New law coming on “Observation” status for Medicare Patients

On Behalf of | Aug 5, 2015 | Uncategorized

The U.S. Senate unanimously approved legislation Monday night requiring hospitals across the nation to tell Medicare patients when they receive observation care, but have not been admitted to the hospital. It’s a distinction that’s easy to miss until patients are hit with big medical bills after a short stay. The vote follows overwhelming approval in the U. S. House of Representatives in March. The legislation is expected to be signed into law by President Barack Obama, said its House sponsor, Texas Democratic Rep. Lloyd Doggett. It’s called the NOTICE Act, short for “Notice of Observation Treatment and Implication for Care Eligibility.” 

Patients would think that they were admitted because they were in a room and staying overnight and therefore covered by Medicare for an inpatient stay. Instead, the reality was they were not admitted. A large part of this problem was because of attempts at cost control by Medicare included what are known as RAC reviews in which contractors which had been hired by Medicare would challenge the hospital as to the necessity for admitting the patient. The contractors would be paid based on the amount they could deny in payments to hospitals in these reviews. If the hospital admitted someone and the hospital charge was denied by Medicare the hospital was stuck with no payment and could not back charge the patient. As a result, the hospitals became every cautious about admitting patients and instead would treat them as on observation status. This lead to other problems because patients that were discharged to nursing homes would not have the three stay in a hospital prior to admission to the nursing home and would not be eligible for the potential 100 days of Medicare coverage in the nursing home that require a prior 3 day stay in the hospital. The patients were spending 3 days in the hospital it’s just they were not admitted. Most patients were never informed until weeks later that they were on observation status. This again resulted in the not only the hospital going after the patient for the hospital care as observation but patient being private pay vs a Medicare patient during potentially the first 100 days in the nursing home.

The law would require hospitals to provide written notification to patients 24 hours after receiving observation care, explaining that they have not been admitted to the hospital, the reasons why, and the potential financial implications. Meanwhile, the number of claims hospitals submitted for observation care continues to skyrocket. According to the most recently available data from CMS, total claims increased 91 percent since 2006, to 1.9 million in 2013. Long observation stays, lasting 48 hours or more, rose by 450 percent to 170,219 during the same period, according to a Kaiser Health News analysis.

In 2013, Medicare officials attempted to control the use of observation care by issuing the so-called “two-midnight rule,” which would require hospitals to admit patients who doctors expect to stay at least two midnights. But Congress delayed its enforcement after hospitals said the rule was confusing and arbitrary.

William Wombacher, your Central Illinois Certified Elder Law Attorney (CELA) and Social Security Disability Specialist. I’ll help you!

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