There may be no noticeable difference between a hospital patient occupying a bed as an inpatient or one in observation status. Yet, state and federal legislators have been concerned that the difference can have important consequences for the patient. “Observation care” is considered by Medicare to be an outpatient service. Patients classified as outpatients in the hospital may fail to achieve a three-day inpatient stay to qualify for subsequent Medicare coverage for skilled nursing facility care. Patients in observation status may also have higher co-payments and charges for doctors’ fees and hospital services, as well as drugs.

Federal Law. The Medicare Outpatient Observation Notice (“MOON”) was developed to inform all Medicare beneficiaries when they are receiving observation services and are not an inpatient of the hospital. The MOON is mandated by the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act), enacted in 2015. All hospitals and critical access hospitals (CAHs) are required to provide the MOON beginning no later than March 8, 2017.

The Center for Medicare and Medicaid Services (“CMS”) has posted a form and instructions for the Moon on its website. The MOON must be delivered to beneficiaries in original Medicare (fee-for-service) and Medicare Advantage enrollees who receive observation services as outpatients for more than 24 hours. The hospital or CAH must provide the MOON no later than 36 hours from the clock time observation services are initiated, as documented in the patient’s medical record, in accordance with a physician’s order.

Hospitals and CAHs must provide both the standardized written MOON, as well as oral notification. Oral notification must consist of an explanation of the standardized written MOON. The format of such oral notification is at the discretion of the hospital or CAH, and may include, but is not limited to, a video format. However, a staff person must always be available to answer questions related to the MOON, both in its written and oral delivery formats. The hospital or CAH must ensure that the beneficiary or representative signs and dates the MOON to demonstrate that the beneficiary or representative received the notice and understands its contents.

Hospitals and CAHs subject to state law observation notice requirements may attach an additional page to the MOON to supplement the “Additional Information” section in order to communicate additional content required under state law, or may attach the notice required under state law to the MOON.

California Law. As of January 1, 2017, every general acute care hospital in California must provide a similar notice to each patient staying in an inpatient or observation unit of the hospital who is receiving observation services or whose status has been changed from inpatient to observation. The notice must inform the patient that he or she is in observation status, and it must be provided as soon as practicable. The California statute, Health and Safety Code § 1253.7, also requires that an observation unit in the hospital must be marked with signage identifying the observation unit area as an outpatient area. In addition, the signage must use the term “outpatient” in the title to indicate clearly to all patients and family members that the observation services provided in that unit are not inpatient services.

Hospitals outside the state of California should check their state laws to determine whether they are subject to similar notice requirements. Patients and their representatives should also ask about their status when they find themselves in the hospital.