AHCA: CMS Already Has Authority to Simplify Three-Day Stay Rule for Nursing Home Coverage

The leading national trade group representing for-profit skilled nursing facilities this week called on the federal government to streamline its policy on Medicare eligibility for nursing home care, arguing that officials already have the legal authority to do so.

American Health Care Association president and CEO Mark Parkinson formally asked Centers for Medicare & Medicaid Services (CMS) administrator Seema Verma to eliminate uncertainty around the so-called three-day stay rule for Medicare nursing home coverage.

“AHCA/NCAL urges CMS to take action and eliminate a confusing policy barrier that each year needlessly prevents thousands of Medicare beneficiaries from accessing their benefit to high quality, post-acute care,” Parkinson wrote in a letter to Verma sent Monday and publicized Wednesday; the related National Center for Assisted Living (NCAL) represents senior living providers.


At issue is the legal requirement for Medicare beneficiaries to spend three days in the hospital on an inpatient basis in order to receive their subsequent 100 days of fully covered skilled nursing services. Hospitals have increasingly admitted seniors on an observation basis — a technical distinction that is generally indistinguishable to hospital patients but leads to extremely costly Medicare denials.

A long-brewing federal class action lawsuit over the inpatient-versus-observation question finally received its day in court earlier this month.. Should the plaintiffs prevail, the government could be forced to pay upwards of 1.3 million Medicare skilled nursing claims — dating back to January 2009 — that were denied because they were associated with observation stays.

Bipartisan groups of lawmakers have also repeatedly tried to change the rule by statute, with the most recent bill on the subject filed earlier this year.


“Whether a patient is in the hospital for three days as an inpatient, or for three days under ‘observation status’ — three days is three days, and quibbling over semantics should not keep Americans from accessing the care they’ve been prescribed by health care professionals, or force them to go into medical debt in order to cover the cost,” Rep. Joe Courtney, a Connecticut Democrat, said in a statement announcing the introduction of the legislation.

In addition, Medicare Advantage plans and other alternate payment models — such as accountable care organizations — can waive the three-day stay requirement entirely.

But Parkinson argued in his letter that CMS already has the power to end the question permanently, citing a 2008 appeals court decision that the secretary of Health and Human Services has sole control over the definition of “inpatient” care — and that no law or regulations formally defines the word.

“In its decision, the Court recognized that neither the statute nor regulations define the word ‘inpatient,’ and that the Secretary defined ‘inpatient’ in the Medicare Benefit Policy Manual as occurring after a formal physician order for admission,” Parkinson wrote. “Although the Court upheld the Secretary’s position in litigation, it acknowledged that the Secretary has the authority to change the interpretation of ‘inpatient’ to include time spent in observation as an outpatient.”

CMS also allows certain three-day stays in foreign hospitals to count toward SNF coverage, Parkinson noted, while also extending hospice coverage to patients who receive “general inpatient care … not equivalent to a hospital level of care under the Medicare hospice benefit.”

Parkinson additionally pointed out that Verma herself has publicly expressed a desire to change the rules around three-day stays on Twitter.

“#Medicare beneficiary who requires skilled care in a nursing home? Better be admitted for at least 3 days in the hospital first if you want the nursing home paid for,” Verma tweeted earlier this month, including a troubled-face emoji. “Govt doesn’t always make sense. We’re listening to feedback.”

As a result, Parkinson and AHCA argued, CMS should be able to remove the distinction between inpatient and observation stays immediately.

“Both the Court and CMS have recognized CMS’s authority to define ‘inpatient’ care for purposes of satisfying the SNF three-day rule,” he wrote. “CMS has exercised this authority in certain areas of the Medicare program and could do so here as well.”

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