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Patient Notification of Observation Status is Now Law

By Alexandra Wilson Pecci  
   August 12, 2015

Under new federal law, Medicare patients who have been in the hospital for more than 24 hours will be required to be notified of their status within 36 hours of when they start receiving medical services as an outpatient.

UPDATE: CMS on Wednesday, August 12, announced that it would extend the enforcement delay of the two-midnight rule through the end of the year. It had been set to expire September 30.

President Obama last week signed the 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.

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 one 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 one year to comply with the law from the date it is enacted.

Under the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act the notification from the 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 (representative) to acknowledge receipt of the notification, or if the individual or representative refuses to sign, the written notification is signed by the hospital staff who presented it.

Although the federal law 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. Among those states is Vermont, which is currently developing a standardized form that hospitals will be required to use beginning in December.

Alexandra Wilson Pecci is an editor for HealthLeaders.

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