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This CMA Alert highlights a recent individual ALJ decision that sets out an important but often unrecognized beneficiary right to a written notice when he or she is about to use hospital “Lifetime Reserve Days.”  A hospital’s failure to provide appropriate notice in this context can lead to the waiver of a beneficiary’s liability for otherwise uncovered care. 

In a March 10, 2015 decision (available by request), Administrative Law Judge (ALJ), Jimmy R. Barkalow, in the Ohio Office of Medicare Hearing & Appeals, ruled favorably for the Beneficiary’s estate.  The ALJ’s ruling required Medicare to cover the cost of the Beneficiary’s care because the Medicare participating hospitals involved in the appeal failed to provide him with appropriate notice that he was about to use his Lifetime Reserve Days.  The ALJ also decided there was already ample support in the record to find full coverage for the Beneficiary.  

Interestingly, the beneficiary’s hospital stay had been classified as Observation Status; he was not admitted as an inpatient.  Although the Observation Status discussion is not germane to the ALJ’s finding that the hospitals did not give the Beneficiary notice that he was using up his Lifetime Reserve Days, the hearing decision provides useful comments about the proper use of Observation Status.  In particular, ALJ Barkalow referred extensively to the medical record in support of his findings that the Appellant Beneficiary had multiple comorbidities which support an inpatient level of care as opposed to outpatient Observation Status.

Regrettably, on May 12, 2015, Mercy Hospital and St. Francis Hospital appealed ALJ Barkalow’s May 10, 2015 decision (appeal available by request). 

Procedural History

This case was twelve years-old when the ALJ decision was issued. It demonstrates the importance of staying focused on the procedural and substantive claims at issue, not giving up, and having a good understanding of Medicare law and policy.

In undertaking his appeal, the Beneficiary, through his daughter, presented claims for Part A inpatient hospital services provided from August 23, 2003 to December 20, 2003 and March 25, 2004 to August 28, 2004.  Empire Medicare Services, a Center for Medicare & Medicaid Services (CMS) contractor, initially denied the claims and denied them again in two Redetermination Decisions, one on February 7, 2005 and the other on March 9, 2005. On September 23, 2005 an ALJ also denied both sets of claims.

On February 23, 2010, the U.S. District Court (Eastern District of NY) remanded the appeal to the Medicare Appeals Council, Departmental Appeals Board (MAC/DAB) with instructions for a further remand to the Office of Medicare Hearing and Appeals (OMHA), Administrative Appeals Council. The Appeals Council dismissed the claims. On October 24, 2012, the MAC/DAB remanded the appeal for another ALJ hearing per the Order of the U.S. District Court, Eastern District of NY.

On November 21, 2013, the ALJ issued an Order setting a hearing on December 18, 2013.  The hearing was then rescheduled for February 19, 2014.  On February 20, 2014, the ALJ issued an Order for the Beneficiary to Appear and Show Cause why he should not be held in Contempt of Court and the claims dismissed, as it appeared that he had missed the February 19, 2014 hearing.  On March 11, 2014 the ALJ dismissed the appeal for not responding to the Show Cause Order.  On September 18, 2014 the MAC/DAB remanded the appeal to the ALJ stating the appeal was improperly dismissed and that the case should proceed.

Relevant Findings of Fact (the January 26, 2015 telephone hearing)

Lack of Notice of Lifetime Reserve Days

  1. The responses to Interrogatories from each of the beneficiary’s hospitals clearly admit that they did not provide the Beneficiary with notice that the benefit period was expiring, and he was therefore about to use his Lifetime Reserve Days of hospital coverage.
  2. The purpose of the notice requirement is to give beneficiaries a chance to avoid incurring the cost of the non-covered service.
  3. Since no notice was given, the Beneficiary could not be charged costs that would have been avoided had the proper notice been given.
  4. Providers are presumed liable for non-covered claims, unless they transfer or limit the liability using an Advanced Beneficiary Notice (ABN) or some similar instrument (i.e. Notice of Non-Coverage).
  5. Absent an ABN or similar instrument, the hospitals did not transfer liability to Beneficiary and remain liable for any non-covered claims.

Hospitals should make available to beneficiaries an appropriate election statement or form to be included in the patient’s hospital record for the patient to elect not to use Lifetime Reserve Days.

§1879(a) of the Social Security Act, 42 USCA §1395pp; 42 CFR §411.400-§411.408; 42 CFR §§409.6065; Medicare Benefits Policy Manual (MBPM). Pub. 100-02, Ch. 5 §§30.1-30-2; §40.1.

The ALJ’s Conclusions of Law

  1. The only claims at issue were the Provider's provision of medical services (Part A inpatient hospital services) to the Beneficiary from August 23, 2003 to December 20, 2003 and March 25, 2004 to August 28, 2004, and whether those claims are covered by Medicare.  
  2. Any claims other than those stated above were not addressed in the decision, as they were not properly before the ALJ (i.e. Beneficiary's orally voiced concerns of medical neglect or negligence were not considered). The ALJ only has limited statutory jurisdiction to review Medicare coverage or liability for the non-covered claims.
  3. The Beneficiary's claims for coverage of medical services (Medicare Part A inpatient hospital services) provided by St. Francis Hospital and Mercy Hospital to the Beneficiary from August 23, 2003 to December 20, 2003 and March 25 2004 to August 28, 2004 were covered and reimbursable under the Medicare Act and regulations as Part A inpatient hospital services at the DRG and level claimed by the hospitals.
  4. The services were medically reasonable and necessary under §1861 and §1862 of the Social Security Act and the documentation requirements of §1833(e) of the Social Security Act were satisfied.  See §1861(s)(2)(B)(C), §1833(e) of the Social Security Act.
  5. To the extent the Beneficiary, or his agents, has made payments on these bills, the payments should be refunded (less co-insurance, co-payments, deductibles and similar charges) because the services are covered by Medicare.
  6. Medicare coverage applied to all the claims, so liability was no longer at issue.
  7. St. Francis Hospital and Mercy Hospital failed to provide notice to the Beneficiary that his benefit days were expiring or had expired, and there was no valid notice in the file.
  8. The ALJ concluded that Medicare coverage was available for all the claims, so the Beneficiary’s liability was no longer at issue.

Applicable Statutes, Regulations and Guidance on Review

  1. An ALJ is bound to follow statutes, regulations and National Coverage Decisions (NCDs) and should give substantial deference to Local Medical Review Policy (LMRPs), Local Coverage Decisions (LCDs), and Medicare Manuals.
  2. InterQual is not sanctioned or officially recognized by CMS and its use is not authorized in the statute, regulation, NCD, LMRP or LCD, nor is it part of the Medicare Manual series.  Thus an ALJ is required to give InterQual no weight at all.

§1871(a)(2) of the Social Security Act, 42 USCA §1395hh; 42 CFR §405.860; 42 CFR §405.1062; Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 102 (l995); 71 Fed. Reg. §51050 – §5l085, at §51061 (08/28/2006).

Use of Observation Services

The ALJ noted that Observation Status can last for 48 hours, but that the usual limit is 24 hours.  Many authorities suggest that within 24 hours a decision should be made either to admit the patient for further observation/treatment or to discharge. MBPM, pub. 100-02, Ch. 6, §20.6; MCPM, pub. 100-04, Ch. 4, §290.1 & Ch. 12, §30.6.8-§  Further, the ALJ noted that outpatient Observation Status is not a substitute for an inpatient admission or for continuous monitoring.  In making this point, the ALJ cited a closed website:  

Extensive resources on Observation Status and services are available on the Center for Medicare Advocacy’s website at


Strikingly, this case was twelve years-old when the ALJ issued his decision.  It includes many dismissals and remands. Its successful pursuit required an understanding of Medicare’s complicated rules and a willingness – and ability – to stay the course.

May, 2015 – A. Chiplin

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