Man having a visit at doctor's office

Listen up: this could mean the difference between life and death. 

On December 27, 2023, a proposed rule was published in the Federal Register by the Centers of Medicare & Medicaid Services (CMS) that gives certain Medicare beneficiaries the right to appeal a hospital’s classification of their stay as “observation status” as opposed to “admitted.” At stake is payment of both hospital care and post-hospital skilled nursing services. It applies to people who have traditional Medicare, as opposed to those on a Medicare Advantage plan (which already carries a right to appeal to the insurance company). 

CMS did not do this out of the goodness of its heart. No, this rule was the result of a 2020 Federal District Judge’s order in Alexander v. Azar that CMS provide due process to Medicare beneficiaries

Results of the Alexander v. Azar Case

The opinion in the Alexander v. Azar case explains the issue and resolution quite nicely. “An elderly person’s arrival at a hospital is a stressful moment. The person might arrive in an ambulance. He or she might be in pain, suffering shortness of breath, or showing other troubling symptoms. Worried family members might wonder if their sick parent or grandparent will ever see the outside world again once he or she passes through the hospital’s doors. One question that might not be uppermost in their minds at that moment—but that may soon emerge to add to the stress of the experience—is who will pay for the elderly person’s medical care.”

“On arriving at the hospital, the elderly patient will be examined by a physician who, in addition to determining the patient’s course of treatment, will decide whether to admit the patient formally as a hospital inpatient or whether, instead, to place the patient on “observation status.” Although the patient might not know it, this is a critical decision, because formal admission to a hospital is a pre-condition to payment both for hospital services and for post-hospital skilled nursing services under Part A of Medicare, a portion of the Medicare program that is free to most Medicare beneficiaries. If the patient is placed on “observation status” instead of being admitted as an inpatient, the patient will have to pay for both the hospital services and the post-hospital skilled nursing services out of pocket, unless he or she has other insurance coverage, such as Medicare Part B (for which premiums must be paid and which covers outpatient hospital services but not post-hospital skilled nursing services) or private insurance. Under current Medicare regulations, the patient has no right to a say in the doctor’s decision about whether to admit him or her as an inpatient, and no means to challenge it.

“The physician’s decision whether to admit the patient as an inpatient is not, however, the final word on the matter. That decision will be reviewed by the hospital’s “utilization review staff,”… the patient has no right to a say in the hospital’s review process either, and has no means to challenge a decision by the review staff, for example, a decision that the physician’s order admitting the patient as an inpatient should be changed to one placing the patient on “observation” status.

“…I find that the Secretary is violating the Due Process Clause of the Fifth Amendment by denying the members of the modified class the right to challenge the denial of their Part A coverage…”

It took 3 years, but the procedure to appeal an “observation status” classification is now about to be finalized. Hallelujah!

Hammerle Finley Can Help

Do you have questions about medicare? If so, Hammerle Finley’s experienced estate planning attorneys can help! Schedule a consultation today to discuss your options.

Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship and contested litigation. She may be reached at This column contains general information only and does not constitute legal advice.