'Observation' lawsuit remanded to district court for discovery

The U.S. District Court for the District of Connecticut must review whether Medicare beneficiaries challenging the Centers for Medicare & Medicaid Services’ use of observation status have a property interest under the federal Due Process Clause in being admitted to their hospitals as inpatients, the U.S. Court of Appeals for the 2nd Circuit ruled yesterday. “The District Court erred in concluding that plaintiffs lacked a property interest in being treated as ‘inpatients,’ because, in so concluding, the District Court accepted as true the Secretary’s assertion that a hospital’s decision to formally admit a patient is ‘a complex medical judgment’ left to the doctor’s discretion,” the ruling states. “That conclusion, however, constituted an impermissible finding of fact, which in any event is inconsistent with the complaint’s allegations that the decision to admit is, in practice, guided by fixed and objective criteria set forth in ‘commercial screening guides’ issued by the Centers for Medicare & Medicaid Services.” In a friend-of-the-court brief filed last February, AHA shared its perspective on why CMS’s ambiguous policy regarding “observation” stays is a difficult issue for hospitals and hence beneficiaries.