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Hospital Must Give Observation Patients a Written Notice under the Notice Act

October 13th, 2016

President Obama recently signed the Notice Law, or H.R. 876, also known as the Notice of Observation Treatment and Implication for Care Eligibility Act.

Hospitals, including critical access hospitals, will now have to give each patient a written notice when they receive observation services for more than 24 hours. The notice must be provided before discharge and no later than 36 hours after observation begins. It must explain implications, such as cost sharing and information for subsequent eligibility, and that the beneficiary is an observation outpatient, not an inpatient. The patient must sign it. If the patient refuses to sign it then the staff member who presents it can sign a certification that the notice was presented along with the date and time.

Observations do not count for the three qualifying stays for Medicare reimbursement for skilled nursing care. Sometimes, patients were not aware of this. For example, a patient arrived at the hospital and was placed in an outpatient observation bed. The next day she was changed to inpatient admission status. She was then sent to a skilled nursing bed. She was in the hospital three days, but since one of these was an observation day, Medicare did not pay her $54,000 skilled nursing home bill. The new law wants to make sure patients understand the difference.

It can also affect their out-of-pocket expenses. In general, Part A requires patients who are admitted as an inpatient to pay a deductible, which was $1,260 in CY2015.Observation is an outpatient status and the Medicare beneficiary pays 20% of the Medicare reimbursement amount for outpatient items and services after paying the annual Part B deductible, which was $147 in CY2015. The beneficiary could potentially have greater cost-sharing liability as an observation patient. In 2012, the OIG said that in 6% of the observation stays the beneficiary paid more than the inpatient deductible. Hospitals may request patients who consult their physicians while in the hospital be classified as an inpatient.

Here is a copy of the law.

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