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September 2015 Monthly RAC Report: The Notice Act's Observation Notification Requirements

September 02, 2015

On August 6, 2015, the President signed into law the Notice Act, a law that requires both acute and critical access hospitals to provide written and oral notification to beneficiaries who receive observation services for more than 24 hours. This notification must be given to the beneficiary no later than 36 hours after the beneficiary begins receiving such services, or upon release from the hospital, if sooner. The Act becomes effective 12 months after its enactment.

The oral notification simply must explain the written notification, which must include an explanation of the following:

  1. The status of the beneficiary as an outpatient receiving observation services and not as an inpatient;

  2. The reasons for such status;

  3. The implications of such status (for example, cost-sharing requirements); and

  4. Any additional information the Secretary of Health and Human Services deems appropriate.

The beneficiary must sign the written notification acknowledging receipt of it, or, if the beneficiary refuses to sign it, the staff member presenting the notification must sign it and must include (i) the name and title of the staff member, (ii) a certification that the notification was presented, and (iii) the date and time the notification was presented to the beneficiary.

The Notice Act leaves open the opportunity for the Centers for Medicare and Medicaid Services (“CMS”) to expand and expound on the requirements of the Act, including the details of and the implications to include in the written notification and, particularly, details of what implications must be disclosed to the beneficiary. Hospitals, therefore, should remain aware of future regulations proposed by CMS once the implementation date draws nearer, at which point hospitals should begin preparing appropriate forms for hospital staff to utilize for beneficiaries receiving observation services. Hospitals should also take this time to consider their policies with regard to beneficiary cost-sharing and ensure that those policies comport with federal and state law, particularly regarding waivers and reductions to Part B cost-sharing that might implicate the federal Anti-Kickback Law.

Please contact Jeff Moore (jeff.moore@phelps.com) if you have any questions about the Notice Act or would like for Phelps Dunbar to help your hospital prepare for its implementation.