Inspirational Quote

Years ago when I was young to Elder Law I got a phone call from a client’s wife. Her husband had fallen and had been in the hospital for five days. When he went to the rehabilitation facility, they thought that Medicare would cover the cost. She was shocked to discover that the rehabilitation facility wanted almost $10,000 (in 2007) to cover the cost. That was surprise billing on steroids!

When patients are placed in observation status, they are considered

outpatients with coverage under Medicare Part B. This is true even if the care they are receiving is indistinguishable from those admitted to the hospital as inpatients. A Medicare beneficiary must be an inpatient under Medicare Part A for three days before they can receive coverage in a skilled nursing facility. Three days means spending at least two midnights in a hospital. This has been a requirement in the original Medicare statute since 1965. Since then, the length of time a patient typically spends in a hospital before going to rehabilitation has decreased considerably.

Over the years the Department of Health and Human Services (HHS) took the position whether one is classified as an inpatient, entitled to Part A or observation status, entitled to Medicare Part B, was a clinical decision made by the hospital that a beneficiary could not appeal to Medicare. On the flipside, hospitals were pressured by Medicare and its billing rules to consider beneficiaries as outpatients for observation. During this time Medicare auditors were recouping millions of dollars from hospitals asserting that the hospitals erroneously classified as inpatients those who should have been deemed outpatients for observation purposes. So while HHS claimed the beneficiaries in observation had no right to appeal what was hospital clinical decision, the agency was also pressuring hospitals to

classify patients as observation status.

Eventually, Congress mandated HHS to require that hospitals give patients a notice when they were classified as observation. Then HHS promulgated a regulation that the notice could not be appealed. Thus Medicare patients were receiving notice of status without an opportunity to be heard, a violation of their due process regarding federal benefits.

In Barrows v. Becerra, 24 F.4 th 116 (2 nd Cir. 2022) the court held that Medicaid regulates the process that results in hospitals classifying inpatients to observation status. Therefore beneficiaries have a right to appeal that decision. The court stated that “the decision to reclassify a hospital patient from an inpatient one receiving observation services may have significant and detrimental impacts on [the patient’s] financial, psychological, and physical well-being.”

Now under Barrows, Medicare beneficiaries classified as observation status should be able to appeal to Medicare for Part A coverage of their hospital stay and subsequent rehabilitation care.

If you found yourself in that situation, contact our office, we may be able to give you some direction to help.

If you are interested in learning more, contact our office and tell us whether you are interested in us holding a seminar some evening to discuss this and the appeal process.