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On January 25, 2022, the U.S. Court of Appeals for the Second Circuit affirmed the ruling in Barrows v. Becerra that the U.S. Secretary of Health and Human Services (HHS) violated the due process rights of Medicare patients who were reclassified from “inpatient” to “outpatient observation” status by a hospital’s utilization review committee (URC). The Court of Appeals stated patients were not provided an administrative review process that would have allowed them to challenge the change in status determination. This practice of changing a patient’s status from inpatient to observation often resulted in Medicare beneficiaries not having access to their Part A skilled nursing facility (SNF) coverage since the required three-day inpatient stay never occurred, leaving beneficiaries obligated to pay for the SNF stay. The court required the secretary of HHS to develop an appeal process for patients affected by this type of situation.

As of August 2022, HHS has yet to develop a process, but it does appear the window for appeal will be more narrow than originally expected. The general appeal information can be found on the medicare.gov claims & appeals page, but as of late, nothing has been added regarding this specific appeal process. What is known is that the appeal process will be retrospective and not concurrent. To be eligible for this appeal, the following criteria must be met:

  1. The patient’s status must have been changed from inpatient to outpatient under the condition code 44 process.
  2. The patient must have received observation services after the status change.
  3. The patient must have had a three-day or longer hospital stay prior to transferring to a SNF or not have had Medicare Part B coverage for their hospital stay.

The purpose of the appeals process will be to determine if the patient’s status was appropriately and properly changed from inpatient to outpatient. If the status should not have been changed to outpatient and the patient would have qualified for Part A SNF benefits, CMS will need to create a process for refunding patient payments and paying the SNF from Part A dollars. If the patient should have remained inpatient, then hospitals may receive the diagnosis-related group payment, net of the Part B dollars received. This calculation and process promise to be complex and time-consuming.

Hospital leadership will need to follow this issue and be prepared to assist patients through this process. If you have any questions or need assistance, please reach out to a professional at FORVIS or submit the Contact Us form below.

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