CMS Releases Final Medicare Outpatient Observation Notice

The Centers for Medicare & Medicaid Services (“CMS”) posted the final approved version of the Medicare Outpatient Observation Notice (“MOON”) on the CMS Beneficiary Notices Initiative website on December 8, 2016.[1]  According to CMS, all hospitals and critical access hospitals (“CAHs”) are required to provide the MOON beginning no later than March 8, 2017.

The MOON is a product of the Federal Notice of Observation Treatment and Implication for Care Eligibility Act (“NOTICE Act”), passed on August 6, 2015. The MOON standardizes notice to inform Medicare beneficiaries that they are an outpatient receiving observation services and are not an inpatient of the hospital or CAH. The notice must explain the reason that the patient is an outpatient and describe the implications of that status both for cost-sharing in the hospital and for subsequent eligibility for coverage.

Specifically, hospitals and CAHs must provide a MOON within 36 hours after observation services are initiated to Medicare beneficiaries who are placed in outpatient observation status for longer than 24 hours, must verbally discuss its contents with the patients, and obtain the required signatures.  The hospital or CAH must also retain a signed copy of the MOON.  Currently, the approved MOON includes a section for the hospital or CAH to explain the specific reason the patient is an outpatient instead of an inpatient.  CMS has indicated that in the future, they may consider improving the MOON to include checkboxes with “common reasons for the patient’s outpatient status or suggested narratives for insertion in this section.”[2]

A primary consequence for Medicare beneficiaries of being classified as a hospital outpatient is financial. For example, being an outpatient may affect what a beneficiary pays for treatment.  When a Medicare beneficiary is a hospital outpatient, the observation stay is typically covered under Medicare Part B.  Additionally, if a patient needs care from a skilled nursing facility (“SNF”) after leaving the hospital, Medicare Part A will only cover SNF care if the patient is classified as an inpatient for at least three consecutive days, not counting the day of discharge.  Outpatient status would therefore not qualify a patient for Medicare Part A coverage of SNF care.


Hospitals and CAHs should ensure that appropriate policies are in place to address proper use of the MOON.  Hospital and CAH employees should be educated on the required verbal explanation and signature requirements of the MOON. CMS has made available a copy of the approved MOON and accompanying instructions in both English and Spanish here. CMS expects hospitals to use “usual procedures” for delivering notice, such as “translators, interpreters and assistive technology.”[3]

[1]Centers for Medicare & Medicaid Services, Beneficiary Notices Initiative,

[2] Medicare Program, 81 Fed. Reg. 57,046 (Aug. 22, 2016).

[3] Medicare Program, 81 Fed. Reg. 57,049 (Aug. 22, 2016).

Written by: Catherine Moore

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