May 18, 2020

Medicare Beneficiaries Win Right to Challenge Certain Outpatient Observation Placement Orders

By Jessica L. Gustafson, Esq. and Abby Pendleton, Esq., The Health Law Partners, P.C., Farmington Hills, MI

I.  Introduction      

On March 24, 2020, the United States District Court for the District of Connecticut granted members of a class of Medicare beneficiaries the right to challenge their placement in hospitals as outpatients receiving observation services rather than as inpatients.1  The court ruled that for those beneficiaries that were initially admitted to the hospital as inpatients, but whose statuses were later changed from inpatient to outpatient, the Secretary of the Department of Health & Human Services (HHS) violated their due process rights by depriving them of their property interest in Part A coverage for the hospital services rendered to them without any procedural protections in place.  Therefore, the court ordered HHS to establish a procedure that would allow such beneficiaries to challenge the decisions of hospitals to change their statuses from inpatient to outpatient.  The court did not grant patients that were initially placed into outpatient status receiving observation services and remaining there the same opportunity to challenge the hospitals’ status determinations.  Prior to this ruling, there were no administrative review procedures for Medicare beneficiaries seeking to challenge their placement into outpatient status receiving observation services.  Attorneys representing hospitals are well-advised to closely monitor communications from HHS and/or the Centers for Medicare & Medicaid Services (CMS) related to this case as such procedures are developed.

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