Background: Mrs. J (a pseudonym), a 91-year-old woman with advanced dementia, fell at her Connecticut home in April while suffering from a urinary tract infection. She was in severe pain and barely able to move. Her husband and the home health aide who was present were unable to provide the assistance she needed. She went to the hospital by ambulance.
The emergency department found that Mrs. J had broken ribs and deficient oxygen levels. She was experiencing severe pain and confusion that was likely exacerbated by the UTI. She was unable to get out of bed.
Initially, a physician admitted Mrs. J as an inpatient and she was moved to a regular floor. However, the hospital later reclassified her as an observation status “outpatient,” claiming she “did not meet Medicare criteria” for inpatient admission.
The Problem: Mrs. J’s reclassification to observation status created significant medical and financial hurdles. Traditional Medicare requires a three-day inpatient hospital stay to cover skilled nursing facility (SNF) services. Without Medicare coverage, Mrs. J would have to pay nearly $500 per day out-of-pocket for the rehabilitation and nursing services she required at a SNF. Her family was distressed. The hospital was pushing for a prompt discharge, but she required more care than was available at home and her status as an observation outpatient was blocking Medicare coverage in a SNF.
The Solution – Status Change Appeal: Mrs. J’s authorized family member contacted the Center for Medicare Advocacy and learned about expedited appeals for patient status changes. These appeals are now available as a result of CMA’s class action litigation regarding observation status appeals. The family then:
- Received a Medicare Change of Status Notice from the hospital;
- Called the specified Medicare contractor (Acentra Health, a Quality Improvement Organization);
- Explained Mrs. J’s medical situation to Acentra.
Initial Confusion and Resolution: The Medicare contractor initially denied the appeal. However, her family could tell that there had been some confusion. The Acentra representative kept referencing the date of “discharge.” After the family clarified that they were contesting the status change (not discharge timing), Acentra investigated further and reversed the hospital’s decision within an hour.
Results:
- Mrs. J’s inpatient status was restored.
- She was eligible for Medicare coverage of SNF services because she was hospitalized as an inpatient for three days, not including the date of discharge.
- She received four weeks of covered rehabilitation services in a SNF.
- Mrs. J experienced another bad fall after discharge from the SNF. She was re-hospitalized, but never admitted as an inpatient. She therefore could not qualify for Medicare coverage of another SNF stay based on the second hospitalization. However, because the second SNF stay was required within 30 days of the previous one, Mrs. J was able to receive an additional 18 days of covered SNF services. The favorable appeal decision from the first hospitalization ultimately qualified Mrs. J for two Medicare-covered stays in the SNF of her choice.
- Total estimated savings: over $22,000.
- Mrs. J’s family member said that the ability to appeal for inpatient status, gain access to medically necessary services, and save Mrs. J’s resources for other necessities “had a profound impact on our family.”
Hospital reclassifications from inpatient to observation status can result in beneficiaries incurring substantial out-of-pocket costs or forgoing necessary rehabilitation services. Understanding and using change of status appeals can help. Medicare beneficiaries should receive the services and benefits they qualify for, while avoiding unnecessary financial burdens.
PRACTICE TIPS
Appeal!
These appeals are now available and should be used when appropriate. Don’t assume a reclassification from inpatient to observation status is final.
Understand Eligibility Requirements
Status change appeals are available for patients who are:
- Admitted as inpatients;
- Subsequently reclassified as outpatients receiving observation services; and,
- Meet other specified criteria (see CMA’s FAQ about the observation status court decision)
Timing Considerations
- Appeals can be filed while the patient is still hospitalized (ideal for avoiding upfront private payments for SNF care, as Mrs. J did).
- Change of status appeals can also be filed while at a SNF or after discharge, once out-of-pocket payments have already been made. Eligible beneficiaries may file them at any time.
- Successful post-payment appeals may result in Medicare coverage and refunds.
Important Distinctions: Two Types of Expedited Medicare Appeals for Hospital Patients
- Discharge Appeals (long-established): Patient thinks hospital services are ending too soon.
- Change of Patient Status Appeals (available since February 2025): Patient challenges reclassification from inpatient to observation.
Key differences
- Discharge Appeals: Patients can remain in the hospital without responsibility for payment during the appeal process.
- Status Change Appeals: Patients may be discharged during the appeal process and there are no billing protections; only the change in status from inpatient to observation is at issue.
Avoid confusion: Be specific about which appeal you’re pursuing when communicating with hospitals and Medicare contractors. In Mrs. J’s case, hospital personnel seemed to confuse the two types of appeal when they were speaking with her family and providing information to the Medicare appeal contractor.
Hospitals must provide a Medicare Change of Status Notice to eligible beneficiaries (or their representatives). Since these appeals are new, however, you may need to specifically request this notice.
Legal Authority
Change of status appeals are governed by federal regulations at 42 C.F.R. §§ 405.1210-405.1212.
Additional Resources: CMA provides comprehensive observation status appeal resources and guidance materials.
August 7, 2025 – A. Bers