Court Gives Hope to Medicare Beneficiaries Denied Nursing Home Coverage due to “Observation” Status

Todd Bartimole

Medicare Part A covers skilled nursing home benefits (up to 100 days) but only after the beneficiary has been admitted to a hospital for three days.

Medicare and Hospitals have been relegating people to “observation” status for days or sometimes even weeks, rather than actually admitting the patient.  The outcome of this is that Medicare will not cover a nursing home stay after “observation” in a hospital, regardless of how long that observation lasts. Making matters worse was that the decision to “observe” rather than “admit” seemed to evade any review by appeal.

However, in a recent Connecticut case, Plaintiffs sued The Secretary of the Department of Health and Human Services to attempt to establish that there was a right to appeal a claim when a hospital classifies a Medicare beneficiary’s stay in a hospital as “observation” and not “admission.”

The scope of people who have been affected by the classification as under observation instead of being an inpatient is quite large. The decision cited a 2012 study by Brown University researchers who indicated that almost a million (918,180) Medicare beneficiaries received observation services in 2009 alone.

HHS tried to have the case dismissed through summary judgment but were unsuccessful. Plaintiffs moved to certify a class that includes all Medicare beneficiaries who have had or will have a portion of their stays treated as observation since 2009. HHS opposed the scope of the class, and the federal district court of Connecticut granted in part and denied in part the motion for class certification.

The court ultimately certified the following class: “All Medicare beneficiaries who, on or after January 1, 2009: (1) have received or will have received “observation services” as an outpatient during a hospitalization; and (2) have received or will have received an initial determination that the observation services are covered (or subject to coverage) under Medicare Part B.”  (Medicare beneficiaries who pursued an administrative appeal and received a final decision of the Secretary before September 4, 2011 are excluded from the class.)

For more information the court’s decision is here: Alexander v. Price.

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