A federal Court of Appeals panel has rejected the Obama administration's contention that hospital admission-status decisions are mainly in the hands of physicians and beyond the authority of Medicare.
The U.S. Court of Appeals has sided partially with the plaintiffs in a hospital patient admission-status case with huge cost implications for some Medicare beneficiaries.
In an opinion released Thursday, the US Court of Appeals for the Second Circuit sent the case back to District Court, ordering the lower federal court to review whether Medicare beneficiary rights under the due process clause of the Constitution are being violated.
The case centers on Medicare payments for beneficiaries transferred from hospitals to skilled nursing facilities, where patients face paying the whole bill if they leave the hospital without spending at least three days (two midnights) designated as inpatients.
Providers Blast CMS on Two-Midnight Rule
The plaintiffs in the case have argued that there should be federal rules for patient notification about whether they are classified as being under observation or as inpatients. The plaintiffs are also seeking an avenue to appeal admission-status decisions.
The three-judge Court of Appeals panel rejected the Obama administration's contention that hospital admission-status decisions are mainly in the hands of physicians and beyond the authority of Medicare:
"The District Court erred in concluding that plaintiffs lacked a property interest in being treated as 'inpatients,' because, in so concluding, the District Court accepted as true the [Department of Health and Human Services] Secretary's assertion that a hospital's decision to formally admit a patient is 'a complex medical judgment' left to the doctor's discretion. That conclusion, however, constituted an impermissible finding of fact, which in any event is inconsistent with the complaint's allegations that the decision to admit is, in practice, guided by fixed and objective criteria set forth in 'commercial screening guides' issued by the Centers for Medicare & Medicaid Services (CMS)."
The judges rejected the plaintiff's other main contention on appeal, finding the admission-status rules do not violate the Medicare statute.
In November 2011, seven Medicare beneficiaries or their estates filed a federal lawsuit against Kathleen Sebelius, who was then serving as secretary of HHS. The case, which was filed at the federal District Court in Connecticut, was originally titled Bagnall vs. Sebelius, but has since been renamed Lee Barrows, et al. vs. Sylvia Mathews Burwell, the current HHS secretary.
The Center for Medicare Advocacy is representing the plaintiffs in the case. On Thursday, CMA attorney Alice Bers said the Court of Appeals ruling could represent a significant victory for Medicare beneficiaries. "The court recognized that hospital patients in 'observation status' may have Medicare appeal rights protected by the Constitution," she said.
The legal process is far from over, Bers added. "Plaintiffs made plausible allegations that Medicare has not left this decision to doctors' discretion and has set criteria for whether or not someone should be admitted."
"The parties are now to go back to the District Court for discovery on the issue of whether, as a factual matter, the decision is actually in doctors' discretion as the secretary of HHS states, or, is being directed by Medicare as plaintiffs state. If plaintiffs can show [that] Medicare directs this decision, they can proceed on their due process claims. The District Court will still have to address other questions that are also part of the due process analysis."
Bers said "property interest" is a pivotal issue in the case. "Bottom line: The Second Circuit recognizes that Medicare beneficiaries may have a property interest in their Medicare Part A coverage as hospital inpatients that is protected by the due process clause of the Constitution."
She noted that "…under the two-midnight rule, it seems doctors have even less discretion than before about admissions decisions."
The Department of Justice attorney who represented HHS before the Court of Appeals, Jeffrey Clair, did not respond to a request for comment in time for publication.
See also:
Two-Midnight Rule Will Cost Hospitals Big
Observation, Two-Midnight Rules Hit in Hearing
Christopher Cheney is the CMO editor at HealthLeaders.