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, on behalf of seven individual plaintiffs who represent a nationwide class of individuals harmed by an increasingly common practice known as hospital observation stays. The lawsuit, filed against U.S. Department of Health and Human Services Secretary Kathleen Sebelius, has seven named plaintiffs, including five from Connecticut, some of whom faced hundreds of dollars in hospital bills and thousands of dollars in nursing home bills because they were placed on observation status, despite having spent several days in the hospital. The plaintiffs are Medicare beneficiaries who received inpatient hospital services, but were improperly classified as outpatients, often referred to as “observation status,” and therefore deprived of Medicare Part A coverage for their hospital stay and aftercare. (Bagnall vs. Sebelius, 3:11-cv-01703 (D. Conn. 11/3/2011)).

The misapplication of "observation status" deprives Medicare beneficiaries of their coverage rights and may cause them to absorb significant hospital costs that otherwise would be paid for under Medicare Part A. Additionally, they may be forced to forego critical post-hospitalization skilled nursing facility (SNF) care or pay exorbitant out-of-pocket costs for it because Medicare requires a minimum of three consecutive days as a hospital inpatient to qualify for SNF care. The Association has led the charge on this issue — participating in conference calls, forwarding complaints to the Advocacy Center, meeting with congressional representatives on this issue, and working with other stakeholders to develop a communication form so beneficiaries would better understand when they are in an observation stay. Also, as we noted in Action recently, Board Chair Gail Sheridan participated in a special Congressional briefing on this issue late last month.

In their press statement announcing this litigation, the Advocacy Center noted: "We’ve turned to the courts for fairness because 'observation status' harms thousands of Americans receiving Medicare each year, nationwide,” said Judith Stein, founder and executive director of the Center for Medicare Advocacy, one of the nation’s leading legal advocates for the more than 48 million older and disabled Americans enrolled in Medicare. "It causes severe financial problems for beneficiaries and their families, and deprives them of nursing home coverage altogether."

"Worse yet, without advocates, Medicare recipients have virtually no way of challenging their denial of benefits,” said attorney Gill Deford, the Center for Medicare Advocacy’s director of litigation. "Without a class action lawsuit, it may be impossible to stop the government from misusing ‘observation status’ in the first place.”

The lawsuit asks the court to prohibit the health and human services secretary 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, to establish a procedure for administrative review of decisions to put people on observation status, and to review all coverage decisions for named plaintiffs and class members involving Part B coverage related to being on observation status. The lawsuit targets Sebelius, rather than hospitals, because the HHS secretary has the authority to set Medicare criteria and tell hospitals that the observation status they're using is not appropriate.

For more information about the class action lawsuit, or to learn more about observation status or how to get involved in advocacy activities, visit www.medicareadvocacy.org. For press inquiries and interviews, please contact Judith Stein at (860) 456-7790 or Gill Deford, also at (860) 456-7790.

Patti Cullen, CAE
952.851.2487
pcullen@careproviders.org

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