New Observation Status Law Signed into Effect

November 8, 2013
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In a previous blog we reported that most people assume that when they are admitted into a hospital they are automatically considered an in-patient. However, this is untrue. The physician or practitioner decides whether to list the patient as an inpatient or put them on “observation status.” CMS defines observation status as, “a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital.” The issue with observation status is that Medicare Part A will only pay for hospital inpatient stay and does not cover services performed while the patient is on observation status. Services under observation status are instead billed through Medicare Part B and the patient is still responsible for 20% of the cost. This is a problem for those who are not enrolled in Part B. In addition, for those looking to be discharged to a skilled nursing facility for rehabilitative treatment, observation status will not count toward Medicare’s requirement of a three day hospital stay otherwise known as a “qualified stay”.   In the past there were cases where patients were not informed that they were placed on observation status until they received their hospital medical bills or where looking to be discharge to a skilled nursing facility. To address this problem, an amendment was recently made to the public health law. This amendment requires that all patients receive notice if they are placed on observation status. This law will provide the patient and/or their caregiver with the information they need as it relates to their care and their coverage, hopefully allowing them to potentially avoid a significant financial responsibility. Patients will be informed of this with an oral and written notice within twenty four hours of the observation status placement. To read the amendment in its entirety click on the following:

To read our previous blog on this topic please click on the following:

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