“Observation Status” Progress

We are a pen stroke away from making a dent in the mound of issues caused by the hospital observation status rule.  The NOTICE Act, now awaiting the President’s signature, was introduced and passed by the House in March 2015, and just last week before the month’s end was unanimously passed in the Senate.

NOTICE stands for the Notice of Observation Treatment and Implication for Care Eligibility Act (H.R. 876/ S. 1349) and if signed, will amend Title XVIII of the Social Security Act (Medicare) with a provision that requires hospitals participating with Medicare to provide the following to patients receiving observation services as an “outpatient” for more than 24 hours, within 36 hours of the start of those services, or upon discharge if the stay is less than that:

• Verbal and written notice if under “observation” for more than 24 hours explaining the individual’s status (Why is the patient classified as outpatient vs inpatient?)
• Explanation of the implications of coverage based on classification of “observation status”
  • Including the implications for cost-sharing requirements (Who has to pay for what?)
  • Including coverage eligibility for services furnished by a skilled nursing facility (Will Medicare Part A coverage kick in?)

The Act also stipulates that the information must be:

• Written and formatted using plain language
• Made available in appropriate languages
• Be signed by the individual or a person acting on the individual’s behalf (representative) to acknowledge receipt of the notification
• If the individual or representative refuses to sign, the written notification is signed by the hospital staff who presented it.

Though this Act is not specifically about skilled nursing facilities, we as long-term care providers know first-hand how the classification of observation status has impacted both our residents and our facilities. Days deemed under observation status have impacted the SNF Medicare Part A coverage requirement of a 3-day qualifying hospital stay. Hospital stays that were 3 or more days long were in fact NOT qualifying stays because part of the time was classified under “observation.” The frequency of observation status cases increased by 88% from 2006 to 2012, according to a HCPRO.com article published in May this year, and is thought to be due in part to the Recovery Audit Contractor (RAC) Program initiation and increasing intensity of audits in the hospital setting.

Can you think of an occasion where one resident was impacted by “observation status” upon admission to your facility?  These scenarios are factual and may sound familiar:

1. A LTC resident falls in the SNF and fractures a hip requiring ORIF. The resident is admitted to the hospital and the procedure is complete. The resident returns to the SNF 3 days later. The hospital deemed the first day in the ER as observation, therefore, resident did not have a 3-day qualifying stay to activate Medicare Part A. The resident’s Part B coverage is responsible for day 1 in the hospital (pre admission) and Medicare Part A covers the admission portion of the stay. Upon admission to the SNF, the resident is responsible for room and board, and any rehabilitation services needed for the hip fracture will now fall under Medicare Part B (and the therapy cap…)
2. A patient living at home independently has a change in mental status, falls and is sent to the ER. After 24 hours and mutiple xrays and scans to rule out a fracture, the patient is diagnosed with dehydration and a UTI, and is kept under observation status while given IV hydration and antibiotics for another 48 hours. The patient does not have full resolution of the altered mental status and can’t go home independently at this point in time, however, is deemed medically stable and thus sent to a SNF for further recovery. The patient is not eligible for Medicare Part A coverage due to lack of 3-day hospital stay (1 of 3 days was under observation status) and as a result, has to pay privately for room and board in the SNF {which can cost over $400 per day}. Additionally, the patient’s coverage in the hospital is limited to Medicare Part B and can be costly after adding in the tests and services.

The problem up until now with many of these cases is that the patients were not aware of their observation status or the impact of such a status. Hospitals have been documented as utilizing observation status for up to 1 week, as well as retroactively assigning this status to avoid penalty. Facility staff making bed offers and admitting residents from the hosptial to the SNF were often unaware of the observation status due to lack of clear documentation.

The NOTICE Act does not fix the problem but improves upon the patient and SNF knowing the eligibility status for Medicare Part A coverage – and will allow both to make decisions about services. There are other Bills that have been introduced to address the larger problem of observation status and the 3-day hospital stay requirement for SNF Medicare Part A coverage. The Improving Access to Medicare Coverage Act (S. 843 and H.R. 1571) would update Medicare policy to allow the time spent under hospital observation to count toward the 3-day hospital stay that is needed for Medicare Part A coverage in a SNF. The Creating Access to Rehabilitation for Every Senior (CARES) Act of 2015 would rescind the 3-day hospital stay requirement altogether and allow Medicare Part A coverage in a SNF to be used more freely.

Signing the NOTICE Act into law will, at the very least, help Medicare beneficiaries and SNF’s in identifying coverage status…and once we are all on the  same page, we can make additional improvements in the system from there!

As always, if you have any questions visit our Q&A Forum and Just Ask!

In Your Corner,

Dolores

www.RehabResourceForLTC – Subscribe today!

*** Update:  The Notice Act was signed by the President and became Public Law No: 114-42 on 8/6/15