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Case Name Alexander v. Azar PB-CT-0013
Docket / Court 3:11-cv-01703-MPS ( D. Conn. )
State/Territory Connecticut
Case Type(s) Public Benefits / Government Services
Case Summary
On November 3, 2011, seven Medicare beneficiaries who were denied Medicare benefits filed this lawsuit on behalf of themselves and a class of similarly situated persons in the United States District Court for the District of Connecticut. The plaintiffs sued the Secretary of Health and Human ... read more >
On November 3, 2011, seven Medicare beneficiaries who were denied Medicare benefits filed this lawsuit on behalf of themselves and a class of similarly situated persons in the United States District Court for the District of Connecticut. The plaintiffs sued the Secretary of Health and Human Services (HHS) (the Secretary) under the Administrative Procedure Act (APA) and the Freedom of Information Act. Represented by the Center for Medicare Advocacy, Justice in Aging, the National Senior Citizens Law Center, and private counsel, the plaintiffs sought declaratory and injunctive relief, an order of mandamus, costs, and attorneys’ fees. They claimed that they were unlawfully denied Medicare benefits for inpatient hospital services because hospitals placed them on “observation status” without formally admitting them. Specifically, they alleged that HHS regulations which allowed hospitals to place them on observation status:
  • Deprived them of Medicare Part A benefits guaranteed by 42 U.S.C. § 1395d(a);
  • Were promulgated without the notice and comment period required by the APA, 5 U.S.C. § 553, and the Medicare Act, 42 U.S.C. § 1395hh(a)(2);
  • Had no legal effect because they were not published in the Federal Register as required by the Freedom of Information Act, 5 U.S.C. § 552(a)(1)(D); and
  • Violated the APA’s prohibition on agency actions that are “arbitrary, capricious, or an abuse of discretion.” 5 U.S.C. § 706(2)(A).
They also alleged that:
  • The Secretary’s failure to notify them of their placement on observation status violated the notice provisions of the Medicare Act and the Due Process Clause of the Fifth Amendment;
  • They were deprived the right to administrative review guaranteed by the Medicare Act and the Due Process Clause of the Fifth Amendment; and
  • Allowing hospitals to place them on observation status and reverse physicians’ decision to admit them interfered with the practice of medicine in violation of 42 U.S.C. § 1395.
The plaintiffs also sought class certification under Rule 23(b)(2) of the Federal Rules of Civil Procedure. They proposed to define a class of Medicare beneficiaries who lost Medicare Part A benefits due to placement on observation status during hospital stays on or after January 1, 2009.

The Secretary moved to dismiss for lack of jurisdiction and failure to state a claim. The case then bogged down for four years while defendant’s motion to dismiss and plaintiff’s motion to certify a class were pending. The delay was caused by intervention of a number of individual named plaintiffs, frequent re-filing of motions after new plaintiffs were added, numerous motions for extended time on filings, and reassignment of the case from Judge Alvin W. Thompson to Judge Michael P. Shea.

Eventually, Judge Shea dismissed the case. In a September 23, 2018 order, Judge Shea rejected the Secretary’s argument that the court lacked jurisdiction because the plaintiffs failed to exhaust their administrative remedies. He found that the requirement that plaintiffs exhaust their administrative remedies was subject to judicial waiver and public policy weighed against requiring full administrative review in a challenge to the substance rather than application of agency rules. However, Judge Shea held that the plaintiff’s claims failed as a matter of law. Relying on Estate of Landers v. Leavitt, a Second Circuit case that rejected a similar challenge to the definition of a “qualifying hospital stay” for Medicare Part A benefits, Judge Shea found that the Secretary’s interpretation of “inpatient” carried “a great deal of persuasive weight” and was not arbitrary or capricious. Next, Judge Shea determined that the challenged regulations were not subject to notice-and-comment requirements because they merely “clarif[ied] an existing statute or regulation.” He also found that the Secretary’s policies did not have to be published in the Federal Register because they would not adversely affect members of the public and, in any event, that they had already been adequately published in the Register. Turning to the plaintiff’s constitutional and related statutory claims, Judge Shea found that the decision to admit hospital patients was discretionary and did not create a property interest subject to the Fifth Amendment’s Due Process Clause. Finally, Judge Shea found that the Secretary’s policy did not “direct or prohibit” any kind of treatment in violation of 42 U.S.C. § 1395. 2013 U.S. Dist. LEXIS 135251.

The plaintiffs appealed Judge Shea’s decision with respect to their claims under the Medicare Act and Due Process Clause. Two years later, the Second Circuit affirmed in part and reversed in part. In an opinion issued January 22, 2015, Judge José A. Cabranes upheld the district court’s dismissal of the plaintiffs’ claims under the Medicare Act. But Judge Cabranes found that the district court should not have accepted the Secretary’s claim that a hospital’s decision to formally admit a patient is a discretionary “complex medical judgment.” Instead, Judge Cabranes held that the plaintiffs alleged a property interest protected by the Due Process Clause sufficiently strong to withstand a motion to dismiss. 777 F.3d 106.

Little was accomplished during the remainder of 2015. On October 13, Judge Shea denied the parties’ joint motion to amend the scheduling order, citing “the Second Circuit’s apparent expectation that this case be handled expeditiously.”

The Secretary moved for summary judgment and to dismiss on June 16, 2016, arguing that Medicare beneficiaries do not have a property interest in inpatient status because physicians make initial determinations of inpatient status based on their professional medical judgement. The plaintiffs moved for summary judgment on July 29, arguing that Medicare beneficiaries have a property interest in inpatient status because final determinations of inpatient status rely on objective criteria.

In a February 8, 2017 order, Judge Shea denied both summary judgment motions. Judge Shea found that ascertaining whether the Secretary’s policies “meaningfully channel[]” doctors towards particular inpatient/outpatient classifications depended on the resolution of disputed issues of fact ill-suited to summary judgment. However, Judge Shea granted defendant’s motion to dismiss in part. He found that regulations promulgated since the lawsuit was filed (42 U.S.C. § 1395cc(a)(1)(Y)) that require patients to be informed of their outpatient status deprived plaintiffs of standing to challenge the Secretary’s notice procedures and rendered plaintiff’s lack of notice claims moot. 2017 U.S. Dist. LEXIS 17671.

The plaintiffs filed another motion for class certification on March 3, 2017, and the Secretary timely answered the original complaint on March 15, six years after it was filed.

On July 31, 2017, Judge Shea certified a class of Medicare beneficiaries who, on or after January 1, 2009:
  1. Have received or will receive “observation services” as an outpatient during a hospitalization;
  2. Have received or will receive an initial determination that the observation services are covered by Medicare Part B; and
  3. Did not pursue an administrative appeal and receive a final decision before September 4, 2011.
Judge Shea included the requirement that class members receive an “initial determination” to ensure that plaintiffs have taken action to request benefits so that the court would have jurisdiction. The third requirement eliminated potential statute of limitations problems. 275 F. Supp. 3d 313. On October 16, Judge Shea amended the class definition by inserting “or Medicare Outpatient Observation Notice (MOON)” after “initial determination.”

After the court granted class certification, the case became mired in discovery disputes. The Secretary filed a second motion for summary judgment on July 30, 2018 and moved to decertify the class on August 24. On November 8, Judge Shea suggested that the trial could be bifurcated, where the first phase would focus on the existence of a property interest and the second phase would consider the remaining elements of the plaintiffs’ due process claim. After a brief delay in early 2019 due to the government shutdown, the Secretary filed a new motion to dismiss for lack of subject matter jurisdiction on January 30.

In a March 27, 2019 order, Judge Shea denied defendant’s motions for summary judgment, for class decertification, and to dismiss. First, Judge Shea determined that a trial would be necessary to “strike the balance” of the Mathews factors required to evaluate plaintiffs’ due process claim. Next, he declined the Secretary’s invitation to decertify the class. The Secretary had argued that not all class members were injured by placement on observation status. But Judge Shea determined that decertification risked prejudice to existing class members. Instead, Judge Shea narrowed the class to include only a subset of Medicare beneficiaries who would suffer financial losses due to observation status. The new class included only those who were not enrolled in Part B coverage when hospitalized or stayed at a hospital for three or more consecutive days without being designated as inpatients. Finally, Judge Shea rejected defendants’ motion to dismiss based on lack of redressability. He found that the Secretary exercised sufficient control over patient classification policies to allow the suit to proceed. The order also expressed frustration over the case’s slow progression. Judge Shea noted that the litigation had outlived every plaintiff named in the original complaint and resolved not to delay the trial again. 2019 U.S. Dist. LEXIS 51476. See also 2019 WL 2358960 (denying reconsideration).

As of June 5, 2019, the trial is set for August 2019. The case is ongoing.

Timothy Leake - 06/05/2019


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Issues and Causes of Action
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Issues
Benefit Source
Medicare
Constitutional Clause
Due Process
Defendant-type
Hospital/Health Department
Jurisdiction-wide
General
Government Services (specify)
Payment for care
Public benefits (includes, e.g., in-state tuition, govt. jobs)
Plaintiff Type
Private Plaintiff
Causes of Action Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.
Freedom of Information Act (FOIA), 5 U.S.C. § 552
Medicare, 42 U.S.C. 1395-1395lll (Title XVIII of the Social Security Act)
Defendant(s) Secretary of Health and Human Services
Plaintiff Description Medicare beneficiaries who were denied benefits by hospitals who placed them on "observation status" under Department of Health and Human Services regulations.
Class action status sought Yes
Class action status granted Yes
Filed Pro Se No
Prevailing Party None Yet / None
Public Int. Lawyer Yes
Nature of Relief None yet
Source of Relief None yet
Filing Year 2011
Case Ongoing Yes
Additional Resources
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  Bagnall v. Sebelius
https://www.medicareadvocacy.org/bagnall-v-sebelius-no-11-1703-d-conn-filed-november-3-2011/
(Center for Medicare Advocacy)
[ Detail ] [ External Link ]

  Alexander v. Azar - Litigation
https://www.justiceinaging.org/our-work/litigation/alexander-v-azar-litigation
(Justice in Aging)
[ Detail ] [ External Link ]

Docket(s)
3:11-cv-01703-MPS (D. Conn.)
PB-CT-0013-9000.pdf | Detail
Date: 06/04/2019
Source: PACER [Public Access to Court Electronic Records]
General Documents
Complaint for Declaratory, Injunctive, and Mandamus Relief [ECF# 1]
PB-CT-0013-0001.pdf | Detail
Date: 11/03/2011
Source: PACER [Public Access to Court Electronic Records]
Memorandum of Decision [ECF# 106] (2013 WL 5346659 / 2013 U.S.Dist.LEXIS 135251) (D. Conn.)
PB-CT-0013-0003.pdf | WESTLAW| LEXIS | Detail
Date: 09/23/2013
Source: PACER [Public Access to Court Electronic Records]
Untitled (777 F.3d 106)
PB-CT-0013-0004.pdf | WESTLAW| LEXIS | Detail
Date: 01/22/2015
Source: PACER [Public Access to Court Electronic Records]
Complaint in Intervention [ECF# 123]
PB-CT-0013-0002.pdf | Detail
Date: 05/11/2015
Source: PACER [Public Access to Court Electronic Records]
Memorandum of Decision [ECF# 196] (2017 WL 52294 / 2017 U.S.Dist.LEXIS 17671) (D. Conn.)
PB-CT-0013-0006.pdf | WESTLAW| LEXIS | Detail
Date: 02/08/2017
Source: PACER [Public Access to Court Electronic Records]
Ruling on Class Certification [ECF# 242] (275 F.Supp.3d 313) (D. Conn.)
PB-CT-0013-0005.pdf | WESTLAW| LEXIS | Detail
Date: 07/31/2017
Source: PACER [Public Access to Court Electronic Records]
Memorandum of Decision [ECF# 378] (370 F.Supp.3d 302) (D. Conn.)
PB-CT-0013-0007.pdf | WESTLAW| LEXIS | Detail
Date: 03/27/2019
Source: PACER [Public Access to Court Electronic Records]
show all people docs
Judges Cabranes, José Alberto (FISCR, D. Conn., Second Circuit) show/hide docs
PB-CT-0013-0004
Shea, Michael Peter (D. Conn.) show/hide docs
PB-CT-0013-0003 | PB-CT-0013-0005 | PB-CT-0013-0006 | PB-CT-0013-0007 | PB-CT-0013-9000
Walker, John Mercer Jr. (S.D.N.Y., Second Circuit) show/hide docs
PB-CT-0013-0004
Winter, Ralph K. Jr. (FISCR, Second Circuit) show/hide docs
PB-CT-0013-0004
Plaintiff's Lawyers Bailey, Regan (Washington) show/hide docs
PB-CT-0013-9000
Berger, David J. (California) show/hide docs
PB-CT-0013-9000
Bers, Alice (Connecticut) show/hide docs
PB-CT-0013-0001 | PB-CT-0013-0002 | PB-CT-0013-9000
Berthelot, Mary T (Connecticut) show/hide docs
PB-CT-0013-0001 | PB-CT-0013-0002 | PB-CT-0013-9000
Brehnan, Alexander Kenneth (California) show/hide docs
PB-CT-0013-9000
Carlson, Eric (California) show/hide docs
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Costin, Whitney (New York) show/hide docs
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Deford, Gill (Connecticut) show/hide docs
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Edelman, Toby (District of Columbia) show/hide docs
PB-CT-0013-0001 | PB-CT-0013-0002 | PB-CT-0013-9000
Edwards, Lindsey (District of Columbia) show/hide docs
PB-CT-0013-9000
Guggenheim, Steven D. (California) show/hide docs
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Kwok, Wey-Wey (Vermont) show/hide docs
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Liss, Luke A (California) show/hide docs
PB-CT-0013-9000
Mollick, Jason B (New York) show/hide docs
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Prindiville, Kevin Edward (California) show/hide docs
PB-CT-0013-0001 | PB-CT-0013-0002 | PB-CT-0013-9000
Rich, Anna Margaret (California) show/hide docs
PB-CT-0013-0001 | PB-CT-0013-0002 | PB-CT-0013-9000
Savage, Dylan G (California) show/hide docs
PB-CT-0013-9000
Stein, Judith A. (Connecticut) show/hide docs
PB-CT-0013-0001 | PB-CT-0013-0002 | PB-CT-0013-9000
Wong, Carol A (District of Columbia) show/hide docs
PB-CT-0013-9000
Defendant's Lawyers Bitran, Eva Lucia (California) show/hide docs
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Coyle, Garrett Joseph (District of Columbia) show/hide docs
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Gostin, Kieran Gavin (District of Columbia) show/hide docs
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Hauser, Kelley (Massachusetts) show/hide docs
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Ikari, Carolyn A. (Connecticut) show/hide docs
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Kneedler, Jennie L. (District of Columbia) show/hide docs
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Lee, Jason (District of Columbia) show/hide docs
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McElvain, Joel (District of Columbia) show/hide docs
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Sandberg, Justin Michael (District of Columbia) show/hide docs
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Schwartz, James J. (District of Columbia) show/hide docs
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Tulis, Elizabeth (New York) show/hide docs
PB-CT-0013-9000
Other Lawyers Honecker, Rodman E (New Jersey) show/hide docs
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Lobenfeld, Eric J (New York) show/hide docs
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Zeitlin, Andrew M (Connecticut) show/hide docs
PB-CT-0013-9000

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