On October 26, 2012, CMS issued notice of policy clarifications to be effective next year governing key components of coverage of post-hospital extended care services payable under Medicare Part A.  In Transmittal 161 (Change Request 8044), CMS has clarified its coverage rules relating to the three-day prior hospitalization requirement, the 30-day transfer rule, and the definition of daily skilled services. 

In general, Medicare Part A covers post-hospital extended care services furnished in skilled nursing facilities (SNFs) when: (i) a beneficiary was an inpatient of a hospital for not less than three consecutive days before discharge; (ii) the inpatient stay was medically necessary; (iii) the extended care services are initiated within 30 days after discharge from a qualifying hospital stay; (iv) the extended care services are for the treatment of a condition for which the beneficiary received treatment during the qualifying hospital stay; and (v) it is medically necessary to provide skilled services to the beneficiary on a daily basis, which, as a practical matter, can only be provided in a SNF.  When these coverage requirements are not satisfied, no payment is made under Medicare Part A for post-hospital extended care services to the SNF. 

With regard to these coverage rules, CMS provides the following clarifications affecting Chapter 8 of the Medicare Benefit Policy Manual (Coverage of Extended Care (SNF) Services Under Hospital Insurance):

• The condition treated in the SNF need not be the principal diagnosis that precipitated the beneficiary’s admission to the hospital, but it could be any of the conditions present during the qualifying hospital stay.
• If the beneficiary qualifies for limitation of liability for the hospital stay, this conclusively establishes that the hospital stay was not medically necessary. 
• The date of hospital discharge is the day the beneficiary physically leaves the hospital.   The level of care furnished just prior to discharge (even if less intensive) is not a determining factor of SNF coverage as long as some portion of the stay included at least three consecutive days of medically necessary inpatient care. 
• If a beneficiary’s care needs drop from acute to SNF-level, but no SNF bed is available, the regulations at 42 C.F.R. § 424.13(b) permit a physician to certify that the beneficiary’s continued inpatient stay in the hospital is, in fact, medically necessary under this particular set of circumstances.  These “alternative placement” days can be included in the 3-day count for coverage of SNF services under Medicare Part A.
• So long as a skilled level of care is needed and initiated in a SNF within 30 days after discharge from a qualifying hospital stay, the timely transfer requirement is satisfied even if actual Medicare payment does not commence until later (e.g., when another payment source is primary to Medicare for the initial portion of a the SNF stay).
• A new inpatient hospital qualifying stay is required for Medicare Part A SNF coverage when a beneficiary has had coverage under Medicare Part for a SNF stay, but thereafter is determined not to require skilled care for a period of more than 30 days, even if the beneficiary remains in the SNF.
• The provision of skilled services on a daily basis can be met by furnishing a single type of skilled service on a daily basis, or by furnishing various types of skilled services on different days of the week that collectively add up to “daily” skilled services.  However, arbitrarily staggering the timing of therapy modalities through the week just to meet the daily basis requirement will be subject to question.  The requirement is only satisfied when the beneficiary actually needs skilled rehabilitation services to be furnished on each of the days the facility makes the services available.  “The basic issue here is not whether the services are needed, but when they are needed.  Unless there is a legitimate medical need for scheduling a therapy session each day, the ‘daily basis’ requirement for SNF coverage would not be met.” 

The clarifications will be effective and implemented in Chapter 8, Sections 20.1, 20.2.1, and 30.6 of the Medicare Benefit Policy Manual as of April 1, 2013. 

Notably, the above policy clarifications should be distinguished from the issues of Medicare coverage for skilled services in SNFs (and for home health and outpatient therapy benefits) addressed in the Department of Health & Human Services (HHS) recent proposed settlement in Jimmo v. Sebelius, Civ. Act. No. 5:11-CV-17-CR (D. Va. Oct. 16, 2012).  In Jimmo, the plaintiffs challenged the use of an alleged “improvement standard” for determining coverage of skilled services.  Although HHS denies use of an improvement standard, the standard according to the plaintiffs in Jimmo, refers to a rule of thumb under which Medicare coverage of skilled services is denied on the basis that a Medicare beneficiary is not improving without regard to an individualized assessment of the beneficiary’s medical condition and the reasonableness and necessity of the treatment, care or services in question.  Under the terms of the proposed settlement, HHS has agreed, among other things, to clarify maintenance coverage standards for SNF, home health and outpatient therapy benefits when a patient has no restorative or improvement potential but the patient nevertheless needs skilled services.  The proposed settlement must be approved by the Court and thereafter HHS will have one year from the Court’s approval of the settlement to make the promised policy clarifications.  Expressly excluded from the proposed settlement agreement are eligibility requirements for receiving Medicare coverage for, among other things, post-hospital extended care (SNF) services.

Reporter, Tracy Weir, Washington, D.C., +1 202 626 2923, tweir@kslaw.com.