Hospitals should start now to develop a process to deliver the Medicare Outpatient Observation Notice (MOON), alerting patients that they are receiving observation services and informing them of their potential financial responsibilities.

  • CMS announced in the Inpatient Prospective Payment System final rule that hospitals must deliver the MOON to all patients receiving observation services for more than 24 hours, provide an oral explanation of why they are in observation, and get the form signed.
  • Hospitals will have to use a standard form that includes the reason the patients are receiving observation services instead of being admitted, the potential for out-of-pocket expenses, and that observation stays do not count toward the three-day requirement for Medicare to pay for a skilled nursing facility.
  • The requirement goes into effect 90 days after the form is approved by the Office of Budget and Management, which is anticipated to be late fall.

Hospitals should start now to determine what internal processes they will use to deliver the Medicare Outpatient Observation Notice (MOON) to notify patients when they are receiving observation services, advises Teresa McNulty, RN, BA, ACM, IQCI, director at Huron Consulting Group, a Chicago-based healthcare consulting firm.

In the 2017 final rule for the Inpatient Prospective Payment System (IPPS), CMS set Oct. 1 as the date hospitals should begin delivering the MOON. CMS asked for public comment on the required form, which has delayed implementation, probably until late fall, McNulty says. The 30-day comment period closes Sept. 1. The Office of Management and Budget (OMB) must review and approve the final version. After that, hospitals have 90 days to implement it.

“Until hospitals have the required form, they can’t begin implementing the requirement,” McNulty says.

The Notice of Observation Treatment and Implication for Care Eligibility Act, passed by Congress on Aug. 8, 2015, requires hospitals, including critical access hospitals, to provide written and oral notification to patients receiving observation services for more than 24 hours. Hospitals must deliver the notice no later than 36 hours after observation services begin.

Hospitals must use a standardized notice and fill in the specific reason the patient is not an inpatient. CMS does not offer any standard language for the clinical reason patients are not inpatients, but leaves a blank to fill in, McNulty points out.

The standardized form explains the implications of receiving outpatient services, including the potential the patient will have out-of-pocket costs and how an observation stay affects the eligibility requirements for Medicare to cover a skilled nursing facility stay. Hospitals also are required to provide an oral explanation of what the notice means, preferably at the same time the written notice is delivered.

“Hospitals should identify how they will meet all of the elements of the rule and be ready to do so when the form is approved,” she says. Determine who fills in the form, who delivers it, how and when it’s delivered, and how it is documented, she says.

Some hospitals have the patient access department staff deliver the notice at the time the patient is registered, McNulty says. Others deliver it in the ED once the physician issues the order for observation services. However, CMS has issued guidance that the form should not be given at the beginning of the stay when there is a lot going on, although it says hospitals may issue the form before the patient has received services for 24 hours, she adds.

Patients must sign the form and should get a copy for their records.

The MOON requirement creates a double burden on providers in some states, where there is a state requirement to notify patients they are receiving observation services that may be different from the Medicare requirement, McNulty point out.

CMS has not announced the penalties for not delivering the MOON, McNulty says. Hospitals are unlikely to be audited specifically for delivering the MOON, but any lapses may be uncovered when hospitals are audited for compliance and billing, she adds.

The draft of the MOON document is available at: http://go.cms.gov/2bcGnlJ.