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Hospital Patients to Receive Notice of Observation Status

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A new federal law will require hospitals to notify patients of their status as outpatients.

H.R. 876 Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act was signed into law by President Obama on August 6, 2015. Outpatient status limits the patient’s ability to receive Medicare coverage for care in a skilled nursing facility after discharge from the hospital.

The law will apply in situations where a patient is receiving services as an outpatient for more than 24 hours. It will require hospitals to notify those patients of their outpatient status within 36 hours, or, upon discharge if that occurs sooner. The law will become effective one year after it is signed by the President. During that time regulations will be developed to implement the law.

The outpatient notification will have to explain that, because the beneficiary is receiving outpatient—rather than inpatient—services:

  •     The beneficiary will be subject to cost-sharing requirements that apply to outpatient services, and
  •     The beneficiary’s outpatient stay will not count toward the three-day inpatient stay required for a beneficiary to be eligible for Medicare coverage of subsequent skilled nursing facility services.

Congressional Research Service summarizes the legislation by noting that the new law will require hospitals to give each individual who receives observation services as an outpatient for more than 24 hours an adequate oral and written notification within 36 hours after beginning to receive them which:

  • explains the individual’s status as an outpatient and not as an inpatient and the reasons why;
  • explains the implications of that status on services furnished (including those furnished as an inpatient), in particular the implications for cost-sharing requirements and subsequent coverage eligibility for services furnished by a skilled nursing facility;
  • includes appropriate additional information;
  • is written and formatted using plain language and made available in appropriate languages; and
  • is signed by the individual or a person acting on the individual’s behalf (representative) to acknowledge receipt of the notification, or if the individual or representative refuses to sign, the written notification is signed by the hospital staff who presented it.

I’ve written previously about the problems created by hospital’s growing use of observation status for patients. See: Beware of Hospital “Observation Status.” The new law will not cure these problems, but will at least give patients a warning before they spend thousands of dollars on care that will not be covered by Medicare. Some beneficiaries will likely decide to receive a different set of medical services after being notified of their observation status.

In 2014 Pennsylvania enacted a state law which requires hospitals to provide notice of observation status to outpatients who receive onsite services for more than 23 consecutive hours which includes a hospital bed and meals that have been provided in area of the hospital other than the emergency room.  See Act 169 of 2014.  Hospitals will likely need to provide notices that comply with the slightly different requirements of both the Pennsylvania and federal laws.

For More Information:

Beware of Hospital “Observation Status.”

Senate unanimously passes NOTICE Act, president’s signature next

Text of H.R. 876