On August 6, 2015, President Obama signed the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act. This legislation requires hospitals to provide specific notice to patients who receive outpatient observational services for more than 24 hours. An AARP report on the growth in the frequency and duration of hospital observation services (OS) by Medicare beneficiaries between 2001 and 2009 found that Medicare claims for OS grew by more than 100 percent, with the greatest increase occurring in cases not leading to an inpatient admission. The duration of OS visits has also increased dramatically. Observation service visits lasting 48 hours or longer were the least common, but had the greatest increase—almost 250 percent for outpatient.
According to Medicare guidelines, the use of OS is appropriate when a patient does not meet screening criteria for an acute admission, but requires extended care of eight or more hours. In general, the guidelines indicate that OS should be used for patients whose condition is expected to be evaluated, treated or significantly improved, usually in less than 24 hours, and should span more than 48 hours only in rare and exceptional cases. Observation service is not appropriate for preoperative or routine postoperative care following outpatient surgery. The decision to admit patients to the hospital as inpatients or place them on observation status is ultimately the responsibility of the attending physician, although the hospital may provide guidance.1