Providers back bill alerting Medicare patients about observation stays

Healthcare providers are expressing support for legislation overwhelmingly approved by Congress that would require hospitals to notify Medicare patients when they are under observation care in a hospital but have not been admitted. Some observers, however, say the measure doesn't address the underlying regulatory problems.

The bill is a partial response to the sticker shock beneficiaries face when they go to a skilled-nursing or rehabilitation facility following a hospital discharge and discover that Medicare won't cover the tab.

That's because to qualify for SNF coverage Medicare beneficiaries must first spend three consecutive midnights as an admitted patient in a hospital, and observation days don't count. Beneficiaries also find themselves facing unexpected Medicare Part B co-pays for drugs received during observation care at a hospital, since they were never admitted and the drugs are therefore not covered under Part A.

The Notice of Observation Treatment and Implication for Care Eligibility Act, or Notice Act, would require hospitals to inform beneficiaries receiving observation services for more than 24 hours about their outpatient status.

The written notification also would have to explain that Part B cost-sharing requirements apply to those beneficiaries. The notice would further have to state that the observation stay would not count toward the three-day inpatient stay required for Medicare coverage of subsequent SNF services.

There is some uncertainty about whether President Barack Obama will sign the bill in time for it to become law. He has to affirmatively sign it, rather than let it become law without his signature, because Congress will be in recess.

But a spokeswoman for Rep. Lloyd Doggett (D-Texas), one of the act's sponsors, said Doggett is optimistic Obama will sign it. As of Friday, the president had eight days to sign the bill and had not yet done so.

A White House representative did not respond to a request for comment.

Providers were mostly positive about the bill.

The American Hospital Association generally supports transparency for patients so that they know what their costs will be, and it looks forward to working with the CMS on rulemaking, said Tom Nickels, the AHA's senior vice president for federal relations.

Dr. Robert Wergin, president of the American Academy of Family Physicians, said that “patients can't afford not to know if they are ineligible for Medicare's hospitalization coverage or nursing home benefits. This legislation will provide a much-needed layer of transparency for many patients who find themselves under medical care within the walls of a hospital but haven't officially been admitted.”

The legislation “means millions of individuals who leave a hospital, preparing for a short stay in a skilled-nursing center, will now know what their hospital status is, which could save them thousands of dollars in out-of-pocket costs,” said Clifton Porter II, senior vice president of government relations at the American Health Care Association, which represents skilled-nursing facilities.

But Medicare beneficiary advocates are lukewarm to the Notice Act. While it's a good first step, the bill gives patients no formal recourse to have their status changed from observation to inpatient, said Toby Edelman, a senior policy attorney at the Center for Medicare Advocacy.

Her group and the Medicare Rights Center prefer another bill, the Improving Access to Medicare Coverage Act of 2015, which would count a patient's time under observation status toward the three-day hospital inpatient-stay requirement for Medicare SNF care coverage. But little action has been taken on that bill since it was introduced in the House and Senate in March. Part of the holdup is that it has yet to be scored by the Congressional Budget Office. The CBO has said the Notice Act would pose limited costs for the government.

But the National Rural Health Association said the Notice Act doesn't address the fundamental problem, which it says was created by CMS rules. “While transparency and good patient communication about their hospital bill is important, the problem was created by CMS in the first place through the ambiguous two-midnight rule and the real risk for inappropriate inpatient admissions, disproportionately impacting rural safety net providers,” said Lindsey Corey, a spokeswoman for the association. “Fix the regulatory problems and there would be no need for this legislation.”