Today, NAHU submitted a comment letter to the Centers for Medicare and Medicaid Services (CMS) on the Medicare observation status notification provisions in a very long proposed rule titled, “Medicare Program: Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2017 Rates” (the relevant section appears on pages 764-779 for all of you super nerds). Last August, the Notice of Observation Treatment and Implications for Care Eligibility Act of 2015 was signed into law and it will require hospitals to provide Medicare beneficiaries and their authorized representatives with written notification and an oral explanation when a patient is placed on “observation status” by a hospital and not actually admitted even though they may stay overnight. Hospitals are going to have to start providing this notice to Medicare beneficiaries by August 6, 2016, and the proposal NAHU gave comments on spells out exactly how CMS expects hospitals to give this notification, which has been dubbed the Medicare Outpatient Observation Notice or MOON, to affected patients. Members of NAHU’s Medicare Advisory Group reviewed the CMS proposal and gave feedback to shape NAHU’s response.
Hospitals frequently treat Medicare beneficiaries for more than 24 hours but then do not actually admit them for a wide variety of reasons. Unfortunately, the common practice of placing a beneficiary on “observation status” can have significant financial consequences for Medicare consumers, since Medicare Part A and its related coverage rules only apply to actual inpatient care admissions. So a Medicare beneficiary treated on observation status can face unexpected costs with regard to Medicare Part B copayments, the cost of self-administered drugs given at the hospital that are not covered under Part B, and the cost of post-hospital skilled nursing facility care. The new law won’t curb a hospital’s practice of putting patients on observation status, but merely is intended to require hospitals to explain to affected consumers if they are an observation status patient and how this classification could have coverage consequences. Therefore, NAHU’s comment letter focused on possible improvements to the written notice content to make it more understandable and specific for Medicare beneficiaries with their various coverage situations. We also urged CMS to provide notification to spouses and medical and financial powers of attorney upon request and to retroactively classify a patient as inpatient for claims and coverage purposes if notification is not provided correctly. Finally we asked them to consider drugs provided to outpatient observation status by a hospital pharmacy as “in network” pharmaceutical coverage for Medicare Part D and Medicare Advantage beneficiaries so that they do not have to pay out-of-network rates. NAHU expects this rule to be finalized shortly to give hospitals sufficient time to meet their August implementation deadline.