Blog: New Hospital Observation vs. In-Patient Stay Appeal Process and Updates 

The Center for Medicare Advocacy (CMA) filed a lawsuit in November of 2011 regarding the length of patient hospital stays being classified or reclassified as “observation” versus “inpatient” days—resulting in the loss of a qualifying Part A stay in an SNF. In the ruling on October 15, 2025, the results of that lawsuit became final.  

CMA Lawsuit Decision: 

Medicare was found to be in violation of class members’ constitutional rights by not allowing an appeal process when patient stays were reclassified from inpatient to observation days while in the hospital. 

Order of Lawsuit: 

An appeal process was mandated for those who did not previously have an appeal process option (retrospective) and an expedited appeals process going forward (prospective). 

Retrospective Effective January 1, 2025 

  • Hospitalizations from January 1, 2009 – February 14, 2025
  • Must be filed by January 2, 2026  
  • Request must be made using CMS’s NEW Form for Retrospective Appeal of Med A Coverage (on CMS.gov website) 
  • If successful, refunds will be made for out-of-pocket payments 

Prospective Effective February 14, 2025 

  • A person is considered eligible if enrolled in Traditional Medicare (not Medicare Advantage) and is admitted as an inpatient but later reclassified as an “outpatient receiving observation services”
  • Hospitals must issue a NEW Medicare Change of Status Notice  form prior to discharge for eligible cases (three or more consecutive days in the hospital) 

Opportunities for Additional Information: Who Can Appeal, The Steps Required, and the Lessons Learned Since the Onset of This Program on January 1st  

  • Click here to access CMA’s webinar recording from last month
  • Click here for the webinar slides
  • Click here to sign up for CMA’s second webinar on January 22, 2025 at 2 PM EST  

Billing Details: 

This week, CMS issued instructions on how to bill SNF claims for beneficiaries who are successful in their appeals via the Medicare Learning Network: 

“When billing for an SNF stay where the 3-day qualifying hospital stay was subject to a change of status review, SNF and swing bed providers must also add condition code C6 and Remarks ‘MCSN’ to TOB 021x admission claims. These indicators alert MACs that the QIO has already reviewed and upheld the patient’s inpatient status for the qualifying hospital stay dates reported in occurrence code 70.” 

The Point Is: This is a long-awaited solution, advancing access to care with reimbursement commensurate with the level of care delivered and necessary.  

Please share with all interested parties who can help with the retrospective appeals, billing and collections, and those needing to understand required steps to ensure prospective advocacy for appropriate levels of care and payment.  

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