When it comes to dealing with patients that you may know or meet on the outside, always let them take the lead in acknowledging you. Don't feel like you are being rude in doing that; instead, you are acting in the patient's best interest. And you'd be surprised that he probably doesn't remember you as much as you think he does.
I've had to deal with this situation before, except it was in reverse: they were a coworker first, then they became a patient. To be honest, I hardly remembered this person as a coworker--it wasn't until they mentioned where they worked that I said to myself, "oh...".
I held back and let them decide how to approach our relationship, though I did advise my immediate supervisor of our prior working relationship. Turned out not to be a problem at all thanks to mutual poor memories on both my and their parts
Though if either they or I were uncomfortable with the fact that we were prior coworkers, I would have immediately requested reassignment until their stay was over.