Bagnall v. Sebelius
A patient who is placed on "observation" status and is not admitted to a hospital may not be entitled to Part A Medicare coverage. Allegedly, the plaintiffs suffered from dizziness, hypertension and nausea and were placed on observation status, then spent three to seven days in the hospital for diagnostic tests and monitoring, without being formally admitted. The plaintiffs were denied Part A Medicare coverage, both for their hospital stay and the time that they spent at a skilled nursing facility, because they were not admitted as "inpatients" at the hospital, with the expectation that they would remain overnight and occupy a bed. Under Medicare Part A, which covers "inpatient" hospital services, a patient pays a one-time deductible for "inpatient" hospital services for the first 60 days at the hospital. Patients who are placed on "observation" status may end up with a greater financial responsibility for hospital services than if they had been admitted as "inpatients" and the services had been covered under Part A. The plaintiffs brought a putative class action against the secretary of Health and Human Services, to protest their placement on "observation" status, which deprived them of Part A coverage. The plaintiffs qualified for Medicare Part B and were required to make a co-payment for every individual hospital service. Because Part A coverage is tied to formal hospital admissions, as opposed to the nature of medical services provided, pursuant to the Connecticut District Court's 2005 decision in Landers v. Leavitt, the denial of Part A coverage did not violate the Medicare statute. The court also rejected the plaintiffs' argument that the secretary was required to promulgate the rule using notice-and-comment procedures. The court denied the plaintiffs' assertion that the government was required to provide notice about "observation" status in the Federal Register, because it qualified as a "substantive rule of general applicability," pursuant to 5 United States Code §552(a). The decision to classify "observation" status as outpatient services has already been published in the Federal Register. The District Court granted the secretary's motion to dismiss and denied the plaintiffs' motion for class certification as moot.