On October 11, 2024, CMS issued a final rule establishing a new appeals process for Medicare beneficiaries who were initially admitted to a hospital as an inpatient but are later reclassified as an outpatient receiving observation services during their hospital stay (the Final Rule). The policy comes after a court order in Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn. 2020), aff’d sub nom., Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022) required CMS to create such a process. The Final Rule contains expedited, standard, and retrospective appeals processes.
Alexander v. Azar was a nationwide class action lawsuit filed in 2011 seeking certain appeal rights for Medicare beneficiaries who were initially admitted as inpatients by a physician but whose status was later changed to outpatient observation by their hospital. This status change results in a denial of coverage for the hospital stay under Medicare Part A. The distinction between inpatient and outpatient is critical in Medicare for other reasons as well. For instance, Medicare only covers subsequent care in a skilled nursing facility for patients who were hospitalized as inpatients for three or more consecutive days.
Alexandar ordered the Secretary to create additional appeals processes for such beneficiaries, including an expedited appeals process while beneficiaries are still in the hospital and a retrospective review process for beneficiaries who met the conditions for appeal eligibility prior to the rule taking effect. Under the Final Rule, these appeals are to be filed with a Beneficiary & Family Centered Care-Quality Improvement Organization (BFCC-QIO). The BFCC-QIO will independently review the beneficiary’s patient record to determine whether the inpatient admission satisfied the relevant criteria for Part A coverage.
Under the expedited appeals process, the BFCC-QIO will render a determination within one day after receiving patient records from the hospital. Under the retrospective process, beneficiaries with hospital admissions on or after January 1, 2009, and before October 11, 2024, will have 365 calendar days from the implementation date of the Final Rule to gather any related documentation and file an appeal request. CMS will announce the implementation date on www.cms.gov and/or www.medicare.gov.
These appeals processes will be available to beneficiaries after an operational implementation period. CMS is projecting implementation beginning early in 2025.
The Final Rule that was published in the Federal Register on October 15, 2024, is available here. CMS’s fact sheet is available here.
