The Centers for Medicare and Medicaid Services has outlined an appeals process for Medicare beneficiaries who believe hospitals inappropriately classified their stays as observations instead of admissions.
The proposed rule published Thursday aims to resolve a 12-year-old class-action lawsuit seeking redress for fee-for-service enrollees whose hospital or nursing home care wasn't covered under Medicare Part A because hospitals designated them as outpatients. The U.S. District Court for the District of Connecticut ruled for the plaintiffs and against the Health and Human Services Department in 2020 and the U.S. Court of Appeals for the 2nd Circuit upheld the decision last year.
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The plaintiffs, represented by the Center for Medicare Advocacy, Justice in Aging and the law firm Wilson Sonsini Goodrich & Rosati, led a class of Medicare enrollees whose hospital stays or subsequent skilled nursing care did not gain them the status of hospital inpatients. In those cases, beneficiaries must fulfill their cost-sharing obligations under Medicare Part B outpatient coverage for their hospital care and are ineligible for Part A coverage of short-term nursing home stays.
"We’re pleased that the proposed rule is finally being published and we are reviewing it in expectation of submitting comments," Center for Medicare Advocacy Litigation Director Alice Bers said in a statement.
Hospitals determining that patients were not admitted despite stays spanning several days, leading to unexpected and higher costs for hospital and nursing home care, triggered a strong political response more than a decade ago. In addition to the lengthy legal battle that commenced in 2011, CMS issued regulations and President Barack Obama enacted a law requiring hospitals to notify patients when they are declared to be under observation and not admitted.
"At first glance, AHCA/NCAL supports what CMS is aiming to achieve," the American Health Care Association/National Center for Assisted Living said in a statement. "While this rule will certainly be helpful, we urge Congress to resolve this issue permanently by eliminating the three-day-stay requirement or recognizing observation stays as qualifying stays."
The proposed rule carries out the decision in Alexander v. Becerra by defining who is eligible to appeal observation status and the process for adjudicating those appeals. The draft regulation applies only to fee-for-service Medicare beneficiaries because Medicare Advantage enrollees are subject to their insurance carriers' policies. Beneficiaries may only appeal incidents that occurred on or after Jan. 1, 2009.
Appeals are available to Medicare enrollees whose status changed from inpatient at admission to observation during their stays, who have received notice that Part A will not cover their care, and either did not have Part B or have Part A and Part B and were in the hospital for at least three consecutive days but were considered inpatient for less than three days and did not receive skilled nursing care within 30 days of leaving the hospital.
In addition to standard appeals following hospital stays, Medicare beneficiaries may seek expedited appeals prior to discharge and CMS will accept retrospective appeals of past cases.
“This rule takes a step in the right direction for patients. However, it only applies only to Medicare fee-for-service beneficiaries," Federation of American Hospitals President and CEO Chip Kahn said in a statement. "CMS needs to take aim at MA plans. They have excessive inpatient denials based on black box criteria that clinicians and providers are blinded to.”
The proposed rule is scheduled to formally appear in the Federal Register on Wednesday. CMS will accept comments until 60 days later, which would be Feb. 25.
