Medicare beneficiaries would have new options for appealing their hospital patient status under a proposed rule from CMS

A proposed rule from CMS would affect the appeals process for some patients whose status is reclassified from inpatient to outpatient observation during a hospital stay.

After a 2020 court ruling that was upheld at the appellate level in 2022, the U.S. Department of Health and Human Services and CMS were obligated to create additional appeals processes.

The processes would apply to beneficiaries whose status was reclassified during a stay and who either:

• Were in the hospital for at least three days but designated as an inpatient for fewer than three days (thus affecting their eligibility for skilled nursing facility coverage) or
• Did not have Medicare Part B coverage

New processes would include:

• An expedited appeal available to beneficiaries while hospitalized
• A retrospective review for beneficiaries who were affected by a patient-status change before implementation of the new rule

HFMA’s policy team is reviewing the rule to gauge what sort of technical guidance may be appropriate for members, said Shawn Stack, director of perspectives and analysis.

“HFMA always places strong emphasis on patient-centered approaches to healthcare cost-sharing, ensuring patient awareness of decisions impacting medical care and coverage under Medicare Part A, with a particular focus on education regarding observation status and services not covered by Part A,” Stack said.

Comments on the proposed rule are due by Feb. 26 at regulations.gov.

Option for expedited appeal

An expedited appeal would need to be filed with a beneficiary and family-centered care quality improvement organization (BFCC-QIO) while the patient is in the hospital. The QIO would be tasked with reviewing the patient’s record and issuing a determination within one day of receiving all pertinent information. Hospitals would have to provide requested information by noon on the day after being notified of the appeal.

A standard appeal, with a two-day turnaround time for a decision, could be made by beneficiaries who don’t file their appeal while hospitalized. Such an appeal might be processed after the hospital has filed a Part B claim, the proposed rule notes. Unlike during an expedited appeal, the beneficiary would not have billing protection.

The patient subsequently could appeal the initial expedited or standard ruling to the QIO as well.

To give patients a chance to file the initial appeal, the hospital would have to deliver a standardized beneficiary notice prior to a patient’s release, with information about the change in patient status, the resulting impact on Medicare coverage of the stay, and appeal rights.

This would be a new notice, distinct from Condition Code 44 notifications and the Medicare Outpatient Observation Notice. The notice would need to be delivered as soon as possible and no later than four hours before discharge. For beneficiaries with Part B coverage, the notice would be due as soon as possible after the patient’s third day.

The requirement likely would not be overly burdensome for hospitals, CMS wrote in the rule, because the notice would be standardized and modeled on the existing discharge-centered appeals notice and would require little customization.

A 15-year retroactive window

The option for retrospective review would be available for hospital admissions taking place on or after Jan. 1, 2009. The appellant would need to file any such appeal within a year of implementation of the upcoming final rule.

An established appeals contractor would track retrospective appeals requests and determine eligibility for review, working with providers, Medicare administrative contractors (MACs) and other parties to track down medical documentation from the hospital stay as needed. A decision would have to be rendered within 60 days.

If deemed valid, the appeal would go to a MAC and, if necessary, could continue through the existing five-level appeals framework (in order: MAC determination, qualified independent contractor reconsideration, administrative law judge hearing, Medicare Appeals Council review, judicial review).

In the event of a favorable ruling for the beneficiary, existing Part B outpatient claims would not be reopened. If the beneficiary was not enrolled in Part B, the hospital would have to refund payments received for covered services but then could submit a new Part A claim to Medicare within 180 days.

The proposed rule notes, “The retrospective appeals required by the court order constitute a new process under the Medicare program, as the appeals would be based on alleged entitlement to coverage for services that were not actually billed to the program on a claim.” However, the procedures likely would be similar to the existing processes for discharge-centered appeals.