What Is Medicare Observation Status?

Over the last several years, there has been a trend towards placing Medicare hospital patients who are receiving “medically necessary” treatment, which was ordered by their doctor, under Medicare observation status.  What this does is makes the person an “outpatient” as opposed to admitting them as an “inpatient”.  Some patients have even been in the hospital receiving treatment and testing for weeks and never admitted as an inpatient.

So what does this mean?  If the patient needs to go to a skilled nursing facility for rehabilitation following the hospitalization, the patient will not qualify for the skilled nursing benefit under Medicare Part A because she was never considered an inpatient during her hospital stay. Without the required 3-day inpatient admission, Medicare only covers some services that the resident receives under her Medicare Part B coverage.  This results in the majority of the cost of the rehabilitation center, such as room and board, falling on the resident to pay out of her own pocket.  And care in a skilled nursing facility can run $250 to $300 per day!

The Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act) was signed by President Obama on August 6, 2015.  Beginning August 6, 2016, the NOTICE Act requires hospitals and Critical Access Hospitals (CAH) to provide written and oral notice to patients who are receiving observation services as outpatients for more than 24 hours.  The notice must be given no later than 36 hours after observation services are initiated and must explain that the patient is an outpatient, not an inpatient, and inform the patient of the implications of that status.

The written, standardized notice, known as the “Medicare Outpatient Observation Notice” (MOON), was approved by the Office of Management and Budget (OMB) and the finalized notice was published on December 8, 2016.  The form requires that the hospital provide an explanation for the patient’s outpatient status.  It states “You are not an inpatient because” and there is a blank space for the hospital to fill in the reason.  The form also informs patients how being categorized as an outpatient may impact what the patient pays in the hospital, how observation services affect coverage and payment of care after leaving the hospital and prescription drug costs.  Hospitals and CAHs must begin using the MOON by March 8, 2017.  The MOON form and instructions as to how to complete the form are located at the following link: https://www.cms.gov/Medicare/Medicare-General-Information/BNI/index.html?redirect=/bni.

If a patient disagrees with the finding that she under observation status and is an outpatient, it should be noted that the MOON does not give the patient the opportunity to formally appeal her observation status.  When at all possible, the patient should work with her physician to try to change her status to inpatient while still in the hospital.

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By | 2017-01-06T09:43:53+00:00 January 6th, 2017|Categories: Elder Law, Medicare|Tags: , , , |0 Comments