Healthcare News & Insights

Law will require hospitals to disclose observation status

A new bill making its way through Congress will change how hospitals interact with Medicare patients when they’re admitted under observation. And with nearly unanimous support, it’s only a matter of time before it becomes law. 

Female Doctor Talking To Senior CoupleAccording to an article from Kaiser Health News and NPR, the bill is called the NOTICE Act, which stands for “Notice of Observation Treatment and Implication for Care Eligibility.”

Under the act, hospitals would be required to give patients written notification of their observation status after 24 hours of receiving treatment – but no later than 36 hours after their treatment has started.

Several states already have laws requiring hospitals to let patients know that they’re under observation status, including Virginia, New York, Pennsylvania and Connecticut. But acute care and critical access hospitals in every state will have to follow the provisions of the NOTICE Act.

Both the Senate and the House of Representatives have approved the bill, and it’s expected to be signed into law by President Obama shortly.

Facilities will have a bit of time to adjust, however. Hospitals won’t be required to notify Medicare patients of their observation status until a year after the NOTICE Act becomes law, per language in the bill.

Growing trend

Defining patients as inpatients or outpatients has always been tricky for hospitals.

Observation claims have been on the rise because many facilities want to err on the side of caution, according to the article. Rather than risk paybacks if an auditor determines a patient should’ve been treated as an outpatient instead of an inpatient, hospitals keep patients on observation to cover their bases.

Information from the Centers for Medicare & Medicaid Services (CMS) shows that the total number of observation claims has risen 91% since 2006. For 2013, the most recent year for which numbers were available, hospitals submitted 1.9 million of these claims to Medicare.

Length of stay for observation care has also increased over time. In fact, long observation stays (or hospital stays lasting at least 48 hours), rose by 450% from 2006 to 2013, according to an analysis in Kaiser Health News.

‘Two-midnights’ confusion

The feds see this trend as a serious problem, as evidenced by both this bill and the creation of the “two-midnight” rule. In a nutshell, hospitals would have to admit all patients if doctors expect them to be at the hospital for at least two midnights, and claims would be paid on a case-by-case basis.

While the rule was originally set to go into effect this year, enforcement has been pushed back to clarify confusion surrounding when stays would be covered and how claims would be audited, per information on CMS’ website.

What hospitals must do

Between the impending two-midnight rule and the NOTICE Act, which is all-but-certain to become law, it’s clear CMS is still cracking down on improper reimbursement for inpatient stays – and trying to keep hospitals from putting financial burdens on Medicare patients who may not be aware that their treatment may not be fully covered.

So, with that in mind, hospitals should begin preparing to have more frank discussions with patients about their observation status – and whether they’ll have to pay more out of pocket for treatment as a result.

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