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Paul Zimmerman
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Senate Passes NOTICE Act Regarding Observation Care

On July 29, 2015, the Notice of Observation Treatment and Implication of Care Eligibility (NOTICE Act) was approved by the U.S. Senate. The law will require hospitals to provide written notification to patients within 24 hours of receiving observation care—laying out the reasons the patient has not been admitted to the hospital, and the potential financial implications of the decision. Hospitals will have one year to comply with the NOTICE Act once it becomes law, or face penalties.  

The implications for seniors can be severe. With observation care, Medicare’s comprehensive hospital coverage stalls. Additionally, patients receiving this kind of care may be precluded from receiving Medicare’s nursing home benefits—should they need them—after being discharged from the hospital. Observation care is essentially limbo for patients; they are too ill to go home, but not sick enough for hospital admittance. In the absence of coverage, seniors pay thousands of dollars out of pocket. This kind of care is also provided on an out-patient basis, leaving seniors high co-payments and costs for routine drugs.

According to a recent study by the Center for Medicare and Medicaid Services (CMS), observation care claims submitted by hospitals has increased 91% since 2006. A number of states, including New York, Connecticut, Maryland, Pennsylvania and Virginia have required observation care notices, but Medicare finally decided to push for a new legislative requirement. In 2013, Medicare issued the “two midnight rule,” requiring hospitals to admit patients doctors believe wills stay at least two midnights. Congress found the rule to be confusing. A small, though potentially larger trend, may be for patients to leave the hospital once they learn they are receiving observation care.

Hospitals should consult with knowledgeable attorneys to ensure compliance while minimizing the potential impact on their bottom line.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.