I 

116TH CONGRESS 

1ST SESSION H. R. 1682 

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 12, 2019 

Mr. COURTNEY (for himself and Mr. THOMPSON of Pennsylvania) 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, 

3 SECTION 1. SHORT TITLE. 

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

5 Medicare Coverage Act of 2019’’. 


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1 SEC. 2. FINDINGS. 

2 Congress finds the following: 

3 (1) Medicare requires beneficiaries to be hos4 pitalized for medically necessary inpatient hospital 

5 care for at least three consecutive days before cov6 ering post-hospital care in a skilled nursing facility 

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

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

9 (2) Often patients remain under ‘‘observation 

10 status’’ in the hospital for several days and these ob11 servation days are not counted toward the 3-day 

12 stay requirement because they are considered out13 patient days. 

14 (3) Hospitals’ use of observation stays has in15 creased sharply since 2006. According to the March 

16 2014 report of the Medicare Payment Advisory 

17 Commission, outpatient visits, many of which are ob18 servation stays, increased 28.5 percent between 

19 2006 and 2012, with a simultaneous 12.6-percent 

20 decrease in inpatient stays over this same six-year 

21 time period. A study published in Health Affairs 

22 found a 34-percent increase in the ratio of observa23 tion stays to inpatient admissions between 2007 and 

24 2009, leading the researchers to conclude that out25 patient observation status was becoming a substitute 

26 for inpatient admission. The same study also docuVerDate Sep 11 2014 20:55 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1682.IH H1682

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1 mented increases in long-stay outpatient status, in2 cluding an 88-percent increase in observation stays 

3 exceeding 72 hours. 

4 (4) To health care providers, care provided dur5 ing observation is indistinguishable from the care 

6 provided to inpatients and all medically necessary 

7 care is provided, regardless of patient status. Bene8 ficiaries are generally not informed of their inpatient 

9 or outpatient status and assume that they are inpa10 tients when they are placed in a hospital bed, only 

11 to find out that such care was not counted for pur12 poses of satisfying eligibility requirements for medi13 cally prescribed Medicare coverage of post-hospital 

14 care in a skilled nursing facility. 

15 (5) Older Americans and people with disabilities 

16 who are hospitalized but do not meet the 3-day inpa17 tient hospital stay requirement simply because they 

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

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

20 total actual stay exceeds three days in the hospital) 

21 can face a significant and unexpected financial bur22 den, which can amount to thousands of dollars, for 

23 skilled nursing facility care. Among beneficiaries 

24 who received care in a skilled nursing facility that 

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


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

2 Office of Inspector General of the Department of 

3 Health and Human Services. 

4 (6) The Centers for Medicare & Medicaid Serv5 ices (CMS) attempted to provide hospitals with clar6 ity on which patients should be categorized as inpa7 tients in the inpatient hospital payment rule for fis8 cal year 2014. However, this rule fails Medicare 

9 beneficiaries because it does not address the problem 

10 and explicitly states that days spent in observation 

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

12 day inpatient stay requirement. 

13 (7) Because of CMS’ policy which indicates 

14 days under observation do not count towards the 3- 

15 day inpatient stay requirement, some patients under 

16 observation and their families will continue to face 

17 a significant, often insurmountable financial burden 

18 if they need skilled nursing care after their hospital 

19 stay. 

20 (8) This Act updates Medicare policy by deem21 ing patients under observation as inpatients for the 

22 purposes of satisfying the Medicare 3-day inpatient 

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

24 inpatient stay requirement; rather it simply expands 

25 the Secretary’s administrative definition of ‘‘inpaVerDate Sep 11 2014 20:55 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1682.IH H1682

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1 tient’’ for purposes of the 3-day stay requirement to 

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

3 not a reprise of the Medicare Catastrophic Coverage 

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

5 This Act simply restores the original objective of the 

6 3-day rule, which was to ensure Medicare coverage 

7 of skilled nursing facility stays following hospital 

8 care for patients who stayed in the hospital for 3 

9 days. 

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

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

12 the population of beneficiaries who meet medical ne13 cessity requirements for such care, but who do not 

14 satisfy the 3-day inpatient stay requirement simply 

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

16 hospital is characterized as ‘‘outpatient observation 

17 status’’ for billing purposes. 

18 (10) It is the understanding of Congress that 

19 the Secretary of Health and Human Services will 

20 monitor patterns of behavior to ensure that pro21 viders deliver appropriate and needed levels of care. 

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

23 Department of Health and Human Services is sup24 portive of counting hospital observation days to25 wards the 3-day inpatient stay requirement. In addiVerDate Sep 11 2014 20:55 Mar 28, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1682.IH H1682

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1 tion, in September 2013, the Congressionally estab2 lished Commission on Long-Term Care rec3 ommended that CMS’ count time spent in observa4 tion status toward meeting Medicare’s 3-day stay re5 quirement. In addition, in a December 2016 report, 

6 the Office of the Inspector General of the Depart7 ment of Health and Human Services found that an 

8 increased number of Medicare beneficiaries classified 

9 as outpatients are paying more for care that is sub10 stantively similar, and have limited access to skilled 

11 nursing facility care due to their patient status. 

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

13 OBSERVATION SERVICES IN A HOSPITAL TO14 WARD THE 3-DAY INPATIENT HOSPITAL STAY 

15 REQUIREMENT FOR COVERAGE OF SKILLED 

16 NURSING FACILITY SERVICES UNDER MEDI17 CARE. 

18 (a) IN GENERAL.—Section 1861(i) of the Social Se19 curity Act (42 U.S.C. 1395x(i)) is amended by adding at 

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

21 an individual receiving outpatient observation services 

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

23 and the date such individual ceases receiving such services 

24 shall be deemed the hospital discharge date (unless such 


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1 individual is admitted as a hospital inpatient at the end 

2 of such period).’’. 

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

4 subsection (a) shall apply to receipt of outpatient observa5 tion services beginning on or after January 1, 2019, but 

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

7 that was completed before the date of the enactment of 

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

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

10 after the date of the enactment of this Act. Notwith11 standing any other provision of law, the Secretary of 

12 Health and Human Services may implement such amend13 ment through an interim final regulation, program in14 struction, or otherwise. 

Æ 


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