The issue of observation status involves a patient in a hospital who receives medically necessary care, tests, treatment, and medications ordered by their physicians but are in observation status or are otherwise called an outpatient, rather than an admitted inpatient. The primary consequence for patients of the inpatient/outpatient Medicare billing distinction is financial: Medicare will not pay for post-hospital care in a skilled nursing facility (SNF) unless a patient is classified as an inpatient for at least three consecutive days, not counting the day of discharge. Observation status and outpatient status are not inpatient and they do not qualify a patient for Medicare Part A coverage of SNF care.
Beginning August 6, 2016, the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act) 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 (and not an admitted inpatient) and describe the implications of that status both for cost-sharing in the hospital and for subsequent “eligibility for coverage” in a skilled nursing facility (SNF). In final regulations for inpatient hospital reimbursement that were put on display at the Office of Federal Register on August 2, 2016, the Centers for Medicare & Medicaid Services (CMS) announces that the final rules, including rules to implement the NOTICE Act, become effective October 1, 2016 and that the required written notice to patients will not become effective until 90 days following approval the Office of Management and Budget (OMB). As of August 4, OMB had not approved the MOON. What the CMS final rules mean is that the NOTICE Act will not be implemented until the late Fall of 2016, at the earliest.
Source/More: Center for Medicare Advocacy