Eighty-four-year-old Nancy Niemi of North Carolina was hospitalized for 39 days earlier this year after her doctor sent her to the emergency room. It took weeks to stabilize her blood pressure and she experienced serious complications. But Ms. Niemi was categorized as an outpatient on “observation status” for her entire hospitalization, and she therefore lacked the three-day inpatient stay Medicare requires for coverage of her subsequent, very expensive care at a nursing home. Ms. Niemi’s son tried to help her challenge her lengthy placement on observation status, but Medicare does not allow beneficiaries to appeal this issue. She still owes thousands of dollars to the nursing facility. However, due to the federal court decision issued July 31, 2017, she is now a member of a nationwide class of hospital patients who may gain the right to appeal their placement on observation status.
In Alexander v. Azar, 3:11-CV-1703 (MPS) (formerly Barrows v. Burwell and Bagnall v. Sebelius), Judge Michael P. Shea of U.S. District Court in Connecticut, certified a class composed of all Medicare beneficiaries who, since January 1, 2009, have received or will have received “observation services” as an outpatient during a hospitalization. Justice in Aging originally filed this lawsuit in November 2011 with lead counsel, the Center for Medicare Advocacy. The case was a appealed and returned to Federal District Court. In addition to attorneys from the Center for Medicare Advocacy and Justice in Aging, the class is also represented by attorneys from the law firm of Wilson Sonsini Goodrich & Rosati.
Class members are likely to number in the hundreds of thousands. The court cited a 2012 study by researchers at Brown University that identified 918,180 Medicare beneficiaries who experienced observation stays in 2009 alone. In addition to lacking coverage for very costly nursing home care, patients on observation status can also face increased costs for drugs taken at the hospital and copayments for hospital services, as noted by a recent report from the Department of Health and Human Services’ Office of the Inspector General.