In a motion filed last week in Alexander v. Azar, No. 3:11-cv-1703-MPS (D. Conn.), HHS argued that it cannot be sued by Medicare beneficiaries objecting to a hospital’s decision to admit them as inpatients instead of placing them under observation. The plaintiffs in the case, a certified class of Medicare beneficiaries, sued HHS in the United States District Court for the District of Connecticut, claiming due process violations resulting from their inability to appeal hospitals’ decisions to provide outpatient observation care rather than admit them as inpatients. Plaintiffs allege that they incur higher out-of-pocket costs when placed in observation because they have co-payment responsibilities under Part B that they would not incur if they were admitted as inpatients. Inpatient care is covered by Part A. Although Medicare inpatients may have deductible responsibilities, Part B co-payments and charges for non-covered services, like self-administered drugs, can sometimes be higher than a patient’s Part A financial responsibility. Plaintiffs are seeking an injunction requiring HHS to establish administrative review procedures to appeal a hospital’s decision to place a Medicare beneficiary on observation status.

HHS has moved to dismiss the plaintiffs’ lawsuit for lack of standing, arguing that the plaintiffs’ alleged injuries are not traceable to HHS’s failure to provide administrative review procedures and an injunction would be unlikely to redress their alleged injuries. HHS reasons that “there is a fundamental mismatch between the Plaintiffs’ remaining cause of action and the defendant they have chosen to sue” because HHS lacks the power to “formally admit” a beneficiary to a hospital or retroactively reverse a hospital’s inpatient admission denial. HHS also claims that the plaintiffs failed to establish standing because they did not allege that they would have used an administrative review process if it had been available. Finally, HHS argues that the plaintiffs’ claims are moot because there is currently no protected property interest in inpatient admission arising from the Two-Midnight Rule, which is the current standard for inpatient admission.

A copy of the HHS memorandum in support of its motion to dismiss is available here.