Purpose Algorithms for classification of inpatient COVID-19 severity are necessary for confounding control in studies using real-world data. Methods Using Healthverity chargemaster and claims data, we selected patients hospitalized with COVID-19 between April 2020 and February 2021, and classified them by severity at admission using an algorithm we developed based on respiratory support requirements (supplemental oxygen or non-invasive ventilation, O2/NIV, invasive mechanical ventilation, IMV, or NEITHER). To evaluate the utility of the algorithm, patients were followed from admission until death, discharge, or a 28-day maximum to report mortality risks and rates overall and by stratified by severity. Trends for heterogeneity in mortality risk and rate across severity classifications were evaluated using Cochran-Armitage and Logrank trend tests, respectively. Results Among 118 117 patients, the algorithm categorized patients in increasing severity as NEITHER (36.7%), O2/NIV (54.3%), and IMV (9.0%). Associated mortality risk (and 95% CI) was 11.8% (11.6–12.0%) overall and increased with severity [3.4% (3.2–3.5%), 11.5% (11.3–11.8%), 47.3% (46.3–48.2%); p < 0.001]. Mortality rate per 1000 person-days (and 95% CI) was 15.1 (14.9–15.4) overall and increased with severity [5.7 (5.4–6.0), 14.5 (14.2–14.9), 32.7 (31.8–33.6); p < 0.001]. Conclusion As expected, we observed a positive association between the algorithm-defined severity on admission and 28-day mortality risk and rate. Although performance remains to be validated, this provides some assurance that this algorithm may be used for confounding control or stratification in treatment effect studies.