Thanks for all the feedback. I had previously discussed this issue with the hospital and my Part D provider. Hospital confirmed my status will be outpatient. My Part D provider confirmed the hospital pharmacy is not a "preferred provider", so Part D coverage will reimburse only the price I pay to my preferred provider. Since many are generic, in most cases the reimbursement will be $0. It's pretty much a lose/lose situation and Medicare does not approve appeals for this situation.
For the record, I was finally able to talk with someone in the hospital business office who gave a damn. She confirmed the situation to be exactly how it is described by Medicare and my Part D provider. She also confirmed the cost of the drugs billed to me will be significantly higher than $0.

The hospital also does not allow me to bring my own drugs. They will administer them, bill Medicare who will reject the self-administered drugs portion, and the hospital will bill me. She also told me if I would call her when that happens, they will excuse the charge, but only if I call and complain. In the long run, I guess that's the bottom-line answer I was looking for, but it seems to be a sad reflection of the state of health care in the US.
Thanks again for all the comments.