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 House Panel Tackles Surprise Billing; Advocates Push for Observation Stays Inclusion

Amid discussion in the House Ways and Means Subcommittee on Health May 21 on surprise medical billing and how to eliminate enormous charges for unsuspecting consumers, a number of members of a coalition supporting changes to how observation stays are classified urged the panel to include the issue in any comprehensive effort to curtail bills that cause sticker shock.

In a written statement from the National Observation Stays Coalition, which includes the American Health Care Association/National Center for Assisted Living as a member, the group said it formed to address a surprise medical billing issue that affects Medicare patients in hospitals who are called observation status patients, or outpatients.

Although these individuals receive medically necessary care that is no different from the care provided to formally admitted inpatients, their classification as observation or outpatient is significant, “because the Medicare statute covers a post-hospital stay in a skilled nursing facility only if the patient was hospitalized for three consecutive days as an inpatient,” the coalition said. 

The group told the committee, which is chaired by Rep. Lloyd Doggett (D-Texas), that eliminating surprise medical bills and the observation stays classification go hand in hand.

“Counting observation status toward the three-day inpatient requirement in the Medicare program is a common-sense policy that does not affect hospital care, but does protect the ability of beneficiaries to receive needed post-acute nursing home care,” the statement said. 

Notably, the coalition said that earlier in this current Congress, bipartisan legislation titled the “Improving Access to Medicare Coverage Act” (HR 1682/S 753), was reintroduced to update a current loophole in Medicare policy that would help protect seniors from high and often surprise medical costs for the skilled nursing facility (SNF) care they require after hospitalization. 

Sponsored by Reps. Joseph Courtney (D-Conn.) and Glenn “GT” Thompson (R-Pa.) and Sens. Sherrod Brown (D-Ohio), Susan Collins (R-Maine), Sheldon Whitehouse (D-Vt.), and Shelley Moore Capito (R-W.Va.), the legislation would allow for the time patients spend in the hospital under “observation status” to count toward the requisite three-day hospital stay for coverage of skilled care. 

The coalition told the committee this “legislative fix is important for several reasons, including the fact that our nation’s most vulnerable seniors could be surprised with high out-of-pocket costs due to being admitted to the hospital under observation status.” 

Without changes, more older Americans and their families will have had to pay high out-of-pocket charges since they were deemed to be on observation status, and Medicare did not cover their necessary SNF care, the statement said. 

“Often, these individuals didn’t even know they were on observation status or know to ask,” the statement said.

But, the group said, even if those affected did receive and understand the Medicare Outpatient Observation Notice, which is required by law, they have no right to appeal and request a change to inpatient status.

During the course of the hearing, Doggett and Republicans on the panel stressed the bipartisan support for the end to surprise billing, even if there is no agreement yet on how to do so. Notably, Doggett said President Trump supports relief for patients who are billed exorbitant amounts, usually as a result of getting emergency medical care from clinicians not in their health insurance network of providers.

Doggett said one in seven Americans has been affected by surprise bills, and he has sponsored legislation, the End Surprise Billing Act of 2019, which requires a critical access hospital or other hospital to comply, as a condition of participation in Medicare, with certain requirements related to billing for out-of-network services.

Under the Doggett plan, any individual who has health benefits coverage and is seeking services must receive notice from a hospital as to whether the hospital, or any of the providers furnishing services at the hospital, is not within the provider network or otherwise a participating provider with respect to the individual's coverage. If so, the legislation says the estimated out-of-pocket costs of the services must be revealed to the individual.

Also, the bill says at least 24 hours prior to providing services, the hospital must document that the individual 1.) has been provided with the required notice; and 2.) consents to be furnished with the services and charged an amount approximate to the estimate provided.

“Otherwise, the hospital may not charge the individual more than the individual would have been required to pay if the services had been furnished by an in-network or participating provider,” the legislation says. “With respect to such an individual who is seeking same-day emergency services, a hospital may not charge more than the individual would be required to pay for such services furnished by an in-network or participating provider.”

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