Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Reimbursement News

Skilled Nursing Facility 3-Day Rule Behind $84M in Improper Pay

CMS is paying millions in Medicare improper payments because the skilled nursing facility (SNF) 3-day rule lacks a coordinated notification mechanism, OIG finds.

Skilled nursing facility (SNF) 3-day rule

Source: Thinkstock

By Jacqueline LaPointe

- The Office of the Inspector General (OIG) estimates CMS improperly paid $84 million for post-acute care services that did not meet the skilled nursing facility (SNF) 3-day rule in a recent two-year period.

In a new report, the federal watchdog analyzed a random sample of SNF claims from more than 22,000 skilled nursing claims totaling $134.9 million from 2013 to 2015. Of the 99 random SNF claims, OIG determined that 65 claims contained services that did not have a preceding hospital stay of at least three consecutive days.

The sample of claims that violated the Medicare payment rule totaled $481,034. But OIG believes CMS paid out significantly more to skilled nursing providers who delivered services that did not meet the SNF 3-day rule during the period.

“We attribute the improper payments to the absence of a coordinated notification mechanism among the hospitals, beneficiaries, and SNFs to ensure compliance with the 3-day rule,” the watchdog wrote in the report. “We noted that hospitals did not always provide correct inpatient stay information to SNFs, and SNFs knowingly or unknowingly reported erroneous hospital stay information on their Medicare claims to meet the 3-day rule.”

OIG conducted the recent probe into SNF reimbursement after a prior agency review revealed that CMS improperly paid $169 million for SNF services from 1996 to 2001. The improper payments during that period also stemmed from SNF 3-day rule violations.

READ MORE: Post-Acute, At-Home Care Saves Next Gen ACO Atrius Health $19.9M

However, the follow-up investigation showed that hospitals and skilled nursing providers still struggle to comply with the Medicare payment requirement.

The long-standing SNF 3-day rule states that beneficiaries are only eligible for skilling nurse care or rehabilitative services in a SNF when they have been admitted to the hospital on an inpatient basis no fewer than three consecutive days, not counting the date of discharge.

The rule means hospital patients who are in observation status or receive care in the emergency department are ineligible for SNF care unless they enter inpatient status for three days. Otherwise, CMS will not reimburse skilled nursing providers for those services.

For that reason, many stakeholders have taken issue with the rule. A coalition of provider organizations led by the American Health Care Association called for reforms to the rule in 2017, arguing the requirement was outdated and decreased patient access to care.

AMGA also contends the SNF 3-day rule “hinders timely and appropriate care, impedes care coordination, heightens the risk of iatrogenic harm from extended hospital stays, and is a burden on beneficiaries and their family caregivers.”

READ MORE: Finding a Revenue Cycle Management System for Post-Acute Care

The rule has been a problem for value-based care models, as well. As result, many Medicare demonstrations offer 3-day rule waivers to participating providers.

Adding to the debate surrounding the requirement is the OIG’s latest finding that a coordinated effort to verify that a three-day inpatient stay for a medically necessary condition occurred was lacking during the period, and the watchdog is unsure which type of provider is to blame.

The report showed that SNFs entered incorrect inpatient hospital stay information on 65 of the SNF claims analyzed. The post-acute care provider sometimes used a combination of inpatient and non-inpatient hospital days to verify that the SNF 3-day rule was met.

“[W]e could not always determine whether the SNFs did so knowingly or unknowingly,” the report stated. “Therefore, we could not ascertain that the SNFs were at fault. For 18 of the 65 noncompliant SNF claims, we noted that the hospitals provided incomplete, misleading, or erroneous discharge information to the SNFs, thereby affecting the SNFs’ ability to determine whether their services met the 3-day rule.”

OIG explained that a lack of coordinated notification mechanism among hospitals, beneficiaries, and SNFs is to blame. The SNF 3-day rule does not require hospitals to provide beneficiaries and SNFs with written notifications that explicitly list dates of the inpatient stay.

READ MORE: Importance of Post-Acute Alignment, Integration to Value-Based Care

The rule also does not specify the information SNFs need to verify their Medicare claims for services and it does not require SNFs to give written notice to beneficiaries if the providers expect Medicare to deny payment for the services.

“Without a coordinated notification mechanism, CMS does not have sufficient documentary evidence to hold SNFs accountable for submitting erroneous claims that result in improper payments and to determine whether SNFs were at fault for the improper payments,” OIG wrote.

SNFs will not be responsible for repaying CMS for the improper payments. But OIG expects the federal agency to start requiring hospitals to provide written notifications to SNFs that include dates of the inpatient stay and whether the hospital stay qualifies for reimbursable SNF care. SNFs should also have to keep the written notification as a condition of payment.

Additionally, the watchdog recommended that CMS turn on the qualifying inpatient hospital stay for SNF claims so Medicare contractors can flag potential improper payments when processing claims.


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