland and New York.

The move by Virginia lawmakers is designed to provide some clarity on an issue that is driven by federal regulations, said Julian Walker, vice president of communications for the Virginia Hospital & Healthcare Association, in an email.

Some patients, particularly in Medicare, have been hit by greater-than-expected co-payments and other fees as a result of being covered by insurance like an outpatient, but receiving care more like an inpatient.

Some patients may think: "I'm in a bed, I'm in a hospital, I'm being treated, I'm being given meals, I must be an inpatient," said Teresa Gonzalvo, vice president of care coordination for Virginia system Sentara Healthcare, Norfolk.

Gonzalvo noted that Medicare already had requirements concerning notification, but Sentara beginning today will use the letter format required by the state.

"It is important for patients to know that they are outpatients so that they have an understanding that there may be co-pays, that there may be times that their over-the-counter medications may not be covered," Gonzalvo said.

For that reason and for others, Medicare's reimbursement structure for observational status, known as the two-midnight rule, has been questioned by the American Hospital Association and others in part for creating patient misunderstanding.

"Medicare beneficiaries who receive observation services while their physician and care team determine a course of treatment, commonly receive care in the same hospital rooms as inpatients and the care delivered is often indistinguishable from inpatient care," Jyotirmaya Nanda, M.D., system medical director for informatics and physician compliance at the Center for Clinical Excellence and Corporate Responsibility at St. Louis-based SSM Health Care, told the Senate's Special Committee on Aging on behalf of the AHA in May.

"As a result, observation status can be confusing for patients who are physically in the hospital, many times overnight, and who receive tests, procedures, medications and nursing care that could never happen in the outpatient clinical setting," Nanda testified.