Thursday, March 30, 2017

The MOON has risen on Medicare Outpatient Observation

By Lara Anderson

This month marks the beginning of the Medicare Outpatient Observation Notice (MOON). The MOON is a standardized notice used to inform Medicare beneficiaries if they are staying in the hospital under observation status and are not formally admitted as inpatients in the hospital.

Most people assume that if they spend the night in the hospital, they have been admitted as inpatients, but this can create costly misunderstandings with financial consequences for Medicare patients.

The new law is intended to protect Medicare beneficiaries and requires hospitals to explain the MOON to individuals who receive observation services for more than 24 hours without being formally admitted. The patient or patient’s representative must acknowledge receiving the form by confirming with a signature. According to the Centers for Medicare & Medicaid Services, the MOON will inform more than one million Medicare beneficiaries every year of the reasons they are considered outpatients under observation and the potential out-of-pocket costs associated with this status. 

Hospitals are cautious about formally admitting patients because Medicare auditors can financially penalize them for inappropriate admissions. Private companies hired by the government to review Medicare claims often question decisions by doctors to formally admit patients to a hospital.

For individuals with Original Medicare, outpatient status is covered under Part B, which may not offer coverage as complete as Part A hospital benefits. When spending time in the hospital as an outpatient, the 20% deductible patients need to pay under Part B can quickly add up. Medigap policies can help pay the gaps in Part B coverage, but patients often haven’t purchased this additional protection.

Also, Original Medicare (Parts A and B) will not pay for a skilled nursing facility or non-custodial nursing home care after a hospital stay if a patient was not admitted to the hospital for three midnights as an inpatient. Instead, the costs would have to be paid solely by the patient. An incident like this can have enormous financial consequences for someone at such a vulnerable stage in life. See relevant stories in The New York Times and NBC here.

There are protections in place for Medicare beneficiaries, and doctors are often very supportive of ensuring their patients are covered. If a patient disagrees with the observation status, the individual can request that the doctor change the status if the patient meets hospital admission criteria. Another option is to ask his or her own doctor to contact the treating physicians in the hospital to try to get the status changed. 

If the status is not changed, a patient may follow the appeal process outlined in the Medicare Summary Notice received after the hospital stay. I called the Centers for Medicare and Medicaid Services and was informed that patients do have the right to appeal any Medicare coverage determinations. And while this action is not a guarantee a hospital stay will be billed as inpatient care, at least there is a chance when appealed.

This new law is an important step in clarifying Medicare rules for patients in an effort to protect their financial well being and provide the best treatment for their individual needs. I look forward to writing a follow-up article that will review the MOON’s effect on Medicare patients, and the impact it has had on hospitals and the Medicare system.

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