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[Senate Report 114-107]
[From the U.S. Government Publishing Office]

                                                      Calendar No. 186
114th Congress     }                                     {      Report
                                 SENATE
 1st Session       }                                     {     114-107

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NOTICE OF OBSERVATION, TREATMENT, AND IMPLICATION FOR CARE ELIGIBILITY 
                          (NOTICE) ACT OF 2015

                                _______
                                

                 July 30, 2015.--Ordered to be printed

                                _______
                                

               Mr. Hatch, from the Committee on Finance, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1349]

    The Committee on Finance, to which was referred the bill 
(S. 1349) to amend title XVIII of the Social Security Act to 
require hospitals to provide certain notifications to 
individuals classified by such hospitals under observation 
status rather than admitted as inpatients of such hospitals, 
having considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                       I. LEGISLATIVE BACKGROUND

    The Committee on Finance, to which was referred the bill 
(S. 1349) to amend title XVIII of the Social Security Act to 
require hospitals to provide certain notifications to 
individuals classified by such hospitals under observation 
status rather than admitted as inpatients of such hospitals, 
having considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

Background and need for legislative action

    On February 11, 2015, Representative Lloyd Doggett (D-TX) 
and Representative Todd Young (R-IN) introduced H.R. 876, 
legislation requiring hospitals to notify Medicare 
beneficiaries, who have been in a hospital for at least 24 
hours, if they have been classified by the facility as 
receiving care under outpatient observation status or if they 
have been admitted as an inpatient. H.R. 876 was favorably 
reported by the Committee on Ways and Means on February 26, 
2015. On March 16, 2015, H.R. 876 passed the House of 
Representatives by a vote of 395-0 (Roll Call Vote Number 115).
    On March 14, 2015, Senator Benjamin L. Cardin (D-MD) and 
Senator Michael B. Enzi (R-WY) introduced S. 1349, the Notice 
of Observation Treatment and Implication for Care Eligibility 
(NOTICE) Act. S. 1349 is identical to the House-passed bill, 
H.R. 876. S. 1349 provides Medicare beneficiaries accurate and 
timely information about their patient status. Prior notice 
will provide Medicare patients increased certainty regarding 
their status as an outpatient under observation or as an 
inpatient admission in the hospital setting. S. 1349 requires a 
hospital provide Medicare patients the following:
           Explanation for the reason behind a Medicare 
        patient's classification as either outpatient or 
        inpatient;
           Clarification on how a Medicare patient's 
        classification under outpatient status impacts the 
        individual's eligibility for Medicare coverage for 
        certain items and services (such as skilled nursing 
        facility care) as well as the individual's cost-sharing 
        liabilities;
           Name and title of the hospital staff member 
        who delivered the required oral notification to the 
        Medicare patient as well as the date and time of the 
        notification; and
           Requirement that the hospital written 
        notification be signed by the patient to acknowledge 
        receipt. If the patient refuses to sign, then the staff 
        of the hospital who presented the written notification 
        must sign the document indicating that notice was 
        provided.

                      II. EXPLANATION OF THE BILL

    A. Amend title XVIII of the Social Security Act to require 
hospitals to provide certain notifications to individuals 
classified by such hospitals under observation status rather 
than admitted as inpatients of such hospitals.

                              PRESENT LAW

    Under Medicare payment rules, services furnished to 
beneficiaries as hospital inpatients are generally billed under 
the Inpatient Prospective Payment System, while services 
furnished to outpatients are generally billed under the 
Outpatient Prospective Payment System. Beneficiaries' liability 
for Medicare cost-sharing can be impacted by whether the 
beneficiary was admitted as an inpatient or treated on an 
outpatient basis. In general, Medicare Part A requires 
beneficiaries to pay an inpatient deductible ($1,260 in CY2015) 
if they are admitted to the hospital. For beneficiaries who 
receive hospital outpatient services, beneficiaries typically 
pay 20 percent of the Medicare reimbursement amount for 
outpatient items and services after paying the annual Part B 
deductible ($147 in CY2015). Therefore, beneficiaries who 
receive several outpatient services could potentially have 
greater cost-sharing liabilities as an outpatient under 
observation than if they were admitted as an inpatient to the 
hospital. In 2012, according to the Health and Human Services 
Office of Inspector General, for 6 percent of all observation 
stays, beneficiaries paid more than the inpatient deductible.
    In addition, beneficiaries' coverage for Medicare skilled 
nursing facility (SNF) services depend on whether or not they 
were admitted to an acute care hospital as an inpatient, or 
were treated as an outpatient. To receive coverage for SNF 
services following a beneficiary's hospitalization, the 
Medicare statute requires that the beneficiary had a qualifying 
hospital inpatient stay of at least three consecutive days. For 
purposes of SNF coverage, the time spent under observation does 
not count towards the requirement of a three-day hospital 
inpatient stay.
    The number of Medicare beneficiaries receiving outpatient 
observation care over the last several years has been steadily 
increasing. Some beneficiaries are surprised to learn that 
although having received treatment overnight in a hospital bed, 
the beneficiary was never formally admitted as an inpatient but 
was instead a hospital outpatient. In most cases, beneficiaries 
who spend 24 hours or more in a hospital as an outpatient are 
under ``observation.'' Observation care is often characterized 
as a component of emergency medicine which allows hospitals to 
triage patients who do not immediately require a hospital 
inpatient admission but are too sick to immediately discharge. 
Under observation, the hospital provides assessment, ongoing 
short-term treatment, and reassessment before determining 
whether or not the patient should be admitted as an inpatient 
for additional treatment or the patient is well enough to be 
discharged from the outpatient department. Current law does not 
include a specific requirement that hospitals notify Medicare 
beneficiaries of their patient status.

                        EXPLANATION OF PROVISION

    Beginning one year after the date of enactment, S. 1349 
would require hospitals and critical access hospitals (CAHs) to 
provide a written notification to an individual who has 
received observation services for more than 24 hours, that 
explains: (1) the status is outpatient and not inpatient care, 
and the reasons for such status, (2) the implications of such 
status for cost-sharing requirements under Medicare and 
eligibility for SNF care, and (3) other information the 
Secretary determines appropriate. The written notification is 
to be provided no later than 36 hours after the time the 
individual began receiving observation care and must be signed 
by such individual (or a person acting on the individual's 
behalf) or by the staff member of the hospital or critical 
access hospital that provided such notification in cases where 
the individual refuses to provide a signature. The written 
notification must be formatted using plain language and made 
available in appropriate languages as determined by the 
Secretary. An oral explanation of the written notification must 
also be provided.

                             EFFECTIVE DATE

    The provision becomes effective 12 months after the date of 
enactment.

                    III. BUDGET EFFECTS OF THE BILL

                         A. Committee Estimates

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                          B. Budget Authority

    In compliance with section 308(a)(1) of the Congressional 
Budget and Impoundment Control Act of 1974 (P.L. 93-344), the 
Committee states that no provisions of the bill as reported 
involve new or increased budget authority.

            C. Consultation With Congressional Budget Office

    In accordance with section 403 of the Congressional Budget 
and Impoundment Control Act of 1974 (P.L. 93-344), the 
Committee advises that the Congressional Budget Office has 
submitted a statement on the bill. The following is the cost 
estimate provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 9, 2015.
Hon. Orrin G. Hatch,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1349, the Notice of 
Observation Treatment and Implication for Care Eligibility Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Jamease 
Kowalcyzk and Kevin McNellis, who can be reached at 226-9010.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

S. 1349--Notice of Observation Treatment and Implication for Care 
        Eligibility Act As ordered reported by the Senate Committee on 
        Finance on June 24, 2015

    S. 1349 would require hospitals to notify Medicare 
beneficiaries receiving observation services for more than 24 
hours of their status as an outpatient under observation. The 
written notification would have to explain that, because the 
beneficiary is receiving outpatient--rather than inpatient--
services:
           The beneficiary will be subject to cost-
        sharing requirements that apply to outpatient services, 
        and
           The beneficiary's outpatient stay will not 
        count toward the three-day inpatient stay required for 
        a beneficiary to be eligible for Medicare coverage of 
        subsequent skilled nursing facility services.
    Enacting S. 1349 could affect direct spending; therefore, 
pay-as-you-go procedures apply. CBO expects that some 
beneficiaries would decide to receive a different set of 
medical services after being notified of their observation 
status than they would under current law. Those decisions could 
either increase or decrease costs, depending on each 
beneficiary's particular needs and preferences. However, CBO 
estimates those effects would not be significant over the 2015-
2025 period. Enacting the bill would not affect revenues.
    S. 1349 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    On March 13, 2015, CBO provided a cost estimate for H.R. 
876, as ordered reported by the House Ways and Means Committee 
on February 26, 2015. The bills are the same, as are the 
estimated budgetary effects.
    The CBO staff contacts for this estimate are Jamease 
Kowalcyzk and Kevin McNellis. The estimate was approved by 
Holly Harvey, Deputy Assistant Director for Budget Analysis.

                       IV. VOTES OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that, with a 
majority present, the ``Notice of Observation, Treatment, and 
Implication for Care Eligibility (NOTICE) Act'' was ordered 
favorably reported by voice vote on June 24, 2015.

                 V. REGULATORY IMPACT AND OTHER MATTERS

                          A. Regulatory Impact

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact that might be 
incurred in carrying out the provisions of the bill.

Impact on individuals and businesses, personal privacy and paperwork

    In carrying out the provisions of the bill, there is no 
expected imposition of additional administrative requirements 
or regulatory burdens on individuals or businesses. The 
provisions of the bill do not impact personal privacy.

                     B. Unfunded Mandates Statement

    The Committee adopts as its own the estimate of federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act of 1995 (P.L. 104-4). The Congressional Budget Office 
estimates the bill would not impose intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act and would impose no costs on state, local, or tribal 
governments.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In the opinion of the Committee, it is necessary in order 
to expedite the business of the Senate, to dispense with the 
requirements of paragraph 12 of rule XXVI of the Standing Rules 
of the Senate (relating to the showing of changes in existing 
law made by the bill as reported by the Committee).

                                  [all]
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