Health Information Management

Federal judge dismisses observation care lawsuit

HIM-HIPAA Insider, October 7, 2013

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by Jaclyn Fitzgerald, Associate editor

A federal judge in Hartford, Conn., recently dismissed a lawsuit filed by 14 Medicare beneficiaries who challenged hospital observation status, The Hartford Courant reported.The lawsuit asked the court to eliminate observation status or require hospitals to inform patients of their observation status and establish an expedited appeals process for reviewing Medicare coverage determinations, according to the article.

Medicare denied the beneficiaries skilled nursing facility (SNF) coverage because they did not have a minimum qualifying three-night inpatient stay, The Hartford Courant reported. The beneficiaries claimed observation services are not significantly different from inpatient status other than the fact they would pay their own SNF bills after receiving outpatient care, according to the report.

Lawyers representing HHS argued that the patients should have appealed Medicare coverage determinations prior to filing the lawsuit, according to the report. The judge’s 50-page ruling referred to a 2008 federal court decision supporting HHS’ right to allow physicians to determine a patient’s status and a federal law requiring inpatient status for SNF coverage under Medicare, The Hartford Courant reported.

The 2014 IPPS Final Rule redefined inpatient status as care that crosses two midnights. Under the final rule, observation stays crossing one midnight count towards the two midnights needed for a qualifying inpatient stay. However, observation time does not count towards the three inpatient nights needed to qualify for SNF care.

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