1. 2017 Medicare Outpatient Observation Notice (MOON)
Xtend Healthcare
2017 Medicare Outpatient Observation Notice (MOON)
Linda Corley, BS, MBA, CPC
Vice President – Compliance, Quality Assurance and Associate Development 1

2. Background
Why has CMS identified Observation as a problematic service for traditional Medicare beneficiaries?
Which generally costs more – inpatient stay or observation stay?
Inpatient cost = benefit period deductible (60 days of care)
Observation cost = line item charge for each APC co- payment / annual deductible
When inpatient stays were being denied as not meeting inpatient criteria, what happened with the number of hours or days the beneficiary was retained in observation?

3. Observation Defined According to CMS, what is “observation”?
Short-term (< 48 hours) assessment, treatment and re-assessment to decide:
has the patient’s condition improved for safe discharge?
has the patient’s condition deteriorated so that now inpatient criteria have been met, and the patient should be admitted?
Remember – appropriate wording of observation order according to CMS =
Place in observation (outpatient) status
Admit to inpatient care

4. Observation Supporting Documentation
Although observation is generally a patient whose acuity is not as serious as an inpatient, the supporting documentation for placement in observation is just as important!
Physician (licensed provider) order with supporting diagnosis.
Signed and dated for “initiation” of observation services.
Initial Risk Assessment – that states clearly the medical or clinical reason the patient will benefit from or needs observation (monitoring).
Encourage physician to document alternatives he or she considered when making the decision to place the patient in observation.
CMS has specifically requested physicians document their decision-making process for observation placement instead of inpatient admission.

5. Background
On August 6, 2015, Congress enacted the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act) Public Law , amending Section 1866(a)(1) of the Social Security Act (the Act) (42 U.S.C. 1395cc(a)(1)).
The NOTICE Act requires hospitals and critical access hospitals (CAHs) to provide written and oral notification to individuals receiving Observation services as outpatients for more than 24 hours.
The statute mandates the Secretary develop a plain language written notice for this purpose.

6. Background The written Observation notice
must be delivered no later than 36 hours after Observation services are initiated,
must include the reason the individual is receiving Observation services, and
must explain the financial and coverage implications of receiving outpatient Observation services,
such as cost sharing (deductible and co-insurance), and
post-hospitalization eligibility for Medicare coverage of skilled nursing facility (SNF) services.
Note: Observation services may increase the patient portion of payment more than Inpatient! Each line item Observation diagnostic test, therapeutic service, exam or drug may have a separate co-payment.

7. Background
The hospital or CAH must obtain the signature of the individual on the Medicare Notice of Observation (MOON) or an individual acting on behalf of the patient.
The statutory effective date of the NOTICE Act is 12 months after the date of the enactment, which is August 6, 2016.
Because the form of the MOON document requires a proposed review and comment period prior to adoption, the “go-live” date has been delayed indefinitely – but may occur around January 1, 2017.

8. Background Cont’d
To fulfill these statutory requirements, we (CMS) are submitting the Medicare Outpatient Observation Notice (MOON) for approval as a new collection of patient data.
The MOON will serve as the standardized notice used to notify persons entitled to Medicare benefits under Title XVIII of the Act,
who receive more than 24 hours of Observation services that their hospital stay is Outpatient and not Inpatient, and
the financial and coverage implications of being an Outpatient.
The MOON contains all of the informational elements listed above as required by statute.

9. Background Cont’d
We (CMS) have added implementing regulations for the NOTICE Act to 42 CFR and

10. Need and Legal Basis
Section 1866(a)(1) lists conditions for providers of services to participate in the Medicare program.
Under this section, the NOTICE Act adds a new subparagraph (Y) containing requirements for MOON (notification).
The MOON (notification) must be provided as both a written notice and an oral explanation.
The MOON document (dated and signed by patient or his / her representative) will serve as the written notice component of this new mandatory notification process.
The standardized content of the MOON will include all informational elements required by statute in language understandable to beneficiaries.

11. Information Users
Based on CMS statistics for 2014, we (CMS) estimate the number of hospitals and CAHs delivering the MOON to be 6,142.
Delivering approximately 1,399,999 MOON notices
(sources: CMS Office of Enterprise and Data Analytics and CMS Medicare Plan Payment Group).
MOONs are not given every time items and services are furnished in a hospital or CAH.
Rather, hospitals are only required to deliver the MOON to patients receiving Observation services as Outpatients for more than 24 hours.

12. Improve Information Technology
Hospitals must deliver a hard copy of the MOON to beneficiaries and enrollees.
Hospitals must retain a copy of the signed MOON and may store the MOON electronically if electronic medical records are maintained.
If a hospital elects to issue an MOON that is viewed on an electronic screen before signing, the beneficiary must be given the option of requesting paper rather than electronic issuance if that is what the beneficiary prefers.

13. Improve Information Technology
Regardless of whether a paper or electronic version is issued,
and whether the signature is digitally captured or manually penned,
the beneficiary must be given a paper copy of the signed MOON.
In cases where the beneficiary has a representative who is not physically present, hospitals are permitted to give the MOON by telephone as long as a hard copy is delivered to the representative.

14. Burden Estimates
We (CMS) estimate that delivery of the 2-page MOON, including the oral explanation, will take approximately 15 minutes (0.25 hour).
Based on the 15 minute (0.25 hour) response time and annual frequency of responses, the annual hour burden is estimated to be 350,000 hours (1,399,999 responses x 0.25 hour) or approximately 57 hours per respondent (350,000 annual hour burden / 6,142 hospitals and CAHs).

15. Burden Estimates
The cost per response is approximately $16.78 based on an hourly salary rate of $67.10 and the 15 minute response estimate.
By multiplying the annual responses by $16.78, the annual cost burden estimate is $23,491,983 (1,399,999 responses x $16.78) or approximately $3, per hospital ($23,491,983/6,142 hospitals and CAHs).

16. Burden Estimates
To derive average costs, we (CMS) used data from the U.S. Bureau of Labor Statistics’ May 2014 National Occupational Employment and Wage Estimates for all salary estimates. (
In this regard, the following table presents the mean hourly wage, the cost of fringe benefits (calculated at 100 percent of salary), and the adjusted hourly wage.

17. Burden Estimates
As indicated, we are adjusting our employee hourly wage estimates by a factor of 100 percent.
This is necessarily a rough adjustment, both because fringe benefits and overhead costs vary significantly from employer to employer, and
because methods of estimating these costs vary widely from study to study.
Nonetheless, there is no practical alternative, and we (CMS) believe that doubling the hourly wage to estimate total cost of $67 per MOON is a reasonably accurate estimation method.

18. Program and Burden Changes
This is a new collection, but there have been burden changes since we (CMS) put this out for comment with the IPPS NPRM.
We (CMS) inadvertently did not include outpatient observation service claims for Medicare Advantage (MA) enrollees in the estimated MOON burden in the proposed rule.
We have updated our calculations to include MA outpatient observation service claims and our estimate now fully accounts for outpatient services claims for all Medicare Beneficiaries.

19. Program and Burden Changes
In addition, we have increased the estimated time for hospitals to prepare and deliver the MOON to 15 minutes.
We (CMS) have done this to account for the addition of a free text field to indicate why a beneficiary is receiving outpatient observation services, in response to public comments suggesting such rationale be included in the MOON.

20. Notice Instructions: Medicare Outpatient Observation Notice
Page 1 of the Medicare Outpatient Observation Notice (MOON)
The following blanks must be completed by the hospital. Information inserted may be typed or legibly hand-written in 12-point font or the equivalent.
Patient Name:
Fill in the patient’s full name or attach patient label.
Patient ID number:
Fill in an ID number that identifies this patient, such as a medical record number or the patient’s birthdate or attach a patient label. This number should not be the patient’s social security number.

21. Notice Instructions: Medicare Outpatient Observation Notice
“You’re a hospital outpatient receiving observation services. You are not an inpatient because:”
Fill in the specific reason the patient is in an outpatient, rather than an inpatient stay.

22. Notice Instructions: Medicare Outpatient Observation Notice
Page 2 of the MOON
Additional Information:
This may include, but is not limited to, Accountable Care Organization (ACO) information, notation that a beneficiary refused to sign the notice, hospital waivers of the beneficiary’s responsibility for the cost of self-administered drugs, Part A cost sharing responsibilities if the beneficiary is subsequently admitted as an inpatient, physician name, specific information for contacting hospital staff, or additional information that may be required under applicable state law.
Hospitals may attach additional pages to this notice if more space is needed for this section.

23. Notice Instructions: Medicare Outpatient Observation Notice
Oral Explanation:
When delivering the MOON, hospitals and CAHs are required to explain the notice and its content, document that an oral explanation was provided and answer all beneficiary questions to the best of their ability.
Signature of Patient or Representative:
Have the patient or representative sign the notice to indicate that he or she has received it and understands its contents. If a representative’s signature is not legible, print the representative’s name by the signature.
Date/Time:
Have the patient or representative place the date and time that he or she signed the notice.

24. MOON Recommendations
Most hospitals are deciding a clinical staff member will need to complete the MOON and explain the notice to the patient or representative.
The department of Patient Care Management (case manager, UR nurse, discharge planner, nurse auditor) is being chosen to establish an appropriate facility specific process for ensuring this new documentation requirement is met:
Process defined:
Admission of Medicare patient to Observation
Tracking of “expected” hours in Observation
System Report each shift – or Excel spreadsheet
Preparation of MOON
Delivery of Moon
Audit of MOON available in medical record prior to discharge or upgrading to inpatient

25. MOON Recommendations
Remember – MOON (as it is legislated at this time) is non- negotiable
Included in Provider Conditions of Participation
MAC Audit?
QIO Audit as part of RAC reviews?
Pre-payment Review (ADR request)?
Penalty yet to be identified, other than non-payment or recoupment of prior payment.

30. Questions and Discussion
Linda J. Corley, MBA, CPC, CRCR
Vice President of Compliance
Xtend Healthcare 30

31. Thank you!