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SHM Proposes Recommendations for Medicare Patient Observation Notice

June 22, 2016

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Representing the fastest growing specialty in modern healthcare, the Society of Hospital Medicine (SHM) is the leading medical society for hospitalists and their patients.

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Society Expresses Concern with Potential for Patient Confusion, Stresses Hospitalists’ Essential Role in Observation Status Policy Development

In response to the proposed written Medicare patient observation notice, set to take effect on August 6, the Society of Hospital Medicine (SHM) issued comments to the Centers for Medicare and Medicaid Services (CMS) to ensure the best interests of hospitalized patients and the hospitalists who care for them are properly represented. Hospitalists are central players in the inpatient admission decision and handle over 50 percent of all initial observation care as well as over 50 percent of observation status patient discharges, according to SHM research.

“Medicare beneficiaries deserve to know whether they are hospitalized as an inpatient or as an outpatient, and how this alters their Medicare coverage. Yet notification does not fix the issues in observation coverage, including the lack of skilled nursing facility benefit for those without a 3 midnight inpatient stay.,” notes hospitalist and SHM Public Policy Committee member Ann Sheehy, MD, MS. ”We remain optimistic that CMS and Congress will view NOTICE as the first step in comprehensive observation reform.”

After confusion among patients, providers and hospital staff alike, the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act was signed into law by President Obama on August 6, 2015. It requires hospitals to a provide a written statement to patients receiving more than 24 hours of observation care outlining the distinction between inpatient admission and outpatient observation and its financial implications: The Medicare Observation Outpatient Notification (MOON).

While SHM encourages the CMS to consider structural reforms to observation status as part of a more comprehensive approach to improving patient care and increasing transparency of healthcare costs, SHM recommends restructuring the MOON draft to better address patient understanding and provider concerns. Highlights include:

  • Using fewer technical terms and abbreviating the draft’s length to more clearly and concisely express what observation status is and its implications on patients’ hospital stays and associated costs
  • Clarifying that observation is a billing distinction, not a quality of care issue
  • Encouraging patients to contact their patient relations, case management or hospital billing departments with concerns
  • Developing an alternative method to indicate patient refusal to sign the document instead of requiring a provider signature, which raises ethical concerns for providers not legally able to accept financial responsibility on patients’ behalves