Second Circuit Revives Medicare Beneficiaries’ Observation Status Suit – On January 22, 2015, the U.S. Court of Appeals for the Second Circuit reversed a decision by the U.S. District Court for the District of Connecticut dismissing a lawsuit by Medicare beneficiaries alleging deprivation of due process rights of proper notice and administrative review of their placement in observation status during multi-day hospital stays. Medicare Part A covers hospital inpatient stays, while Part B covers observation status stays, as beneficiaries under observation are considered to be outpatients. The amount of payment for which a beneficiary is responsible may vary significantly depending on whether the stay is a covered inpatient stay under Part A or is covered under Part B. The Second Circuit explained that Medicare beneficiaries may have a property interest in inpatient status, and, thus, a due process claim from denial of that status if the inpatient admission criteria are based on fixed and objective measures.

The District Court had accepted the assertion by HHS that a physician’s medical judgment serves as the basis for inpatient admissions decisions rather than “rote application of commercially available screening tools” as argued by the plaintiffs. In overturning the District Court, the Second Circuit made it clear that it took no position on the issue, but stated that the plaintiffs had “a plausible claim that they possessed a property interest in being admitted as ‘inpatients.’” The Second Circuit remanded the issue to the District Court and instructed that it conduct fact-based discovery on whether hospital admissions decisions are based on objective criteria or physician judgment.

A copy of the decision is available by clicking here. 

Reporter, Kerrie S. Howze, Atlanta, + 1 404 572 3594, khowze@kslaw.com.