When a Medicare beneficiary goes into the hospital they are often categorized as “observation” status on their chart. This has become the standard practice for many hospitals. It has led to Medicare beneficiaries who need skilled care or rehab in a nursing facility after their hospital stay to be denied coverage. The reason for the denial is because “observation status” does not qualify one for skilled care; one has to be designated as “inpatient” for 2 midnights while in the hospital to qualify for subsequent nursing facility services. 

Because many Medicare beneficiaries were denied coverage for skilled care due to having been placed on observation status, there was a class action lawsuit. The ruling of that lawsuit states Medicare beneficiaries who were denied coverage for nursing facility services after transferring from hospitals because hospitals changed their status from “inpatient” to “observation” now have the right to appeal their classification going back to 2009. They may be entitled to reimbursement from Medicare for the uncovered nursing facility charges. 

How do I initiate an appeal you might ask? It isn’t certain yet how the agency will implement the court’s ruling including how notice will be provided or which contractors will handle the appeals. We do know to show the hospitalization should have been categorized as inpatient the beneficiary will have to show there is reasonable expectation that the beneficiary required care in the hospital for the 2 or midnights or 3 day (depending on when the hospitalization occurred) minimum. Documents that will support this claim are hospital medical records, letters of testimony from doctors, etc.  

The Center for Medicare Advocacy has a “Self-Help Packet” available for free on their website with some instruction for how to use the packet. Follow the link below for the “Self-Help Packet”.  Thank you to Matthew Shepard, Communications Director at the Center for Medicare Advocacy, for the information he provided.

Self-Help Packet for Medicare “Observation Status”