February 8, 2017

Medicare Outpatient Observation Notice

By Janet Potter, Senior Manager, Advisory Services

Medicare Outpatient Observation Notice

Beginning March 8, 2017, hospitals and critical access hospitals (“CAHs”) will be required to issue the Medicare Outpatient Observation Notice (“MOON”) to Medicare beneficiaries who are receiving observation services as an outpatient for more than 24 hours in a hospital or CAH. The MOON is a requirement of the Notices of Observation Treatment and Implication for Care Eligibility Act (the “NOTICE Act”) enacted on August 6, 2015. The purpose of this notice is to inform Medicare beneficiaries that their stay in the hospital is not an inpatient stay, and therefore, does not qualify as a prerequisite for the skilled nursing facility (SNF) inpatient benefit and that they may be subject to Part B coinsurance. The notice is only given to those beneficiaries who are receiving observation services. If a beneficiary is receiving a different outpatient service, the notice is not required.

The notice must be provided to all Medicare beneficiaries, regardless of whether or not the stay qualifies for Medicare payment, if the beneficiary has traditional fee-for-service Medicare or Medicare Advantage, or whether the beneficiary has Medicare Part B benefits. The notice must be provided to the beneficiary no later than 36 hours after the beneficiary begins to receive observation services, and is generally expected to be given between 24-36 hours of the start of observation. It is not required to give the notice to those individuals who receive less than 24 hours of observation care. Also, even if the beneficiary is later admitted as an inpatient of the hospital or CAH after 24 or more hours of observation, a notice is required.

Some states require hospitals to notify all patients as to their status as an inpatient or outpatient. The requirement for issuing the MOON is not affected by state law. All hospitals and CAHs must still issue the MOON when applicable regardless of any other notices they may be required to issue for their state. It is possible that the MOON could substitute for a state notice, however, hospitals and CAHs should confirm this with their state or a healthcare attorney licensed to practice in their state prior to changing their current practices in regard to state law.

The form is currently available in both English and Spanish. Hospitals and CAHs are required to present the notice to the beneficiary and give an oral explanation of the content and be able to answer any questions the beneficiary may have. For beneficiaries who are unable to understand the notice a hospital or CAH may use alternate means such as providing the notice to a responsible party or using an interpreter. The notice must be signed and dated by the beneficiary or responsible party. If they refuse to sign, the staff person providing the notice should note the refusal and sign and date the MOON. The signed notice must be retained on file by the hospital or CAH, but can be stored either electronically or as a paper copy.

This beneficiary notice offers no appeal rights to the recipient. CMS expects questions about the observation status be answered by a hospital staff member or the physician involved in the care. Beneficiaries are also provided with 1-800-MEDICARE, as a resource. Another resource for use with beneficiaries is the CMS publication, “Are You a Hospital Inpatient or Outpatient? If you have Medicare – Ask!” available at www.cms.gov. CMS states in the Hospital Inpatient Prospective Payment Systems Final Rule for fiscal year 2017:

The decision to admit a beneficiary as an inpatient is a complex medical decision made by the physician in consideration of various factors, including the beneficiary’s age, disease processes, comorbidities, and the potential impact of sending the beneficiary home. It is the responsibility of the physician to make the complex medical determination of whether the beneficiary’s risk of morbidity or mortality dictates the need to remain at the hospital because the risk of an adverse event would otherwise be under reasonable standards of care, or whether the beneficiary may be discharged. We expect that the NOTICE Act and implementing policies will result in beneficiaries having a better understanding of the care they are receiving.

Hospitals and CAHs must use good judgment when treating a Medicare beneficiary under observation status versus admitting as an inpatient. New policies and procedures will need to be put into place to incorporate the use of the MOON into their standard operating procedures. Staff will need to be trained on the issuance of the form and be available to issue and explain the notice in the short time frame required by statute.

In addition, admissions staff at skilled nursing facilities should be aware of the MOON, and work with their hospital discharge planning staff and potential new resident admissions to determine whether or not the beneficiary’s stay at the hospital was inpatient or observation.

If you have questions regarding issuing the notice, or how observation status affects the beneficiary’s benefits, please contact a Marcum advisor.

Information contained herein is accurate at the time of publication. We recommend that you consult with your Marcum advisor before implementing any action.

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