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All hospitals must now give Medicare recipients notice when they are in the hospital under observation status. The notice requirement is part of a law enacted in 2015 but that just took effect.

Signed by President Obama in August 2015, the law was intended to prevent surprises after a Medicare beneficiary spends days in a hospital under “observation” and is then admitted to a nursing home. This is important because Medicare covers nursing home stays entirely for the first 20 days, but only if the patient was first admitted to a hospital as an inpatient for at least three days.  Many beneficiaries are being transferred to nursing homes only to find that because they were hospital outpatients all along, they must pick up the tab for the subsequent nursing home stay — Medicare will pay none of it.

The law, the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, did not eliminate the practice of placing patients under “observation” for extended periods, but it did require hospitals to notify patients who are under observation for more than 24 hours of their outpatient status within 36 hours, or upon discharge if that occurs sooner.  The Act required hospitals to begin giving patients this notice as of March 8, 2017.  Some states, including California and New York, already require such notice.

To avoid violating the law, hospitals that accept Medicare patients will now have to explain to patients under observation that because they are receiving outpatient, not inpatient, care, their hospital stay will not count toward the three-day inpatient stay requirement and that they will be subject to Medicare’s outpatient cost-sharing requirements.  The law does not make hospital observation stays count towards Medicare’s three-day requirement.

The Notice, known as a MOON (Medicare Outpatient Observation Notice) is a standardized form that describes hospital charges, coverage, and payment for post hospital care. However, this notice does not afford a right to appeal the determination of whether the patient is correctly admitted on inpatient or outpatient status.  Therefore, appealing an admission status decision by the hospital to Medicare is not permitted under the new rules.

If a hospital violates the law by failing to provide a MOON notice, their worst penalty would be the loss Medicare payments for treatment through reduced Medicare reimbursement until their compliance score increases. However, there appears to be no recourse to the patient if the hospital fails to provide the notice.

* Tony DelGiorno is an elder law attorney with the offices of Rammelkamp Bradney, P.C. with offices in Springfield and Jacksonville.  The office phone number is 217-522-6000.