Providers are calling a decision that allows some patients to appeal their observation stay designations “an important win and positive step” forward for long-term care residents. 

A Connecticut federal appeals court on Monday granted certain hospital patients the right to appeal “observation stay” designations in a ruling that many hope will lead to even greater access to Medicare-covered long-term care services.


Judge Michael P. Shea of the U.S. District Court of Hartford, CT, ruled that as a matter of constitutional due process, patients who are initially admitted as inpatients by a physician but whose status is later changed to observation by their hospital have the right to appeal to Medicare to be certified fully as hospital inpatients.

The law currently restricts eligibility for Medicare-covered skilled nursing stays to patients who have held inpatient status for three nights at a hospital. 

“The three-day stay rule causes many outpatients who need follow-up care to be on their own or in debt with thousands in out-of-pocket costs because they do not qualify for Medicare coverage in a nursing center,” Dana Ritchie, senior director of not-for-profit and constituent services at the American Health Care Association, told McKnight’s Long-Term Care News.  

“For years we have advocated to eliminate this confusing policy barrier by recognizing observation stays as qualifying stays for the purposes of the three-day stay requirement or eliminating the three-day requirement all-together,” she added.  

The reference case, Alexander v. Azar, is a nationwide class action case filed by the Center for Medicare Advocacy that went to trial in August 2019. 

The rules previously have “forced many Medicare beneficiaries to either pay thousands of dollars out of pocket for that care or to forgo the needed care altogether,” the Centers for Medicare Advocacy said in a release announcing the court’s decision. 

“While people with Medicare can appeal virtually any issue affecting their coverage, the Centers for Medicare &  Medicaid Service (CMS) has blocked attempts by beneficiaries to appeal their hospital status,” it added.

The federal government can appeal the ruling, explained Marsha Greenfield, vice president of health legislation at LeadingAge. However, she added that it’s still an “important step” for long-term care advocates who have been fighting the three-day stay rule for years. She praised the Center for Medicare Advocacy’s work on the issue.

“The ultimate goal on observation stays is to enact legislation which says that all the nights that you were in the hospital count toward the three-day stay,” Greenfield said.

LeadingAge President and CEO Katie Smith Sloan was unequivocal in her praise for the decision.

“We are very pleased with this ruling,” she said in a statement. “Ironically, CMS has lifted the three-day requirement underlying this issue during the current crisis and we hope this means that the agency will support eliminating these restrictions once the pandemic is lifted.”