American College Of Surgeons - Inspiring Quality: Highest Standards, Better Outcomes

Inpatient Prospective Payment System Rule

Medicare payment for acute care hospital inpatient stays is based on set rates under Medicare Part A. The system for payment, known as the Inpatient Prospective Payment System (IPPS), categorizes cases into diagnoses-related groups (DRGs) that are then weighted based on resources used to treat Medicare beneficiaries in those groups. The Centers for Medicare & Medicaid Services (CMS) updates the IPPS regulations annually, with comment periods open prior to implementation of the final rule. Because a large percentage of surgical care takes place in the inpatient hospital environment, the American College of Surgeons (ACS) has a strong interest in CMS’ IPPS and the hospital quality improvement efforts addressed in the IPPS rules.

ACS Comment Letters

Medicare Outpatient Observation Notice

Effective March 8, 2017, CMS requires all hospitals to deliver the standardized Medicare Outpatient Observation Notice (MOON) to Medicare beneficiaries who are being treated as outpatients for observation and not admitted as inpatients. The notice, required under the Notice of Observation Treatment and Implication for Care Eligibility Act of 2015, was included in CMS’ 2017 IPPS final rule.

Under the rule, hospitals must provide both the standardized written MOON and oral notification to Medicare fee-for-service and Medicare Advantage beneficiaries who receive outpatient observation services in a hospital for longer than 24 hours. The notice must be delivered to the patient or their representative no later than 36 hours after observation services began.

The MOON is intended to give Medicare beneficiaries advance warning about the implications that their admission status may have on Medicare coverage and payment for care after they leave the hospital. If a beneficiary is not admitted to a hospital as an inpatient for at least three days, Medicare will deny Part A payment for stays at skilled nursing facilities.

MOON Instructions