• Class Action Lawsuit Filed Against Federal Government Challenging Use of Observation Status
  • November 15, 2011 | Author: Lora L. Greene
  • Law Firm: King & Spalding LLP - New York Office
  • On November 3, 2011, the Center for Medicare Advocacy and co-counsel, the National Senior Citizen Law Center, filed a class action lawsuit against Kathleen Sebelius, the Secretary of Health and Human Services (HHS), challenging the practice of placing hospital patients on “observation status.”  Bagnall v. Sebelius, 3:11-cv-01703 (D. Conn. Nov. 3, 2011).  The lawsuit was filed on behalf of seven Medicare beneficiaries who spent several days in the hospital but were classified as outpatients receiving observation services as opposed to hospital inpatients.

    Because Medicare patients on observation status are not considered inpatients, they are ineligible for hospitalization coverage under Medicare Part A.  In addition, because Medicare requires a minimum of three consecutive days as a hospital inpatient to qualify for skilled nursing facility (SNF) care, a Medicare beneficiary who is on observation status will not qualify for SNF coverage.  Observation status “is denying thousands of beneficiaries of their Medicare coverage rights, even though they are inpatients in hospitals,” Judith Stein, executive director of the Center for Medicare Advocacy, said during a conference call with reporters Thursday.  “We’ve turned to the courts for fairness.”

    The lawsuit alleges that the use of observation status is a violation of the Medicare statute, the Freedom of Information Act and the Due Process Clause of the Fifth Amendment.  As noted in the complaint, neither the federal Medicare statute nor the relevant regulations mention observation status.  The lawsuit asks the court to prohibit HHS from allowing Medicare beneficiaries to be placed on observation status.  It also asks that patients placed on observation status be given written notification about it and the consequences for Medicare coverage.