OBS Implications in Hospitals and Medicare Appeal Actions
Effective January 1, 2025 a new rule applies to Medicare A patients when the physician (hospitalist) determines a change from inpatient to observation status (OBS) during a hospital stay. The rule allows you to appeal the decision. This has a significant impact on your ability to receive care at a skilled nursing facility (SNF) and your bill.
After being hospitalized, a patient may require rehabilitation to regain strength and endurance before returning home. Rehabilitation can include physical therapy, occupation therapy, speech language pathology, and skilled nursing.
To use Medicare Part A (hospitalization) for a SNF, specific criteria must be met. Although the SNF benefit period extends up to 100 days per calendar year, the actual coverage duration may be shorter. This is contingent upon the individual’s progress towards achieving skilled care goals and overall improvement as assessed by the SNF interdisciplinary team.
Rehabilitation services are covered by insurance only when a patient has been hospitalized for at least three days in a row as inpatient status. This doesn’t include the day of discharge. If the requirements are not met, then the patient is not eligible to transfer to a SNF under their Medicare Part A benefit. They may consider private pay at a SNF.
There are ways to avoid the requirements. For example, some hospitals may participate in a Medicare initiative known as “Skilled Nursing Facility 3-Day Rule Waiver.” Also, a number of Medicare Advantage Plans waive the requirement of a three-day minimum.
Contact your plan or inquire with staff at your local hospital for more information. If the criteria for SNF is not met, the alternative is to pay privately for room and board while services such as skilled rehabilitation, medical treatment, and diagnostic testing are applied towards Medicare B and supplemental coverage.
Filing an Appeal
An appeal (including a retrospective appeal) can be a daunting task. Having the proper information available will make the process go more smoothly.
First, reference your Medicare Summary Notice (MSN) and file your appeal by the date referenced in the notice. A retrospective appeal must be received by January 2, 2026. Complete and send it to the Medicare Administrator Contractor.
If you prefer not to use the form, simply provide a written statement and include your name, Medicare number, hospital name and dates of hospitalization. Provide a summary of why you disagree with the determination and list the specific items and/or services and dates you would like to appeal. Include a copy of the MSN and circle the items and/or services you wish to appeal.
It is strongly recommended to file the appeal with more than one method (i.e., telephone, fax, online portal.) If you’re not tech savvy, consider using FedEx’s fax service. Make sure to document the date and time you filed the appeal and obtain the name of the person each time you call.
Additional documentation, such as a doctor’s note may be helpful to include. A physician can provide documentation to support the appeal and include rationale to support how a delay in rehabilitation could further jeopardize your overall health. Also, if you have a designated family member or Power of Attorney (POA) who will help with the appeal, submit a copy of the POA document.
You will be notified of the decision by mail within 60 days. If the appeal is denied you can request a review of the denial decision and instructions will be included in the letter.
Important resources – how to file an appeal & file a complaint:
https://www.medicare.gov/claims-appeals/how-do-i-file-an-appeal
Getting Assistance
Medicare is overseen by the CMS and follows many administrative rules and timeframes. Guidance from trained volunteers is available from the State Health Insurance Assistance Program (SHIP).
SHIP staff can explain the options for Medicare plan coverage, navigate the steps for filing an appeal, and assist with other inquiries. The program is funded by the federal government to support all Medicare recipients. Visit shiphelp.org to obtain a direct number in your local area. Or, you can call Medicare at 800-633-4227.
When you have elected a representative or family member to assist on with appeals or similar matters, be prepared to submit proof. You can submit an Appointment of Representative (AOR) form found on the Centers for Medicare & Medicaid Services (CMS) website, which provides authority for someone to act on your behalf. Submit POA documents if you are the appointed medical affairs executor
Elder Care Consultants is another important resource. If you are unsure about hospitalization status (observation vs admission) and/or need advice and guidance on the matter, reach out to info@eldercc.com or 703-904-0191. We are here to be your advocate and guide.
