Hospitals must now notify “observation” status Medicare patients, implications for state Medicaid programs

Under federal law, hospitals must now notify Medicare patients if they are on “observation status” rather than an admitted patient. According to Kaiser Health News, patients were often not aware they were considered outpatients, as they were in identical hospital beds and receiving the same care as other admitted patients. Many learned that they were on observation status only when they received large hospital bills and/or were not covered by Medicare for subsequent nursing home care. Observation care does not count toward Medicare’s three day admission requirement to cover nursing home care. This issue has implications for state Medicaid programs as they are responsible for Medicare/Medicaid dual eligibles’ hospital bills. The use of observation status in Medicare has grown in recent years. The federal NOTICE Act passed in 2015 requires hospitals to notify observation status patients by 36 hours in the hospital.