Medicare Therapy Coverage Policy to Be Revised

by Morgan Lewis

[authors: Kathleen McDermott, Howard J. Young, and Brian T. Rockwell]

Proposed class action settlement disavows and discontinues use of the "Improvement Standard."

Under a proposed settlement of Jimmo v. Sebelius, No. 5:11-cv-00017 (D. Vt. filed Oct. 16, 2012) filed with the U.S. District Court for the District of Vermont, a nationwide class action lawsuit, the U.S. Department of Health and Human Services (HHS) agreed to revise portions of the Medicare Benefit Policy Manual (MBPM) to clarify Medicare's coverage of skilled nursing and therapy services necessary either to maintain a patient's current condition or to prevent or slow further deterioration, regardless of whether the patient's condition is expected to improve. The plaintiffs alleged that Medicare contractors apply local coverage determinations, internal guidelines, and policies to deny claims for skilled nursing and therapy services on the grounds 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 (the Improvement Standard).

In Jimmo, a class of Medicare beneficiary plaintiffs who had skilled therapy in a hospital outpatient department, skilled nursing facility, or a home healthcare setting denied, terminated, or reduced due to the application of the Improvement Standard, on or after January 1, 2006, filed suit arguing that the Improvement Standard violates Medicare statutes, regulations, and other laws.

HHS did not admit any wrongdoing in the proposed settlement or that the Improvement Standard even exists. The settlement requires the Centers for Medicare and Medicaid Services (CMS) to revise portions of chapters one, seven, eight, and 15 of the MBPM to clarify the coverage standards for skilled nursing facility, home health, and outpatient therapy benefits when a patient has no restoration or improvement potential but when that patient needs skilled nursing, home health, or outpatient therapy services.

The proposed settlement requires CMS to engage in an extensive educational campaign and certain review activities, including a nationwide educational campaign and national calls with providers, suppliers, Medicare contractors, and administrative adjudicatory about the clarification. The settlement also requires CMS to engage in reviews of random samples of skilled nursing facility, home health, and outpatient therapy coverage decisions by qualified independent contractors to identify any problems in applying the revised coverage standards. Finally, CMS is required to review certain skilled nursing, home health, and outpatient therapy claim denials that were based on the Improvement Standard and became final and nonappealable on or after January 18, 2011.

The settlement is expected to help Medicare beneficiaries with chronic conditions like Parkinson's disease and dementia access skilled care and physical and occupational therapy. While there are no estimates of how much the settlement will cost the Medicare program, some commentary suggests that the settlement may provide some savings by helping to keep beneficiaries out of expensive inpatient facilities.

Because audits, reviews, and claim denials have long suggested application of the Improvement Standard, there is a potential impact on existing audits and administrative proceedings and appeals related to skilled care and therapy services.

The court is expected to approve the settlement within the next several months.

View the proposed settlement here.

View the initial complaint here.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.