Tuesday, January 27, 2015

Observation Stay Litigation Goes Back to District Court

Dianne De La Mare


The Medicare beneficiaries (plaintiffs) involved in a class action lawsuit challenging a common hospital practice of admitting patients “for observation” rather than “inpatient” have another opportunity to be heard in District Court. The US Court of Appeals for the Second Circuit has held that plaintiffs have a sufficient property interest in their Medicare Part A benefits to warrant some form of due process, such as a written explanation of an observation or inpatient classification or the right to appeal that certification (Barrows v Burwell).

The plaintiffs in this litigation first filed a complaint in the US District Court of Connecticut in November 2011, but the Court ultimately dismissed the litigation. Subsequently, in 2013, the plaintiffs filed an appeal in the U.S. Court of Appeals for the Second Circuit. The two specific issues on appeal to the Second Circuit included the US Department of Health and Human Services (HHS) Secretary’s:

 1) failure to provide written notification to Medicare beneficiaries, or to require that they receive written notification, of their placement on observation status, of the consequences of that placement for their Medicare coverage, and of their right to challenge that placement violates the Medicare statute and the Due Process Clause of the Fifth Amendment; and
2) policy of failing to provide Medicare beneficiaries the right to an administrative review, including expedited review, of their placement on observation status violates the Medicare statute and the Due Process Clause of the Fifth Amendment.

In February 2014, AHCA filed an amicus brief supporting the plaintiffs by stating that they “have a valid cause of action for injunctive relief to avoid the due process violations inherent in the HHS Secretary’s current approach,” and should be heard in court. The Second Circuit held oral arguments in late fall, and on January 22, 2015, reversed the District Court’s decision on the due process claims. The litigation now goes back to the District Court where the legal question is whether, as a factual matter, the classification is actually within the doctors’ discretion (as the HHS Secretary asserts), or, is being directed by Medicare (as the plaintiffs assert).

AHCA will continue to monitor and provide updates on this important litigation. For more information about observations stays, please visit the AHCA/NCAL website.

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