The Centers for Medicare and Medicaid Services (CMS) released a proposed rule titled “Medicare Appeal Rights for Certain Changes in Patient Status.” The new regulation seeks to establish appeals processes for select Medicare patients in traditional Medicare who are initially admitted to a hospital as an inpatient but are reclassified by the hospital as an outpatient receiving observation services. For many inpatients, reclassification as outpatient can be the difference between Medicare coverage and thousands of dollars in additional health care bills. For a high-level summary of the proposed rule, click here. CMS is accepting comments on its proposal through February 26th.

Why are we seeing this proposal?

Currently, patients placed in observation status have no way to appeal that decision, often leaving them without the Medicare required three-day inpatient stay needed to have their skilled nursing care covered under traditional Medicare. In January 2022, courts affirmed a nationwide class action lawsuit, ordering HHS to establish additional appeals processes for Medicare beneficiaries who were admitted as inpatients but whose status changed to outpatient during their hospital stay. The proposed processes include an expedited appeal for beneficiaries who appeal their hospital status during their stay, a standard appeal for beneficiaries who appeal after being discharged, and a retrospective appeal for beneficiaries involved in the class action suit.

What does this mean?

Eligible beneficiaries who disagree with the hospital’s decision to reclassify their status while they are still in the hospital from inpatient to outpatient receiving observation services, would be able to file an appeal with a Beneficiary & Family Centered Care – Quality Improvement Organization (BFCC-QIO). Because the creation of these new appeal processes came from a court order, a reversal of the proposed rule is not possible. If you are interested in commenting in order to shape how the new process is set, please send us an email.