Individuals receiving traditional Medicare initially admitted to hospitals as inpatients can face losing Medicare Part A coverage when reclassified as outpatients receiving hospital services. This can result in losing coverage for skilled nursing care, as Medicare Part A only covers skilled nursing care following at least three days of inpatient hospitalization.
In a nationwide class action, Alexander v. Azar, the United States District Court for the District of Connecticut directed the U.S. Department of Health and Human Services to establish an appeals process for those admitted as inpatients but reclassified as outpatients receiving observation services. The court of appeals later affirmed the decision.
Certain individuals who would be harmed by the reclassification may appeal. This includes beneficiaries facing loss or denial of Part A benefits and skilled nursing care, as well as those who do not have Part B coverage.
In October 2024, the Centers for Medicare & Medicaid Services (CMS) issued the finalized rule. Per the Final Rule, individuals may appeal to the Beneficiary & Family Centered Care-Quality Improvement Organization (BFCC-QIO), which reviews whether the appellant meets the criteria for Part A coverage.
The rule outlines three pathways for appeals: expedited appeals, standard appeals, and retrospective appeals.
Expedited appeals are available to those still in the hospital, allowing them to obtain a faster decision than if using the standard appeal process. For expedited appeals, BFCC-QIO must render a decision within one day of receiving the patient records from the hospital.
After a hospital’s Part B outpatient claim has been processed and following a denial of skilled nursing coverage, individuals can make a standard appeal. The standard appeal process is similar to the expedited process but allows BFCC-QIO a longer time frame to make a decision.
Retrospective appeals permit previously reclassified beneficiaries who were denied Part A coverage between January 1, 2009, and October 11, 2024, one year to file an appeal request. CMS has yet to announce the implementation date.
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