Over the years there has been growing concern around the medical bills that Medicare beneficiaries are left with and their subsequent denial of nursing home care because their hospital status was set as “observation” instead of “inpatient”. This led to a large class-action lawsuit brought by a group of Medicare patients in 2011.
So, what were the results of this nine-year case, and does a Medicare patient have a constitutional right to challenge a hospital’s decision affecting their coverage? In a recent webinar, Dr. Heather Bassett, MD, Chief Medical Officer at Xsolis, and Dr. Marlowe Schaeffer, JD, DO, Physician Advisor at Xsolis, shared their thoughts on the implications of the case for Medicare beneficiaries, the precedent it sets for appealing patient status, and what UR professionals should know before the appeal deadline later this month.
In November 2011, this lawsuit was filed by seven Medicare beneficiaries on behalf of themselves and all Medicare beneficiaries deprived of Medicare Part A benefits because their hospital stays were classified as observation. The court then divided the Plaintiffs into two groups: 1.) those who were initially determined to be inpatient but before discharge changed to observation status and 2.) those admitted as observation and never changed to inpatient.
According to Dr. Schaeffer, these beneficiaries argued “their due processes were violated”, which is the legal requirement that the state must respect all legal rights that are owed to a person. It balances the power of law of the land and protects the individual from it. When a government harms a person without following the exact course of the law, this constitutes a due process violation, which offends the rule of law.
On October 1, 2013, the Medicare Two-Midnight Rule was adopted by CMS to serve as a “bright line test” to clarify if a patient was inpatient or observation. The first argument in the Alexander v. Azar case focused on Medicare patients who were denied nursing home benefits who sought to force the Federal Government to eliminate the nonpayment status exception for those labeled as observation patients.
Alternatively, the government (i.e. Health and Human Services, Department of Justice, and U.S. Attorney’s Office) opposed these Medicare litigants arguing the government cannot be made to pay because the Two-Midnight Rule gives hospitals and doctors, not the government, the final word on whether a patient should be admitted or not. Furthermore, since Medicare has not established any “fixed or objective criteria for inpatient admission,” any decision to admit is not traceable to the government, Schaeffer said.
To add another layer of complexity, the physicians involved made their arguments that the Two-Midnight Rule is “illogical and challenging” and should be rescinded. Instead, they suggested CMS should rely on ‘physicians’ clinical judgment to determine a patient’s inpatient or outpatient status”.
Overall, the court had one main concern: each patient has no say in the doctor’s decision about whether to admit him/her as an inpatient and were often unaware of their status. But why is the physician’s decision to admit as inpatient or to place in observation so important to Medicare patients?
The answer left patients frustrated: if classified as observation, the patient had to pay for both hospital services and post-hospital skilled nursing services out of pocket. The Class Action comprised Medicare patients who received large bills. The court found that patients were often not aware of the distinction between “inpatient” and “observation”.
Interestingly, it was the due process requirement that ultimately changed the course of the trial. The Medicare Beneficiary class had to prove they suffered a violation of their due process under the law and they did it by offering the following example:
- A doctor writes inpatient UR reviews based on standards approved by CMS.
- CMS is overseen by HHS.
- Patients are harmed by the loss of Medicare rights, so the government violated the patient’s rights to due process under the law.
The courts also distinguished who the members of each class are within the lawsuit and what relief, if any, would be granted. They are described as follows:
- Medicare beneficiaries who filed administrative appeals (excluded from the class).
- Medicare beneficiaries who were part of the class action who were admitted as observation with no change in their status and remained observation at discharge (excluded from the class).
- Medicare beneficiaries admitted initially as inpatients by a physician but whose status was changed to observation during their stay (entitled to the relief as ordered).
Finally, after almost a decade since the lawsuit was filed, Federal Judge Shea issued a favorable decision in the nationwide class action on March 24, 2020. Now anyone who has had their status changed in the hospital from “inpatient” to “observation” will have a right to appeal their classification by arguing their inpatient admission satisfied relevant criteria. Subsequently, these beneficiaries have a chance to receive reimbursement from Medicare for the uncovered part of the hospital and skilled nursing facility charges.
But as legal pursuits often go, the government (i.e. HHS, DOJ and the U.S. Attorney’s Office) will have until May 25, 2020, to appeal this most recent decision.
This ruling has led to many questions among hospital Utilization Review teams. Dr. Bassett has this advice to share: “hold your current course,” as this court decision will likely be appealed. However, it is expected that the court case/decision will ultimately stand. Bassett continued, “Be sure to have your patients review the QIO’s criteria required to be considered a member of the class that has the right to appeal their hospital status.”
This significant case presents an opportunity for UR teams to review their processes, workflows and overall communications. According to Dr. Bassett, they should be looking at the case through a clinical lens and speaking with the physician overseeing the case. They need to review protocols for working with their physician advisors and review their condition code 44 processes to be sure they are compliant and that the patient is in the appropriate status. If there is no UR process in place, one needs to be established, and quickly. Additionally, this case can be a great education opportunity around the review of the Medicare Two-Midnight Rule and other regulatory changes for hospital staff.
The rule requires hospital-level care to last past two midnights. If possible, they should try to get the status identified correctly upfront. Further, case managers should spend most of their time reviewing and accurately identifying the “gray” cases. Dr. Bassett recommends taking a close look between the first and second midnight and not allowing fear to drive those status decisions.
There are also effects of the COVID-19 pandemic on CMS implementation. Currently, a waiver is in place that does not require that a patient has a three-night hospital stay to be approved for admission into a skilled nursing facility.
This waiver is effective during the COVID-19 pandemic, but its popularity may very well lead to a permanent change of the three-day requirement for an SNF. There will also likely be a large shift towards telemedicine as providers seek ways to safely interact with their patients in the post-pandemic world. A push is also being made towards more home care. The bottom line is that this pandemic is changing healthcare as we know it and findings associated with the final ruling of this case will likely reflect those changes.