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  1. Recent Litigation Victories
  • Bagnall v. Sebelius (Observation Status) No. 3:11-cv-01703 (D. Conn., filed 11/3/2011). In November 2011, the Center for Medicare Advocacy and the National Senior Citizens Law Center filed a class action lawsuit on behalf of individuals who have been denied Medicare Part A coverage of hospital and nursing home stays because their care in the hospital was considered "outpatient observation" rather than an inpatient admission. When hospital patients are placed on observation status, they are labeled "outpatients," even though they are often on a regular hospital floor for many days, receiving the same care as inpatients.  Because patients must be hospitalized as inpatients for three consecutive days to receive Medicare Part A coverage of post-hospital nursing home care, people on observation status do not have nursing home coverage.  They must either privately pay the high cost of nursing care or forgo that skilled care.  The number of people placed on observation status has greatly increased in recent years.

As previously reported, on September 23, 2013, a federal judge in Connecticut granted the government’s motion to dismiss the lawsuit.  Plaintiffs appealed, but limited the appeal to the issue of the right to an effective notice and review procedure for beneficiaries placed on observation status. 

Update: On January 22, 2015, a three-judge panel of the U.S. Court of Appeals for the Second Circuit decided that Medicare patients who are placed on “Observation Status” in hospitals may have an interest, protected by the Constitution, in challenging that classification.  The panel held that the district court erred when it dismissed the plaintiffs’ due process claims, and it sent the case back to that court for further proceedings.

On August 26, 2014, the Center filed a nationwide class action lawsuit in United States District Court in Connecticut: Lessler v. Burwell, No. 14-1230 (D.Conn.). The five named plaintiffs, from Connecticut, New York and Ohio, have all waited longer than the statutory 90-day limit for a decision on their Medicare appeals. The current average wait time is over five times the Congressionally-mandated time limit.  The complaint is available here:

Update: On January 29, 2015, defendant’s motion to dismiss was denied. The judge indicated that he will soon rule on plaintiffs’ pending motion for certification of a nationwide class.

  1. Update on Other Litigation
  • Jimmo v. Sebelius (Improvement Standard) No. 11-cv-17 (D.Vt. filed 1/18/11).  As reported during previous Alliance calls, the Settlement in Jimmo was approved on January 24, 2013 during a scheduled fairness hearing.  As previously discussed, CMS has issued revisions to its Medicare Benefit Policy Manual to ensure that Medicare coverage is available for skilled maintenance services in the home health, nursing home and outpatient settings.  CMS also implemented a nationwide education campaign for all who make Medicare determinations to ensure that beneficiaries with chronic conditions are not denied coverage for critical services because their underlying conditions will not improve. Pursuant to the Settlement, counsel for the parties are meeting twice a year to discuss problems with implementation and possible solutions, and are in regular contact between meetings.
  • For more information, see the Center’s website at:
  • Haro v. Johnson (Medicare Secondary Payer) No. 09-cv-134-TUC-DCB (D.Ariz.), filed March 10, 2009.  Appeal filed June 30, 2011 (No. 11-16606, 9th Cir.).  The issue in Haro was whether the Secretary's aggressive methods for attempting to collect payments under her Medicare Secondary Payer (MSP) program, directed at beneficiaries and their attorneys, violates the Medicare statute and the Due Process Clause.  Plaintiffs sought declaratory and injunctive relief prohibiting defendant's MSP recovery practices, including termination of Social Security benefits before there has been resolution of an administrative appeal of the MSP claim or waiver of recovery request, and requiring attorneys to withhold liability proceeds from their clients.

Update: On November 18, 2014, the court approved the parties’ stipulation of voluntary dismissal.  The stipulation was filed December 1, 2014, and the case was dismissed on January 28, 2015.  The government will be making revisions to the Medicare Secondary Payer Recovery letters it uses by May 17, 2015. It has already revised language on its website to clarify that “lien” is not the proper term for a Medicare recovery claim.

  • Hull v. Sebelius, No. 14-801 (D.Conn.) (Lower level Medicare appeals) On June 4, 2014, the Center filed a complaint in United States District Court in Connecticut against Kathleen Sebelius, Secretary of Health and Human Services (at that time), on behalf of plaintiffs who have been denied a meaningful review of their Medicare claims at the first two levels of appeal. The case was brought as a class action on behalf of Connecticut Medicare beneficiaries seeking home health care coverage, and the four named plaintiffs represent the thousands of beneficiaries who cannot get a meaningful review of their cases. Instead, Medicare beneficiaries receive almost automatic denials of coverage, which is essentially “rubber stamped” at both the Redetermination and Reconsideration levels. The problem persists throughout the country.

Update: On December 8, 2014, the court granted the government’s motion to dismiss on the grounds that the named plaintiffs lack standing.  A motion for reconsideration of the dismissal is fully briefed and currently pending.

On December 19, 2014, the Center for Medicare Advocacy and Vermont Legal Aid filed a class action lawsuit against Sylvia Mathews Burwell, the Secretary of Health and Human Services, to stop Medicare’s practice of repeatedly denying coverage for home health services for beneficiaries on the basis that they are allegedly not homebound, when Medicare has previously determined them to be homebound. (Ryan v. Burwell). The lawsuit was filed in the United States District Court in Burlington, Vermont on behalf of two Vermont residents, Marcy Ryan and John Herbert, as a regional class action lawsuit covering New England and New York.


1.The President’s Proposed FY2016 Budget

On February 2, 2015, the White House released the President’s proposed fiscal year (FY) 2016 budget. Similar to years past, there are proposals that the Center endorses and proposals that cause us concern.

On the positive side, proposals we support include several that would yield savings on prescription drugs, including a new proposal that would give the Secretary of Health and Human Services (HHS) the authority to negotiate drug prices for biologics and high cost drugs in the Part D prescription drug program. The budget would also close the Part D Donut Hole three years earlier (by 2017) than is currently planned under the Affordable Care Act. In another new proposal, the current 190-day lifetime limit on inpatient psychiatric hospital days would be eliminated, reducing a long-time barrier to true mental health parity in the Medicare program.

Among the proposals we oppose are many provisions that would shift additional costs to Medicare beneficiaries, including adding a copayment for certain home health visits, increasing the Part B deductible, further income-relating (“means testing”) Part B and D premiums, and adding a surcharge to Medicare supplemental (Medigap) policies that offer cover all or most out-of-pocket expenses. We are also concerned about proposed changes to the Medicare administrative appeals process.

2.Medicare Physician Payment (SGR)

Congress must soon address the perennial issue of payment for Medicare physicians: the fundamentally flawed reimbursement system known as the sustainable growth rate or SGR.    If Congress does not take action by the end of March 2015, physicians will face an approximate 21% cut in payment from Medicare.    Instead of permanently fixing the SGR, since 2003 Congress has enacted approximately 16 temporary fixes, or patches, at a higher cumulative cost than what would have been spent if the payment formula had been fixed more than a decade ago.  

In early 2014, Congress produced bipartisan proposals to fix the SGR by replacing the current volume-based payment system with one that rewards quality, efficiency and innovation, but instead of permanently fixing SGR, these broader, more permanent policies were not enacted. 

Of critical concern to beneficiaries, there are a number of “extenders” – extensions of other temporary Medicare fixes – that have been part of a larger SGR bill.  These extenders include future funding for the Qualified Individual (QI) program that pays Part B premiums for certain low-income individuals, and an exceptions process to Medicare’s annual caps on coverage of outpatient therapy services.    To permanently replace the SGR, with a freeze on physician payments and without considering these “extenders”, would cost approximately $130 billion over 10 years. 

In January 2015, the House Energy & Commerce Committee held a two day hearing discussing SGR, including how to pay for a permanent fix (here is a link to videos of the hearings on January 21st and 22nd:  Unfortunately, among the ideas discussed as “pay fors” included proposals that would shift additional costs onto Medicare beneficiaries. 


1. Home Health Face-to-Face Requirements  

Revised Home Health Face-to-Face Certification Requirement and the New Supporting Documentation Rule

CMS issued a Final Rule [79 FR 66116] that modified the face-to-face (F2F) encounter requirements for initial certification of Medicare-covered home health services.  Physicians are still required to certify that a F2F encounter: (1) occurred no more than 90 days prior to or within 30 days after the home health start of care date; (2) was related to the primary reason the patient needs home health services; and (3) was performed by a physician or allowed non-physician practitioner (NPP).  This certification must be obtained prior to billing.  Effective January 1, 2015, however, certifying physicians no longer need to provide a narrative explanation of why the clinical findings from the F2F encounter support that the patient is homebound and in need of skilled services.[1] 

In the rule, CMS also revised its medical review process for determining patient eligibility.  CMS and its contractors will now review only the patient’s medical record from the certifying physician or the acute/post-acute care facility (if the patient was directly admitted to home health from that setting) that was used to support the physician’s initial certification, to determine whether the patient is or was eligible to receive services under the Medicare home health benefit at the start of care [79 FR 66043]

The new rule requires physicians and acute/post-acute care facilities to furnish such supporting medical documentation “upon request to the home health agency, review, entities, and/or CMS.” 42 C.F.R. § 424.22(c).  If the documentation used as the basis for certification of eligibility is not sufficient to demonstrate eligibility (i.e., homebound status and need for skilled care), payment will not be rendered for the home health services provided. Id.

HHAs are permitted to “fill in the gaps” by furnishing information to the certifying physician that supports the patient’s homebound status and need for skilled care (e.g., SOC OASIS, Comprehensive Assessment), so long as it “corroborates” and does not contradict the physician or facility’s entries regarding the patient’s diagnoses and condition.  The certifying physician must review and sign off on any additional evidence in order to incorporate it into his/her medical record for the patient [79 FR 66047].

As a practical matter, HHAs should try to obtain: (1) the actual clinical note from the F2F encounter; and (2) any other supporting medical documentation from the certifying physician and/or acute/post-acute facility needed to substantiate the certification of patient eligibility as soon as possible [79 FR 66047].  Although these supporting documents are not required prior to billing, HHAs must be able to provide them to CMS and its review entities upon request. Id.  CMS also clarified in the rule that the F2F encounter requirement applies not just to an initial episode, but to any certification (versus recertification).  A certification is considered to be “any time that a new SOC OASIS is completed to initiate care” [79 FR 66051].

Despite CMS’ revised guidance that discusses the new rules about F2F certification and supporting documentation (, there is still great confusion and uncertainty regarding how HHAs are expected to operationalize the new requirements, and what will or won’t pass muster.  The Center and other organizations have submitted numerous questions to CMS seeking more specific information and clearer direction, and we hope to get answers soon.

2. Medicare Payment Advisory Commission (MedPAC) Proposals

Site-Neutral Payments

The Medicare Payment Advisory Commission (MedPAC), the nonpartisan government agency that advises Congress on Medicare policy, voted in its January 15, 2015  public meeting to recommend (1) phasing-in site-neutral payments for inpatient rehabilitation facilities (IRFs) and skilled nursing facilities (SNFs) for 22 conditions, and (2) loosening regulatory requirements for IRFs so that they might continue to provide care to Medicare beneficiaries after their Medicare reimbursement rates are reduced.[1]  MedPAC has recommended deleting IRF requirements that physicians see patients at least three times per week and that IRFs provide intensive therapy to patients each day. 

            Observation Status

At its January 16, 2015 public meeting, MedPAC addressed observation status as part of its discussion of hospital short stay policy issues. MedPAC Commissioners preliminarily, but unanimously, voted to move forward on a recommendation to count time in observation status towards meeting the statutory requirement for three days of hospital care (not counting the day of discharge) as a prerequisite to Medicare Part A coverage of a subsequent stay in a skilled nursing facility (SNF), but only if at least one of the patient’s days in the hospital reflected a formal inpatient admission.  If this MedPAC recommendation were implemented by Congress as currently proposed, patients whose entire hospital stay was classified as observation or other outpatient status would still not have any Medicare Part A coverage for their SNF stay, regardless of how long they were in the hospital and regardless of the type of care and treatment they received in the hospital.


The Center’s website includes the following self-help packets for consumers and advocates, including one on observation status and a new one on ambulance appeals:



[1] It should be noted, however, that a physician narrative is still required for home health patients who require skilled management and evaluation of their care plan.  If a patient’s underlying condition or complication requires a registered nurse to ensure that essential non-skilled care is achieving its purpose, and to be involved in the development, management, and evaluation of the patient’s care plan, the certifying physician must include a brief narrative describing the clinical justification of this need.  This narrative can exist as a part of, or as a signed addendum to, the certification form, and is required for initial certification and all recertifications.


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