NOTICE Act Now Requires Hospitals to Notify Patients of a Significant Loophole in Medicare Nursing Home Coverage

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Effective August 6, 2016, a new federal act called the “Notice Act” requires hospitals to provide both written and oral notice, within 36 hours, to any patient who is in “observation” or other outpatient status for any period of time exceeding 24 hours.  This newly required notice must explain the reason(s) that the patient is classified as an outpatient and further explain the consequences to the patient regarding how the cost of the hospitalization will be split between the patient and Medicare, as well as inform the patient of the fact that any subsequent stay in a skilled nursing facility will not be paid for by Medicare, but rather be the patient’s responsibility to pay out of pocket.

The Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act was enacted to address the increasing number of patients in hospitals who are not formally admitted as inpatients, but as “outpatients on observation status” and who receive all necessary medical and nursing care, medications and diagnostic tests just like an inpatient but do not qualify for Medicare payments for post-acute care in a skilled nursing facility because they have not satisfied the consecutive three-day inpatient hospital admission that is the prerequisite for Medicare coverage.

In a rare show of bi-partisan support, Congress recognized the potentially financially devastating impact on many of our senior population who reasonably believed that their subsequent nursing home stay would be paid for by Medicare, only to find out that none of the expenses of the skilled nursing facility would be paid for, leaving them with bills often in excess of $50,000 as their personal responsibility to pay.

While it seems inconceivable to most of us as to why this type of situation should ever arise, many hospital administrators have explained that classifying patients as “outpatients on observation status” prevents the hospital from being penalized by Medicare for what it deems to be “inappropriate” admissions.

Patients can expect to receive the newly required notice by January 2017.  In the meantime, I urge all Medicare-eligible hospital patients to inquire as soon as possible after a hospital admission as to their official admission status.