Last year, President Obama signed the Notice of Observation Treatment and Implication for Care Eligibility Act (better known as the “NOTICE Act”).  The NOTICE Act became effective on August 6, 2016.  It may not seem like a big deal, but the Act requires hospitals to inform patients whether the patients have been admitted to the hospital on “inpatient” status versus “observation” status.

When a doctor admits a patient to a hospital, the patient and patient’s family members normally assume that the patient has been “admitted” to the hospital as an inpatient.  This is usually true whether the patient is in the Emergency Room or has been moved to a regular bed.  The patient is probably being taken care of by doctors and nurses, usually receiving medication, and even staying overnight for one or more nights.  However, without the patient knowing it, the doctor may have ordered the hospital to keep the patient in the hospital for observation instead of ordering full inpatient status for the patient.

This might not make much of a difference for younger patients who are on private health insurance, as the insurance will pay for the hospital stay and any subsequent medical needs.  But the difference between observation and inpatient admission status greatly affects senior patients that receive Medicare benefits.  Observation status does not trigger Medicare’s comprehensive hospitalization coverage, so the patient may be required to pay physician and drug co‑pays that Medicare would otherwise cover for a hospital inpatient.

The biggest problem with the senior being kept on observation status is that Medicare will now not pay for any physical rehabilitation costs after observation hospitalization.  If you have been fully admitted and have stayed through two consecutive midnights, Medicare will pay for the hospital expenses and up to 100 days in an inpatient physical rehabilitation facility.  However, if the hospital transfers the patient to the physical rehabilitation facility after an observation admission to the hospital, Medicare will not pay the full hospitalization cost or any of the room and board charges for the inpatient physical rehabilitation services.

Patients and their families should be aware of the Medicare rule and the new NOTICE Act to make sure that any hospitalization follows the Medicare standards.  It is critical (not to mention potentially extremely expensive) that the patient or the patient’s family determine the hospitalization status immediately and challenge an observational placement.  If a patient or the patient’s family waits too long to object to the hospitalization status, the very small time windows for objections and appeals may close and the patient may be stuck with an expensive hospital and/or rehabilitation facility bill.

If you or a family member has any questions about the new law or the objections and appeals process, please contact us.