Medicare Patients Sue HHS over Hospital Payments

http://www.medpagetoday.com/PublicHealthPolicy/Medicare/29458

By Emily P. Walker, Washington Correspondent, MedPage Today
Published: November 04, 2011

A group of Medicare patients are suing the federal government over what they say is misuse of a policy that allows hospitals to classify certain stays as outpatient rather than inpatient stays.

If a Medicare patient is never officially admitted to the hospital, Medicare's Part A hospital benefit doesn't pick up the tab. In addition, because they weren't admitted, they weren't eligible for Part A coverage of post-hospitalization treatment in a skilled nursing facility. Medicare only pays for skilled nursing facilities if a Medicare patient is hospitalized for three consecutive days.

The patients who are suing say they should have been admitted, but were instead placed on "observation status," sometimes for days, which resulted in them having to pay large out-of-pocket expenses.

The class-action lawsuit, Bagnall vs. Sebelius, was filed in a Connecticut court Thursday by the Center for Medicare Advocacy and the National Senior Citizen Law Center against Health and Human Services (HHS) Secretary Kathleen Sebelius, who has authority over the Medicare program.

The plaintiffs are all elderly Medicare beneficiaries who received services that would normally be considered inpatient services at hospitals, but were classified as on observation status, and billed through Medicare Part B, which covers doctor visits and other outpatient care.

It is Medicare policy that observation status should last no more than 24 or 48 hours, except in extreme circumstances, but according to the lawsuit, it's an increasingly common practice of hospitals to place a patient on "observation" status for longer than two days.

The number of observation claims increased by 22% from 2006 to 2008, and the number of stays of 48 hours or more increased by 70% during that same time period, said Judith Stein, Founder and Executive Director of the Center for Medicare Advocacy, on a Thursday conference call to discuss the case.

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The lawsuit is named for Richard Bagnall, 91, a retired physician living in Connecticut who was went to the emergency room on July 9 because he was experiencing dizziness for several days. He was found to have atrial fibrillation and received an IV infusion, EKG, X-ray, and his heart was monitored.

He was discharged on July 12 after being treated for dehydration, weakness, chronic kidney disease, atrial fibrillation, and hypertension, according to the lawsuit.

During that time, he was never officially admitted. Rather, he was deemed to be on observation status, and thus an outpatient. Because Part A didn't cover his stay, he had to pay about $500 out-of-pocket in Part B expenses. His subsequent stay in a skilled nursing facility wasn't covered by Medicare, and Bagnall paid $5,685 out-of-pocket for the stay, according to the lawsuit.

There are bills in both the U.S. House and the Senate that would count all time spent in the hospital toward the three-day minimum hospital stay required for payment for skilled nursing facilities. Neither bill has seen any movement since it was introduced.

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