No Summary Judgment in Lawsuit Claiming Right to Appeal Medicare Observation Status

On remand, a U.S. district court holds that factual questions remain as to whether Medicare beneficiaries have a property interest in being admitted to hospitals as "inpatients," allowing the beneficiaries to continue their suit challenging the fact that they were admitted in observation status and therefore did not qualify for coverage of post-hospital skilled nursing care. Alexander v. Cochran (U.S. Dist. Ct., D. Conn., No. 3:11-cv-1703 (MPS), Feb. 8, 2017).

A group of Medicare beneficiaries who were placed in "observation status" by their hospitals rather than being admitted as inpatients filed a class action lawsuit against the Secretary of Health and Human Services. Because patients who are not admitted are not eligible for Medicare Part A or for coverage of any post-hospitalization stay at a nursing home, the lawsuit claims that being put into observation status cost the beneficiaries thousands of dollars. The group maintains that Medicare's policies promote the use of observation status.

The district court granted the Secretary's motion to dismiss, holding that whether to admit a patient is a complex medical judgment that should be left to the discretion of doctors. The class appealed, arguing that the Secretary's failure to provide an expedited system of notice and review regarding the placement of Medicare beneficiaries in observation status violated the due process clause. The U.S. Court of Appeals for the Second Circuit reversed in part, holding that more evidence was needed to determine if there was a violation of the due process clause, and remanded the case for a period of discovery to focus on whether the beneficiaries have a property interest in being admitted as "inpatients." The parties both filed motions for summary judgment.

The U.S. District Court, D. Conn., denies both summary judgment motions, holding that there is a dispute of material fact as to whether the beneficiaries have a property interest. According to the court, questions remain as to whether the federal government "has established objective criteria that hospitals apply in making their inpatient vs. observation status determinations."

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