Medicare patients initially admitted to hospitals as inpatients but later reclassified as outpatients under observation would finally have a process to appeal those decisions, thanks to a long-awaited proposal from the Centers for Medicare & Medicaid Services.

Patients given observation status, even if in the hospital for days, previously had no way to appeal their status. And without a three-day stay, traditional Medicare patients are not eligible for covered post-acute skilled nursing care, long an issue for the sector.

Hospital and SNF patients who had their benefits denied after a change of classification would have multiple ways to appeal the change under the proposed CMS rule, including both a standard and an expedited process. 

The expedited process would allow patients to appeal while still in a hospital or facility and receive a ruling within a day, according to a fact sheet released by CMS. Patients who don’t appeal in time for the expedited process would go through the standard appeal — a similar procedure, according to CMS, but one which would allow more time for independent reviewers to make a decision.

Patients eligible to be included in the class action suit also would be able to appeal their benefit cases retroactively, including cases from as far back as 2009.

“The beneficiary must demonstrate eligibility for an appeal as a class member and show that the initial inpatient admission satisfied the relevant criteria,” CMS explained in the fact sheet. “Beneficiaries would have a full year from the implementation date of the final rule to gather any related documentation and file an appeal request.”

Losing inpatient status prematurely could leave patients on the hook for thousands of dollars of additional healthcare payments or force them to refuse needed care for financial reasons, according to the Center for Medicare Advocacy.

Consumer advocates wholeheartedly threw their support behind the Dec. 21 proposal.

“The proposed rule brings Medicare beneficiaries one step closer to getting a fair shake if they are changed from inpatient to observation status.” wrote Alice Bers, litigation director of the Center for Medicare Advocacy.

The newly proposed rule follows a class action legal battle — Alexander v. Azar — that has been ongoing since 2011. After Medicare patients won a victory in 2020, leading long-term care provider groups LeadingAge and the American Health Care Association were quick to provide their support for new Medicare appeals processes.

The proposed rule entered the standard 60-day public comment period on Dec. 27, when it was published in the Federal Register.