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Notifying Patients of Their Observation Status Is Now Law

NOTICE Act goes into effect next summer

President Obama has signed the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, which requires hospitals to inform Medicare patients who are in the hospital under outpatient observation status that they haven’t actually been admitted to the hospital and what that means in terms of cost-sharing requirements and subsequent coverage eligibility, according to HealthLeaders Media.

The new law aims to eliminate the confusion and surprise of out-of-pocket costs for Medicare beneficiaries who might not realize that simply spending the night in the hospital doesn’t make one an inpatient — and may leave people vulnerable to unexpected charges.

Medicare patients who have been in the hospital for more than 24 hours are required to be notified of their status within 36 hours of when they start receiving services as an outpatient. Hospitals are required to provide patients with verbal and written notification of their status and will have 1 year to comply with the law from the date it is enacted.

Under the NOTICE Act, the notification from a hospital must:

  • Explain the individual’s status as an outpatient and not as an inpatient and the reasons why;
  • Explain 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;
  • Include appropriate additional information;
  • Be written and formatted using plain language and made available in appropriate languages; and
  • Be signed by the individual or a person acting on the individual's behalf to acknowledge receipt of the notification, or if the individual or representative refuses to sign, the written notification will be signed by the hospital staff who presented it.

Although the NOTICE Act won’t go into effect until next summer, a handful of states have already written laws of their own requiring hospitals to notify patients of their outpatient status.

“People say, ‘I’m in a bed; doesn’t it mean I’m an inpatient?’” said Tara Pacy, RN, Director of Clinical Support Services at the University of Vermont Medical Center. “It’s hard for patients to know their status without having an understanding of the two-midnight rule, and they certainly don’t always know that their copays and what services they qualify for after leaving the hospital are different depending on whether they’re an inpatient or an outpatient.”

According to Pacy, the University of Vermont Medical Center gives patients a hand-delivered notice from a case manager that begins like this:

You are in the hospital under observation. This means your doctor needs to watch you or do more tests to understand your illness. However, you do not meet Medicare's rules for inpatient admission. Even though you are in the hospital and you may stay overnight, Medicare considers you an outpatient. This affects what Medicare will pay for while you are in the hospital and after you leave the hospital. Your share of hospital bills may be larger than if you were an inpatient. If you go to a skilled nursing facility (nursing home) after you leave the hospital, you might have to pay the full cost of your stay.

The notice then goes on to offer explanations of what that means for people’s coverage, such as what’s covered and not covered under Medicare Part A and Part B, and phone numbers for departments within the hospital, as well as for services and resources outside the hospital, where patients can get more information.

Sources: HealthLeaders Media; August 12, 2015; and NOTICE Act; February 2015.


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