According to a 2020 federal court decision, and an appeal in 2022, some Medicare beneficiaries now have the right to appeal previous decisions concerning their inpatient and observation status. This article will help you determine whether you can benefit from the resulting legislation.

The Underlying Issue

When a Medicare patient goes to a hospital, they often enter by way of the emergency department. The physician who attends to them must decide whether to admit them into the hospital as an inpatient, discharge them, or keep them in the hospital under observation status. A patient receiving observation services in a hospital is receiving care that is virtually identical to inpatient care but is classified as an outpatient for the purposes of traditional Medicare coverage.

If the patient who is receiving observation services must go to a nursing home to continue their recovery, traditional Medicare won't cover the nursing home care because they weren't classified as an inpatient for at least three consecutive days when they were in the hospital. This can have a serious financial effect on the patient since they will have to pay for the services on their own. What makes the situation worse is that the Centers for Medicare & Medicaid Services wouldn't allow patients to appeal the decision.

Observation Status

A patient in observation status is in limbo since a physician has determined that they are too sick to go home but not sick enough to be admitted into the hospital as an inpatient. While in the hospital, a patient in observation status may receive basically the same level of care as a patient classified as an inpatient. Observation services can include:

• Mental and physical assessments
• Diagnostic tests
• Short-term treatments
• Medications
• Feedings

In 2015, former President Barack Obama signed the Notice of Observation Treatment and Implication for Care Eligibility Act, a.k.a. Notice Act. The Notice Act requires hospitals to notify patients that they are in observation status if they have been receiving hospital services under such status for more than 24 hours. Patients must be given both written and oral notifications of their observation status if they have been in that status for at least 36 hours.

The written notice must explain why the patient is in observation status and not classified as an inpatient. The notice also needs to explain how their observation status may affect the cost of their hospital care and their eligibility for subsequent skilled nursing facility care coverage. The written notice must be signed by the patient or a person acting on the patient's behalf. If they refuse to sign the notice, then a staff member of the hospital must sign the notice.

Alexander v. Azar

In 2020, a federal court decision in the Alexander v. Azar case sided with Medicare beneficiaries who had been admitted to hospitals as inpatients but then their status had been changed to observation status. If these patients meet certain criteria, they now have the right to appeal the decision to Medicare. To appeal their observation status decision, the patient, or former patient, must have been:

• Hospitalized since January 1, 2009
• A Medicare beneficiary with traditional Medicare (not Medicare Advantage) during their hospitalization
• Admitted to the hospital as an inpatient before their status was changed to observation status
• Received a Medicare Outpatient Observation Notice from the hospital or a Medicare Summary Notice stating that they will, or did, receive observation services that are not covered by Medicare part A
• Eligible for both Medicare Part A and Part B or only Medicare Part A
• Hospitalized for at least three consecutive days but for fewer than three days as an inpatient
• Admitted to a skilled nursing facility within 30 days of discharge from the hospital

The appeals court case Barrows v. Becerra also ruled in favor of Medicare patients in 2022. This affirms a patient's rights in this situation.  Stay up to date on your rights and protect your assets by consulting with us on all your elder law issues.