CHA Supports CMS’ proposed Rule for observation status appeals, both Retrospective & prospective

observation status, appeal, hospital nurse comforting patient

California Health Advocates joins numerous organizations nationwide in submitting supporting comments for the Centers for Medicare and Medicaid Services’ (CMS’) proposed rule, Appeal Rights for Certain Changes in Patient Status. The proposed rule would implement appeal rights for Medicare beneficiaries who are admitted to hospitals as inpatients and subsequently reclassified as outpatients receiving observation services. The letter, authored by Center for Medicare Advocacy and Justice in Aging, supports the general approach to the retrospective and prospective appeals processes and urges CMS to finalize and implement the rule as soon as possible. It also recommends allowing more time to request retrospective appeals, providing additional guidance around submitting medical records, and engaging in more education to beneficiaries about the new appeals process.

This new proposed rule stems from the nationwide class action, Alexander v. Azar, 613 F. Supp. 3d 339 (D. Conn. 2020), aff’d sub nom. Barrows v. Becerra, 24 F. 4th 116 (2d Cir. 2022). In their lawsuit, Medicare beneficiaries established the right to challenge changes in their patient status determinations from inpatient to outpatient receiving observation services. Such reclassifications constitute denials of Part A coverage.

Although the actual hospital services received are typically indistinguishable to beneficiaries under either classification, the distinction between designation as an inpatient (Part A coverage) versus outpatient (Part B coverage) can result in devastating financial consequences for Medicare beneficiaries. Namely, Medicare only covers subsequent care in a skilled nursing facility (SNF) for those who were hospitalized as inpatients under Part A for three or more consecutive days. Any time in the hospital categorized as outpatient and covered under Part B does not count toward the three-day requirement. This has forced many Medicare beneficiaries to either pay thousands of dollars out of pocket for required SNF care or to forgo it altogether, even when they have spent more than three days in the hospital. In addition, individuals who are not enrolled in Part B when they are hospitalized and designated as outpatients can face enormous out-of-pocket costs because Part A does not cover observation services. These beneficiaries are responsible for the full cost of their hospitalization.

For more details, read the letter.

Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.