WASHINGTON – U.S. Senators Ben Cardin (D-Md.) and Mike Enzi (R-Wyo.), both members of the Senate Finance Health Care Subcommittee, welcomed news that the House version of their legislation, S. 1349, Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, passed the Senate and will now go to President Obama for signature. The NOTICE ACT is designed to save seniors the sticker shock that comes after they are discharged from the hospital and realize that Medicare will not cover the cost of post-acute care in a skilled nursing facility, simply because their overnight stays in a hospital were classified as outpatient observation instead of inpatient admissions. This no-cost legislation would require hospitals to notify Medicare beneficiaries of their outpatient status within 36 hours or, if sooner, upon discharge. Outpatient status affects a patient’s ability to receive Medicare coverage for post-acute care in a skilled nursing facility after discharge from the hospital. The House version of the NOTICE Act, H.R. 876, was introduced by Reps. Lloyd Doggett (D-Texas-35) and Todd Young (R-Ind.-9) and passed the House unanimously by a vote of 395-0.

“Passage of this legislation is good news for seniors who deserve to know when their overnight stays in the hospital are classified as something other than an inpatient admission and what that means for Medicare coverage of any post-acute care needed after they are discharged from the hospital,” said Senator Cardin. “The NOTICE Act is a no-cost, commonsense approach that will help ensure our seniors are fully informed about their hospital status and the financial implications.  I thank Senator Enzi, and Representatives Doggett and Young for joining with me to support this important legislation.”

“Passage of the NOTICE Act is important news for seniors who should be aware when their treatment after a hospital stay will be covered by Medicare and when it isn’t,” Senator Enzi said. “I appreciate the support of my colleagues on this important issue, who helped ensure that seniors will now be able to feel a little bit more secure in their medical care.”

“The NOTICE Act does just what its name suggests: it gives Medicare patients notice of the costs that they could incur, potentially many thousands of dollars,” said Rep. Lloyd Doggett. “Hospitals may act in the best interest of a patient’s health but not always in the best interest of a patient’s wallet. This new law arms patients with the knowledge they need to be their own best advocates.”

“Elderly patients shouldn’t have to worry about technical status codes and hospital billing procedures while they’re focused on recovering,” said Congressman Young.  “Yet when those technical details can significantly impact their health coverage and future medical bills, they deserve to be made aware. I applaud Senators Cardin and Enzi, and Representative Doggett’s leadership on this issue, because seniors shouldn’t be caught off guard by a large medical bill because they weren’t informed of their status in the hospital.”

Under current law, Medicare will only cover post-acute care in a skilled nursing facility (SNF) if the beneficiary had three consecutive days of hospitalization as an inpatient. Many hospitals, however, are not admitting beneficiaries as inpatients, but instead classify them under “outpatient observation” for billing purposes, even though these patients may spend multiple nights in the hospital and receive the same type and level of care as inpatients. This means that Medicare will not cover post-acute SNF care for these “outpatient observation” patients after they are discharged from the hospital, which can result in thousands of dollars in out-of-pocket costs for those Medicare beneficiaries. 

Under S. 1349, the NOTICE Act, hospitals are required to provide written notification to Medicare beneficiaries who are classified as outpatient observation status for more than 24 hours.  The notification must meet the following requirements:

• Explain the individual’s status as an outpatient under observation (or any similar status) and not as an inpatient;
• Explain the reason for that classification;
• Explain the implications of that outpatient status on the individual’s eligibility for Medicare SNF coverage as well as cost-sharing requirements;
• Include appropriate additional information;
• Be written using plain language and available in appropriate languages; and
• Be signed by the individual (patient) or his or her representative to acknowledge receipt, or if the individual or representative refuses to sign, it must be signed by hospital staff.

An Office of Inspector General (OIG) report found that the average out-of-pocket cost for SNF services not covered by Medicare was more than $10,000 per beneficiary.

A study published in Health Affairs found that the ratio of hospital observation stays to inpatient admissions increased by 34% between 2007 and 2009.  The same study also found that the number of observation stays exceeding 72 hours has increased by 88%.

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