Abbey, Duane. “Observation in the NOTICE Act: What is Being Accomplished?” RAC Monitor. 27 April 2016. (site visited September 21, 2016). The author points out that observation services may not add up to the 24 hours required for the issuance of the MOON even if the patient seems to have spent 24 hours in … Read more

This summer, the New York Times article “New Medicare Law to Notify Patients of Loophole in Nursing Home Coverage”* told the story of one of many people who contact the Center for Medicare Advocacy for help with hospital “outpatient” Observation Status. These patients stayed in the hospital for multiple days receiving skilled care, but were coded … Read more


The Center for Medicare Advocacy has partnered with The John A. Hartford Foundation in an effort to help those caught in the web of hospital “outpatient” Observation Status. As part of our project, the Center is collecting Observation stories from beneficiaries. <a data-cke-saved-href="" href="" target=_blank>Click here to take the survey now</a>. The survey was created … Read more

An August 7, 2016 New York Times article once again highlighted the problem of hospital Observation Status, including issues with the NOTICE Act, which is supposed to help Medicare beneficiaries understand their status. The article, New Medicare Law to Notify Patients of Loophole in Nursing Home Coverage, featured a Center For Medicare Advocacy client's story. In the piece, Center Executive Director Judith … Read more

Beginning August 6, 2016, the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act)[1] requires hospitals to provide written and oral notice, within 36 hours, to patients who are in observation or other outpatient status for more than 24 hours.  The notice must explain the reason that the patient is an outpatient … Read more

In order for Medicare Part A to pay for a patient’s stay in a skilled nursing facility (SNF), the patient must first have spent at least three consecutive days as an inpatient in an acute care hospital.[1]  For many Medicare beneficiaries, Part A SNF coverage is denied because the hospital classifies the stay as Outpatient … Read more

June 16, 2016 Andrew M. Slavitt Acting Administrator Centers for Medicare & Medicaid Services Department of Health and Human Services Room 445-G, Hubert H. Humphrey Building 200 Independence Ave., S.W. Washington, D.C.  20201 Re: CMS-1655-P, Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and … Read more

The controversial issue of Observation Status continues.[1]  The latest news is that the Centers for Medicare & Medicaid Services (CMS) told Quality Improvement Organizations (QIOs) on May 4 that they should temporarily pause their reviews of hospitals’ compliance with the two-midnight rule.  The pause was reported by Livanta, one of the two QIOs nationwide (the … Read more

In proposed rules updating Medicare reimbursement to acute care hospitals,[1] the Centers for Medicare & Medicaid Services (CMS) announces how it intends to implement the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act).[2]  Effective August 6, 2016, the NOTICE Act requires that hospitals provide written and oral notice, within 36 hours, … Read more

The Centers for Medicare & Medicaid Services (CMS) hosted a Tele Town Hall on December 21, 2015 to solicit comments on the Notice of Observation Treatment and Implications for Care Eligibility (NOTICE) Act, Public Law 114-42.  Beginning in August 2016, the NOTICE Act requires hospitals to inform patients who are hospitalized for more than 24 … Read more

The Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) released a statement on October 30, 2015 that advises hospitals that it will not administratively sanction them if they discount or waive charges for an outpatient’s self-administered drugs. Thus, hospitals now have the option, and a greater incentive, not … Read more

In 2013, the Centers for Medicare & Medicaid Services (CMS) promulgated the Two-Midnight Rule, which, for the first time in the Medicare program’s 50-year history, determined patient status in a hospital by reference to time.[1]  Specifically, CMS’s new rule provided that a patient would be considered an inpatient, and the hospital stay would be covered … Read more

If Congress and the Administration truly seek ways to limit Medicare premiums and deductibles, they ought to look at CMS's hospital Observation Status policy. A major cause of the Part B increase is likely the parallel increase in so-called "outpatient" Observation Status, the use of which has more than doubled since 1999. The result of this … Read more

Hospitals often classify hospitalized Medicare patients as outpatients, even though their hospital care may be indistinguishable from the care they would receive if they were formally admitted as inpatients.  This issue – called Observation Status – has been a serious problem for Medicare beneficiaries for many years,[1] chiefly because patients who do not have at … Read more

An increasing number of patients in hospitals are not formally admitted as inpatients, but as “outpatients” on “observation status.”  Although they receive whatever medical and nursing care, diagnostic tests, medications, and food they need, their status as “outpatients” means that they do not satisfy the three-day inpatient hospital prerequisite for Medicare coverage of post-acute care … Read more

In the annual update to Medicare reimbursement of acute care hospitals for outpatient care (July 8, 2015)[1] the Centers for Medicare & Medicaid Services (CMS) includes proposed revisions to the “Two-Midnight Rule” and its enforcement. If the proposed changes lead to an increased number of patients being formally admitted as inpatients (rather than, as now, … Read more

Effective July 1, 2015, Virginia has become the fifth state to enact legislation requiring hospitals to inform patients when they are in Observation or other outpatient status, and the consequences of not being admitted as inpatients.  Senate Bill 750[1] requires hospitals to provide oral and written notice to patients who are receiving “onsite services” (including … Read more

This CMA Alert highlights a recent individual ALJ decision that sets out an important but often unrecognized beneficiary right to a written notice when he or she is about to use hospital “Lifetime Reserve Days.”  A hospital’s failure to provide appropriate notice in this context can lead to the waiver of a beneficiary’s liability for … Read more

Observation Status – hospital patients’ classification as outpatients, which makes them ineligible for Medicare Part A coverage of their subsequent stay in a skilled nursing facility (SNF) when they do not have “inpatient” status for at least three consecutive midnights – is an ongoing issue that the Center for Medicare Advocacy has discussed many times.[1]  … Read more

At its January 16, 2015 public meeting, the Medicare Payment Advisory Commission (MedPAC), the government agency that advises Congress on Medicare payment policy, addressed observation status as part of its discussion of hospital short stay policy issues.[1]  MedPAC Commissioners preliminarily, but unanimously, voted to move forward on a recommendation to count time in observation status … Read more

Medicare patients considered hospital outpatients on Observation Status may be helped by a decision issued on January 22, 2015 by a federal appeals court.  A three-judge panel of the U.S. Court of Appeals for the Second Circuit decided that Medicare patients who are placed on “Observation Status” in hospitals may have an interest, protected by … Read more

Medicare patients need to be aware that if they were hospitalized after October 1, 2013, hospitals may be contacting them about their bills. Final rules that were published in August 2013 and became effective October 1, 2013 created a new regulatory provision, 42 C.F.R. 414.5, "Hospital services paid under Medicare Part B when a Part … Read more

The use of “Observation Status” – treating certain hospitalized Medicare patients as outpatients when their care is indistinguishable from that of formally admitted inpatients – continues to garner considerable public and Congressional attention. It remains an unresolved problem that has serious financial consequences for Medicare patients and their families.[1]   On July 30, 2014, the Senate … Read more

Under a 2008 decision of the Second Circuit Court of Appeals, the Secretary of HHS has authority under the Medicare statute to include a hospital patient’s time in observation as part of inpatient time in the hospital for purposes of determining whether the patient qualifies for Part A coverage of a subsequent stay in a … Read more

Connecticut Passes Observation Notice Law On June 12, 2014, Connecticut Governor Dannel P. Malloy signed into law a requirement that, starting October 1, 2014, Connecticut hospitals give oral and written notice to patients placed on observation status for 24 hours or more.  Similar laws already exist in New York and Maryland.  Specifically, Connecticut's law requires: … Read more

May 21, 2014 The May 20, 2014 hearing on "Current Hospital Issues in the Medicare Program," held by the Health Subcommittee of the House Committee on Ways and Means, was the first Congressional hearing to consider the impact of observation status on hospitalized Medicare patients.[1]  At the hearing, the Center for Medicare Advocacy's Senior Policy … Read more

Center for Medicare Advocacy Senior Policy Attorney Toby S. Edelman will testify before the House Ways and Means Health Subcommittee on Tuesday, May 20, 2014 at 9:30 AM regarding current hospital issues in the Medicare program, specifically the ongoing problem of observation status. The hearing, announced on May 13th, is the first Congressional hearing to … Read more

The use of Medicare observation status in hospitals has increased dramatically over the past several years.[1] The most notable adverse consequence of Observation Status on beneficiaries is financial liability for any post-hospitalization care at a Skilled Nursing Facility.[2] However, many of the beneficiaries the Center assists also find themselves facing large hospital bills for drugs … Read more

Final rules published in August 2013 by the Centers for Medicare & Medicaid Services (CMS) created time-based rules for determining inpatient status in an acute-care hospital.[1]  Under the rules' two-midnight presumption, a physician should order an inpatient admission if the physician expects that the patient's stay in the acute care hospital will be at least … Read more

As our client, Ms. Bricout states in this video, Observation Status is simply "illogical."  But there is a sound, viable solution! Congressman Joe Courtney has a bill pending in Congress that would fix the observation status problem for good: the Improving Access to Medicare Coverage Act of 2015 (H.R. 1571 and S. 843).

>Hospitals' increasing use of observation status harms more Medicare beneficiaries daily as patients hospitalized for multiple days are denied coverage of subsequent care in a skilled nursing facility because their time in the hospital was labeled "outpatient," not "inpatient."[1]  Since the enactment of the Medicare program nearly 50 years ago, Medicare has limited payment for … Read more

The Center for Medicare Advocacy has heard that some Medicare beneficiaries believe that new federal rules authorize Medicare to pay for their nursing home care if they are inpatients in a hospital for two midnights.  This belief is NOT CORRECT.  New rules published by the Centers for Medicare & Medicaid Services (CMS) in August 2013, … Read more

On September 23, a federal judge in Connecticut dismissed a lawsuit filed by the Center for Medicare Advocacy and the National Senior Citizens Law Center on behalf of Medicare beneficiaries who have been placed on "observation status."[1]  When hospital patients are placed on observation status they are labeled "outpatients," even though they are often on … Read more

While Observation Status continues, recent weeks have seen a great increase in awareness of the problem.  In addition, support for legislation to end Observation Status has grown rapidly. What is Observation Status? Observation Status refers to the classification of hospital patients as "outpatients," even though, like inpatients, observation patients may stay for many days and … Read more

Effective October 1, 2013, new rules for inpatient hospital reimbursement under the Medicare program[1] make final two sets of proposed rules that the Centers for Medicare & Medicaid Services (CMS) published in the Spring 2013 – the definition of an inpatient hospital stay based on time[2] and a hospital rebilling option.[3]  Neither set resolves the … Read more

Joining the discussion about hospitals' extended use of observation status, the Department of Health and Human Services' Office of Inspector General (OIG) has issued a memorandum report that describes the nationwide use of observation and outpatient stays in calendar year 2012.  OIG reports that more than 600,000 Medicare beneficiaries had hospital stays lasting at least … Read more

Although a large and increasing number of Senators and Representatives now support bipartisan legislation to solve the problem of Observation Status, many beneficiaries and their families continue to face this outpatient status as a barrier to Medicare coverage of care in a skilled nursing facility.  This Alert describes the continuing problem, Congressional legislation, a survey … Read more

As part of the annual update to inpatient hospital reimbursement under the Medicare program, the Centers for Medicare & Medicaid Services (CMS) is again considering observation status.  This time CMS is proposing "a time-based presumption of medical necessity for hospital inpatient services based on the beneficiary's length of stay."  78 Fed. Reg. 27486, 47644 (May … Read more

$30,000 – that’s Mrs. Kauffman’s nursing home bill for care she received following a three-day hospitalization. Although she was in the hospital for three full days, Mrs. Kauffman was never admitted as an inpatient. Instead, she was classified as an outpatient on "observation status."  Because Medicare coverage for nursing home care is only available after … Read more

The Center for Medicare & Medicaid Services (CMS) recently issued proposed rules and an interim CMS Ruling to allow  hospitals to bill Medicare Part B after a Part A claim is denied. 78 Fed. Reg. 16,632 (March 18, 2013).[1]  These actions address some financial concerns of hospitals about “observation status;” but they do not help … Read more

Increasingly, hospital patients throughout the country are learning they are considered outpatients, on "observation status," not inpatients, although they have stayed many days and nights and been treated IN a hospital. The Center has written extensively about this practice and is pursuing litigation to challenge it in federal court.  Among the harmful consequences of observation … Read more

On July 30, 2012, as part of proposed rulemaking on the outpatient prospective payment system, the Centers for Medicare & Medicaid Services (CMS) asked for public comment on potential policy options related to "observation status."[1] What is Observation Status? Observation status refers to the classification of a patient in an acute care hospital as an … Read more

August 9, 2012 Note to Alert readers: This Posted version contains additional information beyond that in the emailed version. As part of a notice of proposed rulemaking published in the Federal Register on July 30, 2012, the Centers for Medicare & Medicaid Services (CMS) is asking for public comments on potential policy changes related to … Read more

Hospital case managers and the hospital industry have joined the chorus of those opposed to observation status – a designation that renders a beneficiary ineligible for Medicare-covered skilled nursing facility (SNF) care.  This Alert discusses a recent survey by the American Case Management Association and an amicus brief filed by the American Hospital Association in … Read more

Since 2008, the Center for Medicare Advocacy (the Center) has been reporting that an increasing number of Medicare beneficiaries are being placed in acute care hospital beds for multiple days – receiving medical and nursing care, diagnostic tests, treatments, medications, and food – but are being called "outpatients" in observation status, rather than admitted "inpatients."[1]  … Read more

For several years, reducing rehospitalizations of Medicare beneficiaries has been a key public policy goal, the intent of which is to improve quality of care for beneficiaries and reduce costs for the Medicare program.[1]  Studies have shown that rehospitalizations are common and expensive.  In 2006, for example, nearly one-quarter of nursing home residents (23.5%) were … Read more

For Immediate Release                                             Contacts: Judith Stein and Gill Deford November 3, 2011                                                                          (860)456-7790 Center for Medicare Advocacy Seeks … Read more

The Center for Medicare Advocacy has heard increasingly about beneficiaries throughout the country whose entire stays in a hospital, including stays as long as 14 days, are classified by the hospital as outpatient observation.  In some instances, the beneficiaries' physicians order their admission, but the hospital retroactively reverses the decision.  As a consequence of the classification of … Read more

Coalition Urges Congress to Pass Legislation Safeguarding Medicare Beneficiaries' Skilled Nursing Care For Immediate Release October 21, 2012   Terry Berthelot 860-456-7790 Toby Edelman 202-293-5760 Washington, DC. – A Congressional briefing on "observation status," sponsored by Congressman Joe Courtney (D. CT), was held yesterday afternoon to examine Medicare beneficiaries' being denied Medicare coverage for care … Read more