I 

115TH CONGRESS 

1ST SESSION H. R. 1421 

To amend title XVIII of the Social Security Act to count a period of receipt 

of outpatient observation services in a hospital toward satisfying the 

3-day inpatient hospital stay requirement for coverage of skilled nursing 

facility services under Medicare, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 8, 2017 

Mr. COURTNEY (for himself, Mr. THOMPSON of Pennsylvania, Mr. DEFAZIO, 

Ms. DELAURO, Ms. TSONGAS, Ms. MCCOLLUM, Mr. LANGEVIN, Ms. 

DELBENE, Mr. HECK, Mr. WALZ, Mr. ELLISON, Mr. KILMER, Mr. SEAN

PATRICK MALONEY of New York, Ms. KUSTER of New Hampshire, and 

Mr. SENSENBRENNER) introduced the following bill; which was referred 

to the Committee on Ways and Means, and in addition to the Committee 

on Energy and Commerce, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend title XVIII of the Social Security Act to count 

a period of receipt of outpatient observation services 

in a hospital toward satisfying the 3-day inpatient hospital stay requirement for coverage of skilled nursing 

facility services under Medicare, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Improving Access to 

3 Medicare Coverage Act of 2017’’. 

4 SEC. 2. FINDINGS. 

5 Congress finds the following: 

6 (1) Medicare requires beneficiaries to be hos7 pitalized for medically necessary inpatient hospital 

8 care for at least three consecutive days before cov9 ering post-hospital care in a skilled nursing facility 

10 under section 1861(i) of the Social Security Act (42 

11 U.S.C. 1395x(i)). 

12 (2) Often patients remain under ‘‘observation 

13 status’’ in the hospital for several days and these ob14 servation days are not counted toward the 3-day 

15 stay requirement because they are considered out16 patient days. 

17 (3) Hospitals’ use of observation stays has in18 creased sharply since 2006. According to the March 

19 2014 report of the Medicare Payment Advisory 

20 Commission, outpatient visits, many of which are ob21 servation stays, increased 28.5 percent between 

22 2006 and 2012, with a simultaneous 12.6 percent 

23 decrease in inpatient stays over this same six-year 

24 time period. A study published in Health Affairs 

25 found a 34-percent increase in the ratio of observa26 tion stays to inpatient admissions between 2007 and 


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1 2009, leading the researchers to conclude that out2 patient observation status was becoming a substitute 

3 for inpatient admission. The same study also docu4 mented increases in long-stay outpatient status, in5 cluding an 88-percent increase in observation stays 

6 exceeding 72 hours. 

7 (4) To health care providers, care provided dur8 ing observation is indistinguishable from the care 

9 provided to inpatients and all medically necessary 

10 care is provided, regardless of patient status. Bene11 ficiaries are generally not informed of their inpatient 

12 or outpatient status and assume that they are inpa13 tients when they are placed in a hospital bed, only 

14 to find out that such care was not counted for pur15 poses of satisfying eligibility requirements for medi16 cally prescribed Medicare coverage of post-hospital 

17 care in a skilled nursing facility. 

18 (5) Older Americans and people with disabilities 

19 who are hospitalized but do not meet the 3-day inpa20 tient hospital stay requirement simply because they 

21 were placed in ‘‘outpatient observation status’’ for 

22 some or all of their hospital stay (even when their 

23 total actual stay exceeds three days in the hospital) 

24 can face a significant and unexpected financial bur25 den, which can amount to thousands of dollars, for 


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1 skilled nursing facility care. Among beneficiaries 

2 who received care in a skilled nursing facility that 

3 Medicare did not cover, the average out-of-pocket 

4 charges were more than $10,000, according to the 

5 Office of Inspector General of the Department of 

6 Health and Human Services. 

7 (6) The Centers for Medicare & Medicaid Serv8 ices (CMS) attempted to provide hospitals with clar9 ity on which patients should be categorized as inpa10 tients in the inpatient hospital payment rule for fis11 cal year 2014. However, this rule fails Medicare 

12 beneficiaries because it does not address the problem 

13 and explicitly states that days spent in observation 

14 status do not count for purposes of satisfying the 3- 

15 day inpatient stay requirement. 

16 (7) Because of CMS’ policy which indicates 

17 days under observation do not count towards the 3- 

18 day inpatient stay requirement, some patients under 

19 observation and their families will continue to face 

20 a significant, often insurmountable financial burden 

21 if they need skilled nursing care after their hospital 

22 stay. 

23 (8) This Act updates Medicare policy by deem24 ing patients under observation as inpatients for the 

25 purposes of satisfying the Medicare 3-day inpatient 


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1 stay requirement. This Act does not repeal the 3-day 

2 inpatient stay requirement; rather it simply expands 

3 the Secretary’s administrative definition of ‘‘inpa4 tient’’ for purposes of the 3-day stay requirement to 

5 include time spent under observation. As such, it is 

6 not a reprise of the Medicare Catastrophic Coverage 

7 Act of 1988, which repealed the 3-day requirement. 

8 This Act simply restores the original objective of the 

9 3-day rule, which was to ensure Medicare coverage 

10 of skilled nursing facility stays following hospital 

11 care for patients who stayed in the hospital for 3 

12 days. 

13 (9) It is the intent of this Congress, through 

14 this Act, to allow access to skilled nursing care for 

15 the population of beneficiaries who meet medical ne16 cessity requirements for such care, but who do not 

17 satisfy the 3-day inpatient stay requirement simply 

18 because some or all of their time in the acute care 

19 hospital is characterized as ‘‘outpatient observation 

20 status’’ for billing purposes. 

21 (10) It is the understanding of Congress that 

22 the Secretary of Health and Human Services will 

23 monitor patterns of behavior to ensure that pro24 viders deliver appropriate and needed levels of care. 


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1 (11) The Office of the Inspector General of the 

2 Department of Health and Human Services is sup3 portive of counting hospital observation days to4 wards the 3-day inpatient stay requirement. In addi5 tion, in September 2013, the Congressionally estab6 lished Commission on Long-Term Care rec7 ommended that CMS’ count time spent in observa8 tion status toward meeting Medicare’s 3-day stay re9 quirement. In addition, in a December 2016 report, 

10 the Office of the Inspector General of the Depart11 ment of Health and Human Services found that an 

12 increased number of Medicare beneficiaries classified 

13 as outpatients are paying more for care that is sub14 stantively similar, and have limited access to skilled 

15 nursing facility care due to their patient status. 

16 SEC. 3. COUNTING A PERIOD OF RECEIPT OF OUTPATIENT 

17 OBSERVATION SERVICES IN A HOSPITAL TO18 WARD THE 3-DAY INPATIENT HOSPITAL STAY 

19 REQUIREMENT FOR COVERAGE OF SKILLED 

20 NURSING FACILITY SERVICES UNDER MEDI21 CARE. 

22 (a) IN GENERAL.—Section 1861(i) of the Social Se23 curity Act (42 U.S.C. 1395x(i)) is amended by adding at 

24 the end the following: ‘‘For purposes of this subsection, 

25 an individual receiving outpatient observation services 


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1 shall be deemed to be an inpatient during such period, 

2 and the date such individual ceases receiving such services 

3 shall be deemed the hospital discharge date (unless such 

4 individual is admitted as a hospital inpatient at the end 

5 of such period).’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 subsection (a) shall apply to receipt of outpatient observa8 tion services beginning on or after January 1, 2017, but 

9 applies to a period of post-hospital extended care services 

10 that was completed before the date of the enactment of 

11 this Act only if an administrative appeal is or has been 

12 made with respect to such services not later than 90 days 

13 after the date of the enactment of this Act. Notwith14 standing any other provision of law, the Secretary of 

15 Health and Human Services may implement such amend16 ment through an interim final regulation, program in17 struction, or otherwise. 

Æ 


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