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Alexander v. Price

United States District Court, D. Connecticut

July 31, 2017

CHRISTINA ALEXANDER, et al., Plaintiffs,
v.
THOMAS E. PRICE, Secretary of Health and Human Services, Defendant.

          RULING ON CLASS CERTIFICATION

          Michael P. Shea, U.S.D.J.

         I. INTRODUCTION

         This case is about whether Medicare beneficiaries have a right to administrative review of the decision to treat their hospital stays as “observation” rather than “inpatient”-a decision that can have significant financial consequences. After surviving summary judgment and two motions to dismiss, plaintiffs now move to certify a class under Federal Rule of Civil Procedure 23(b)(2). (ECF No. 203.) The Secretary of the Department of Health and Human Services (the “Secretary”) contests class certification and raises a number of specific issues regarding the scope of the class definition. For the reasons explained below, the Court grants in part and denies in part the motion for class certification, and appoints plaintiffs' counsel as class counsel.

         II. BACKGROUND

         The Court assumes the parties' familiarity with the facts and procedural history of this case, which are also described in the February 8, 2017 ruling on cross-motions for summary judgment and the second motion to dismiss. Alexander v. Cochran, 2017 WL 522944 (D. Conn. 2017). Plaintiffs now move to certify a class under Federal Rule of Civil Procedure 23(b)(2). (ECF No. 203.) The parties presented oral argument at hearings on June 13 and June 28, 2017, and submitted extensive briefing on the issue. (ECF Nos. 213; 219; 230; 234; 235; 239; 240.)

         III. LEGAL STANDARD

         The party seeking class certification must satisfy the requirements of Federal Rule of Civil Procedure 23. Rule 23(a) requires a showing that “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” In addition to these four explicit conditions, the Second Circuit has recognized an implied requirement that the class be ascertainable, that is, “defined using objective criteria that establish a membership with definite boundaries.” In re Petrobras Sec., 2017 WL 2883874, at *1 (2d Cir. 2017).

         Plaintiffs also must satisfy one of the three paragraphs of subsection (b) of Rule 23. Here, because plaintiffs seek to certify a class under Rule 23(b)(2), they must demonstrate that “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Fed.R.Civ.P. 23(b)(2). “The party seeking class certification bears the burden of establishing by a preponderance of the evidence that each of Rule 23's requirements has been met.” Myers v. Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010).

         IV. CLASS DEFINITION

         The parties primarily dispute the language and scope of the class definition, and thus the Court begins with that set of issues.[1] The plaintiffs propose a class of:

All Medicare beneficiaries who, on or after January 1, 2009, have had or will have had any portion of a stay in a hospital treated as observation status and therefore not covered under Medicare Part A.

         The Secretary argues that this definition is overly broad and instead proposes a class (should any class be certified) of:

All Medicare beneficiaries who, on or after January 1, 2009: (1) have received or will have received observation services during a hospitalization; and (2) have received or will have received an initial determination that the observation services are covered (or subject to coverage) under Medicare Part B; and (3) have received or will have received post-hospitalization care in a skilled nursing facility that was not covered by Medicare because either (a) the individual received an initial determination denying coverage or (b) neither the facility or the individual sought Medicare coverage for such care. Medicare beneficiaries who meet the requirements of the foregoing sentence but received a final decision of the Secretary before September 4, 2011 are excluded from this definition.

         For the reasons explained below, the Court adopts the following class definition:

All Medicare beneficiaries who, on or after January 1, 2009: (1) have received or will have received “observation services” as an outpatient during a hospitalization; and (2) have received or will have received an initial determination that the observation services are covered (or subject to coverage) under Medicare Part B. Medicare beneficiaries who meet the requirements of the foregoing sentence but who pursued an administrative appeal and received a final decision of the Secretary before September 4, 2011 are excluded from this definition.

         A. Observation Status or Services

         First, the parties disagree about whether the class definition should refer to “observation status” or “observation services.” Plaintiffs argue that the term “observation services” is misleading because there is no distinguishable set of medical services considered to be “observation”-it is just a billing distinction. Plaintiffs add that they would not be opposed to substituting the term “outpatient status” for “observation status.” (ECF No. 219 at 14.)

         The Court finds that, for clarity, the class definition should refer to “‘observation services' as an outpatient” rather than “observation status.” The Court understands the plaintiffs' concerns: the Secretary has acknowledged that any medical service or treatment rendered to a patient who is not formally admitted as an inpatient can be viewed as an observation service. (ECF Nos. 164-1 ¶ 6; 176-1 ¶ 6.) However, “observation services” and “outpatient observation services” are the terms used in the Medicare Benefit Policy Manual, Ch. 6 § 20.6(A). “Observation services” is also the term used in the NOTICE Act, which provides that within 36 hours, hospitals must explain “the status of the individual as an outpatient receiving observation services and not as an inpatient of the hospital.” 42 U.S.C. § 1395cc(a)(1)(Y). The standardized Medicare Outpatient Observation Notice (“MOON”) that hospitals must give to patients under the NOTICE Act reads, “You're a hospital outpatient receiving observation services. You are not an inpatient because:” 81 Fed. Reg. 57038 (Aug. 22, 2016); see also MOON, available at Centers for Medicare & Medicaid Services, “Beneficiary Notice Initiative (BNI), ” www.cms.gov/Medicare/Medicare-General- Information/BNI (last accessed July 7, 2017).

         And using only the term “outpatient status, ” without any mention of observation, as plaintiffs suggest as an alternative, would be improper. “Outpatient status” encompasses too broad a group of individuals, beyond the plaintiffs' original class definition and the allegations in the complaints, which focus on observation status/services. See, e.g. ECF No. 1 ¶¶ 2-8; see also Medicare Benefit Policy Manual, Ch. 6 §§ 20.1-20.7 (describing different outpatient hospital services, including but not limited to observation).

         B. Presentment

         Next, the parties disagree about how to ensure that the class definition includes only those individuals who have presented their claim to the agency as required by 42 U.S.C. § 405(g) (“Section 405(g)”). Plaintiffs argue that presentment occurs when a Medicare beneficiary arrives at a hospital for care and shows evidence of coverage, with no action by the Secretary required. While this may technically be correct, the Court concludes that the class should be defined to include individuals who “have received or will have received an initial determination that the observation services are covered (or subject to coverage) under Medicare Part B.”[2] Including this “initial determination” requirement in the definition resolves any doubt about the Court's jurisdiction.

         Section “405(g), to the exclusion of 28 U.S.C. § 1331, is the sole avenue for judicial review for all ‘claim[s] arising under' the Medicare Act.” Heckler v. Ringer, 466 U.S. 602, 615 (1984). Section 405(g) “contains the nonwaivable and nonexcusable requirement that an individual present a claim to the agency before raising it in court.” Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 15 (2000). While, earlier in this litigation, the Court held that Section 405(g)'s exhaustion requirement was subject to judicial waiver, Bagnall v. Sebelius, 2013 WL 5346659, at *6-7 (D. Conn. 2013), it is clear that the presentment ...


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