Knowledge Base Article

A friend of mine recently had back surgery and she is following up her hospital stay with up to 21 days in a Skilled Nursing Facility (SNF) for rehabilitation. Most of you reading this probably realized she has Medicare when I said “up to 21 days” and that the stay is for “skilled” care. She will be receiving intensive physical and occupational therapy to prepare her to be able to handle activities of daily living when she is discharged back to her home. This is a great Medicare benefit, but as most Medicare benefits, there are stipulations and rules that must be followed.

For SNF placement:

• The patient must have been an inpatient of a hospital for a medically necessary stay of at least 3 consecutive calendar days, not counting the date of discharge;
• SNF services must be ordered by a physician and provided by, or under the direct supervision of, skilled nursing or rehabilitation professionals;
• The patient must be admitted to the SNF and receive the needed care within 30 calendar days after the date of discharge from a hospital; and
• The SNF services must be for a condition previously treated at a hospital.

Luckily for my friend, she meets all of the above criteria.

However, a recent OIG Report found that Medicare continues to make improper payments for SNF services because the services do not meet the 3-day rule. The OIG estimates overpayments of almost $85 million for CY 2013-2015 (the audit period). Notice I said “continues” to make improper payments; that is because the OIG has performed 27 prior audits of this same issue with similar findings. So, what is the problem and how does the OIG recommend correcting it? AND – is CMS on board with the OIG’s recommendations?

The basic problem is that SNFs are billing for stays when the patient did not have a 3-day qualifying stay and Medicare is making payment for these services. SNFs are required to report occurrence span code “70” to provide the dates of a qualifying hospital stay of at least 3 consecutive days on their Medicare claim. SNFs usually obtain the information about the hospital stay from the hospital. In the hospital setting, case managers or discharge planners make the discharge plans for patients and should consider the above criteria when placing a patient in a SNF setting.

Problem #1 – Medicare Edits:

Medicare claims processing systems should have edits in place to verify whether SNF claims meet the 3-day rule based on the dates reported with occurrence span code “70.” Common Working File (CWF) edits reject claims if the dates reported by the SNF or if the dates on the associated hospital inpatient claim do not span 3 or more calendar days. CMS stated the CWF edits were not enabled and/or working as they should for the time frame of this audit. “CMS said that it enabled the CWF qualifying inpatient hospital stay edit for SNF claims effective April 2018.” Even with the edits working properly, there are reasons they are not always effective. According to the OIG report, this is due to “incorrect or incomplete SNF and hospital claim data, a lack of access to the U.S. Department of Veterans Affairs (VA) or private-pay hospital claims that should be considered while calculating the length of a qualifying hospital stay, and timing differences between the submission of hospital claims and SNF claims…”

Turning on the edits will help a lot, but obviously there are other issues.

Problem # 2 – Counting Incorrectly:

This occurs when a combination of inpatient and non-inpatient hospital days is counted to determine whether the 3-day rule was met. For example, if a patient is seen in the Emergency Department and not admitted as an inpatient until the next day, the day of the ED visit is not counted as an inpatient day. This gets even more confusing when you consider patients receiving observation services. Medicare allows hospitals to consider nights spent as an outpatient (such as outpatient receiving observation) to meet the 2-midnight benchmark for determining inpatient status under the 2-midnight rule. These outpatient days do not count toward a SNF 3-day qualifying stay. Also, the day of discharge is not counted toward the 3 days. Mistakes in counting days incorrectly may be made by SNF or hospital personnel and then reported incorrectly down the line and eventually on the claim to Medicare.

Problem # 3 – Ineffective Communication and Notification

The OIG seems to think this is a big issue. Hospitals may pass along inaccurate information to the SNF which the SNF then uses to accept the patient and bill Medicare. If the SNF was unaware the information was incorrect and billed the claim thinking their information was correct, this raises the issue of liability. If the SNF did not know, should they be liable for the cost? If they are not liable, does liability then fall to the patient? The OIG was often unable to determine “whether SNFs were at fault for the improper payments. The “at fault” consideration affects the determination of whether the SNF or beneficiary is financially liable for the overpayment.” This brings up the issue of patient knowledge – patients are often not really aware of their status despite CMS forms such as the Medicare Outpatient Observation Notice (MOON) and the Important Message from Medicare. SNFs are allowed, but not required, to give the patient a SNF Advance Beneficiary Notice (SNFABN) if Medicare is expected to deny payment for the SNF stay when the 3-day rule is not met.

 “The limitation on liability provision,” provides financial relief to beneficiaries and providers by permitting Medicare payment to be made if the provider or beneficiary was without fault with respect to the overpayment. Medicare may waive recovery “if it would cause financial hardship or would not be equitable and in good conscience.” If this happens, Medicare absorbs the financial cost of the error.

The OIG recommends CMS:

• “Require hospitals to provide a written notification to beneficiaries whose discharge plans include posthospital SNF care, clearly stating how many inpatient days of care the hospital provided and whether the 3-day rule for Medicare coverage of SNF stays has been met. If necessary, CMS should seek statutory authority to do so.
• Require SNFs to obtain from the hospital or beneficiary, at the time of admission, a copy of the hospital’s written notification to the beneficiary and retain it in the beneficiary’s medical record. (See our second recommendation.) If necessary, CMS should seek statutory authority to do so.
• Require SNFs to provide written notice to beneficiaries if Medicare is expected to deny payment for the SNF stay when the 3-day rule is not met. If necessary, CMS should seek statutory authority to do so.”

Interestingly, CMS opposes these recommendations, stating the current notifications (MOON and Important Message) are sufficient notification to the beneficiary. CMS also said that it did not believe it would be appropriate to include a requirement referencing Medicare coverage criteria for SNF care as part of the hospital discharge planning requirements and that it encourages SNFs to provide SNFABNs to beneficiaries when the 3-day rule is not met.

As noted above, CMS did enable the CWF edits and agreed to recommendations to educate hospitals and SNFs about their responsibilities to communicate accurate information to each other and to the Medicare beneficiary.

Remember the estimated overpayment for the 3-year time frame of this audit was over $84 million. Prior OIG reviews estimated CMS paid $169 million for SNF services in calendar years (CYs) 1996 through 2001 (6-year period) when the 3-day rule was not met. Both of these estimates average to over $28 million a year, so essentially there was no improvement in overpayments from prior years reviewed by the OIG. It will be interesting to see if simply claim processing edits and education can make a difference in years to come.