ACPA Special Bulletin: 2017 IPPS Proposed Rule
Summary of Important Proposals in CMS 1655-P
Medicare Outpatient Observation Notice (MOON)
On August 6, 2015, the NOTICE Act became law, requiring hospitals and critical access hospitals to provide written notification and oral explanation of such notification to individuals receiving observation services as an outpatient for more than 24 hours. This must be accomplished no later than 36 hours after the initiation of observation services (or upon release, if sooner than 36 hours). The effective date of this law is 12 months from NOTICE enactment, or August 6, 2016. CMS further proposes that the notice must be given before discharge, transfer, or admission if these events occur prior to 36 hours after initiation of observation services.
The NOTICE Act requires hospitals to explain the status of outpatients receiving observation services, as well as the implications of such status, including cost-sharing requirements and SNF eligibility. NOTICE further requires the notification to be written and formatted using plain language. The written notification must be signed either by the patient or the person acting on the patient's behalf, or in case of refusal, by the staff member of the hospital who presented the written notification. In the case of such refusal, the name and title of the staff member, a certification that the notification was presented, and the date and time the notification was presented must be recorded on the notification.
CMS created the Medicare Outpatient Observation Notice (MOON) to help hospitals satisfy this requirement. CMS deems the MOON applicable to any patient who receives benefits under Title XVIII of the Social Security Act, which includes Medicare Part A patients (with or without Part B coverage) and Medicare Part C (Medicare Advantage) patients. Physician advisors should be aware that observation is a service provided to outpatients upon the order of an eligible provider. Not all outpatients in the hospital are receiving observation services, and these patients (such as outpatient surgical patients) would not require a MOON even if outpatient services extend beyond 24 hours. Similarly, observation patients receiving less than 24 hours of observation services will not require a MOON.
The draft MOON, available here, is still awaiting final approval by the Office for Management and Budget (OMB). In general, it appears to be a well-written document that accurately reflects Medicare policy. One shortcoming of the draft MOON is that it does not inform the beneficiary that there are no appeal rights associated with the decision to provide observation services under outpatient status (as opposed to inpatient admission). Though CMS proposes to amend 42 CFR 405.926 (a list on non-appealable actions) so that the MOON does not trigger appeal rights, it includes no such notice in the document delivered to beneficiaries.
Delivery of the MOON to Medicare Advantage (MA) patients seems to make little sense due to different cost-sharing and SNF eligibility rules that are plan specific - but is required because the NOTICE Act that amended Title XVIII does not exclude MA patients. Keep in mind that patients who receive observation for more than 24 hours, followed by a decision for inpatient admission, are proposed to need a MOON prior to 36 hours after the start of observation, or prior to inpatient admission - whichever is sooner. In addition, since a significant portion of observation patients are released at just over 24 hours, it may prove operationally impossible to deliver the MOON after 24 hours of observation but prior to release. Hospitals may be wise to give the MOON to every observation patient regardless of time in observation.
Acute Care Hospital Market Basket Adjustments
2 Midnight -0.2% Payment Adjustment
It is important to note that the 2 Midnight Rule is not changing with this proposed rule, as reported in some outlets. All that is being proposed for retraction is a payment adjustment that accompanied the 2 Midnight Rule.
CMS is proposing to remove the 0.2% reduction in Inpatient Prospective Payment System (IPPS) payments that was instituted in FY 2014 when the 2 Midnight Rule went into effect. This reduction was the result of assumptions made by CMS in 2013 that the 2 Midnight Rule would increase the net number of inpatient admissions. These assumptions were later challenged in the Shands Jacksonville Medical Center v Burwell case; the judge remanded the case back to CMS to respond to the judge's inquiries. The IPPS rule contains CMS' response. Upon considering FY 2014 and FY 2015 actuarial data and the active litigation, CMS proposes to remove the 0.2% market basket reduction made in FY 2014 and subsequent years. For FY 2017 onward, a factor of 1/0.998 is proposed to be multiplied into the IPPS rates to offset the 0.998 factor implemented in FY 2014. Furthermore, CMS proposes to make up the difference from FYs 2014, 2015, and 2016 by including a one-time factor of 1.006 in the 2017 IPPS rates, which will be nullified in 2018 by a factor of 1/1.006.
CMS had predicted a net of 40,000 more inpatient admissions and net increased expenditure of $220M as a result of the 2 Midnight Rule. What actually happened? CMS actuaries released this analysis in February 2016.
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