Understanding Beneficiary Appeal Rights After Inpatient-to-Outpatient Status Changes

By Ben Kartchner, MD

Dr. Ben Kartchner is Associate Chief Medical Officer and Executive Physician Advisor at Brundage Group. He has worked as a physician advisor for almost a decade and previously served in the roles of associate medical director of care management and medical director of utilization management at various health systems. 

The Centers for Medicare & Medicaid Services (CMS) recently implemented Rule 4204F to address a significant gap in Medicare beneficiary rights following a pivotal legal case, Alexander v. Azar. This ruling recognized the need for due process when a patient’s hospital classification changes from inpatient to outpatient, commonly called a “Code 44”. This article provides an overview of the rule, the associated rights and processes, and its implications for patients and hospitals.

Background on Rule 4204F

The Alexander v. Azar case highlighted the inherent unfairness in denying patients the ability to appeal their reclassification from inpatient to outpatient status. This change often has financial implications, particularly for those without Medicare Part B coverage. While the court ruled that beneficiaries are not entitled to appeal rights, the court also directed HHS to establish an appeals process, culminating in Rule 4204F. The new appeal process allows Medicare beneficiaries with a tangible or financial interest to contest their reclassification through the mechanisms outlined in 42 CFR Part 405, Subpart I, and Subpart J.

Eligibility for Appeals

When a beneficiary disagrees with the hospital’s decision to reclassify their status while still in the hospital, they can appeal this decision with the BFCC-QIO. To qualify for an appeal under Rule 4204F, beneficiaries must meet specific criteria:

AND

OR

This process applies exclusively to beneficiaries with Original Medicare. Per the 4204F, those enrolled in Medicare Advantage plans are already covered under a separate, more robust appeal framework as outlined in 42 CFR §422.562(b)(4).

Appeal Processes: Retrospective vs. Concurrent

There are two types of appeals:

1. 1. Retrospective Appeals: These apply to hospital stays dating back to January 1, 2009, and must be filed with the Medicare Administrative Contractor (MAC). While less relevant to ongoing hospital operations, overturned appeals require hospitals to reprocess the cases correctly.
   2. Concurrent Appeals: These are filed during the patient’s stay and focus on the immediate implications of the Code 44 reclassification. They must be submitted to the Quality Improvement Organization (QIO) before the patient is discharged, and the QIO is obligated to render a decision within one calendar day after receiving all pertinent documentation. These appeals can also be classified as “expedited” or “standard.”

Critical Compliance Requirements

Hospitals must adhere to several requirements to ensure compliance with Rule 4204F:

• Medicare Covered Services Notice (MCSN): This newly mandated notice is critical to the appeal process. It must be delivered to eligible beneficiaries as soon as they meet the criteria to file an appeal. The MCSN:
  • Should not be conflated with other required notifications like the Medicare Outpatient Observation Notice (MOON) or the initial Code 44 notification.
  • Must be delivered in cases where observation services extend beyond three days, or when patients’ overall stay qualifies them for Skilled Nursing Facility (SNF) benefits.
  • Should be signed by the patient or noted as refused, with records retained by the hospital.

Failure to deliver the MCSN accurately and timely could result in noncompliance, undermining the appeal rights of eligible beneficiaries.

Key Considerations for Hospitals

While CMS estimates the volume of these appeals to be relatively low—around 15,000 nationwide, or fewer than three per hospital annually—the operational implications for hospitals are noteworthy. Facilities should:

1. 1. Develop robust workflows for identifying eligible patients and delivering the MCSN promptly.
   2. Ensure all documentation, including the patient’s refusal to sign, is appropriately recorded and retained.
   3. Maintain compliance with the expedited timelines for submission of documentation to the QIO during concurrent appeals.

Financial and Operational Implications

A critical distinction of the appeal process is that it does not afford beneficiaries financial liability protections akin to those provided during discharge appeals. However, hospitals can only bill patients after the QIO renders its decision. This places additional pressure on facilities to handle these cases efficiently while safeguarding patients’ rights.

Closing

CMS Rule 4204F represents a significant step in addressing due process for Medicare beneficiaries affected by inpatient-to-outpatient reclassification. While the overall volume of appeals is expected to be low, hospitals must remain vigilant in implementing the associated processes, ensuring compliance with notice delivery, and respecting the rights of eligible patients. By doing so, healthcare providers can navigate the complexities of Code 44 reclassifications while maintaining trust and transparency in patient care. Per an email from Acentra, a large QIO covering several regions, the rule will be implemented on February 14, 2025. We suspect this will be the same nationwide, but advise hospitals check with their specific QIO. The MCSN form can be found here.

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