CMS: Medicare Advantage Plans Can Use AI Tools To ‘Assist’ but Not Terminate Post-Acute Care Stays

The Centers for Medicare & Medicaid Services (CMS) is placing limits on the use of artificial intelligence (AI) tools in denials of claims related to Medicare Advantage plans, and adding more guidance to health care providers on post-acute care admissions.

The agency issued an FAQ Tuesday to address concerns related to coverage criteria and utilization management requirements in a final rule detailing policy and technical changes to the Medicare Advantage program, originally issued in April of last year. It appears that CMS sent the FAQ directly to MAOs and Medicare-Medicaid plans.

Guidance on AI and algorithm use by MA plans was highlighted in the CMS memo. It also addressed admission denials by these plans despite physician-ordered post-acute care and the patient meeting coverage criteria for admission. The FAQ added to prior authorization guidance too, stating that MA plans may still use prior authorization – with the exception of emergency, urgently needed and stabilization services, and out-of-network services covered by MA PPO plans.


Specifically, the agency said that MA plans can use an algorithm or software tool to “assist” in making coverage determinations, but it’s the responsibility of the MA organization (MAO) to ensure that such technology complies with all applicable rules for how coverage determinations are made, including reassessments of a patient’s condition likely involving the help of clinicians.

For example, making a determination of medical necessity needs to be based on the individual patient’s circumstances. Meaning, the MA plan can’t base its decision solely on an algorithm using a larger data set instead of the patient’s medical history, along with the physician’s recommendations and clinical notes.

“An algorithm or software tool can be used to assist providers or MA plans in predicting a potential length of stay, but that prediction alone cannot be used as the basis to terminate post-acute care services,” according to the CMS FAQ.


An advocacy group win

LeadingAge, in conjunction with other post-acute care provider organizations, in December asked CMS to provide further guidance on how the Calendar Year 2024 Medicare Advantage rules apply in post-acute care settings.

Nicole Fallon, vice president of integrated services and managed care for LeadingAge, said in an email to Skilled Nursing News, “[The FAQs] address many of the issues we raised with CMS, including those related to interrupted stays and aspects of prior authorization,” said Fallon. “Importantly, these FAQs are a tool for providers to use when questions about an MA plan’s practice and compliance with requirements arise.”

Fallon hopes the FAQs help providers understand and fully benefit from changes to MA, including updates to prior authorizations, coverage determinations and AI.

“CMS’s actions are a positive step on two fronts: first, ensuring these changes provide beneficiaries with equitable access to post-acute care services and second, reducing nursing homes’ and home health agencies’ administrative burden associated with repeated, unnecessary authorizations for services,” said Fallon. “We hope to see continued improvements as CMS enforces compliance with the MA rule.”

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) said in an email that the FAQ was greatly appreciated, adding “much-needed clarifications.”

How an interrupted stay must be handled, limits on prior authorizations, restrictions on denials of physician-ordered coverage of post-acute care following hospitalizations, and post-payment audits were among the many updates directly affecting skilled nursing providers, the association said.

“This is a welcome follow-up to the final rule, as well as CMS’ enforcement actions on these rules. We look forward to continuing to work with CMS on the 2025 rule,” AHCA/NCAL said.

A focus on individual assessment

For services to be terminated, the patient must no longer meet the level of care requirements needed. This can only be determined by re-assessing the individual patient’s condition prior to issuing the notice of termination of services.

CMS touched on admissions too, stating that MA plans cannot deny admission or downgrade a patient to an observation stay based on AI or an algorithm alone. Again, the individual’s circumstances must be considered.

AI or algorithms can’t shift internal coverage criteria over time either, the agency said; such criteria must be publicly posted, or publicly accessible. In other words, criteria must be available via a website and can’t be behind a paywall or require subscription for access, CMS said.

When it comes to the use of internal coverage criteria at all, CMS said MA plans may use their own criteria – as long as they are publicly accessible – if Medicare coverage criteria isn’t fully established through Medicare statutes, regulations, national coverage determinations, or local coverage determinations.

Clarification on denials

The FAQ also delved into admission denials by the MA plan, even after the physician has ordered post-acute care and the patient meets coverage criteria for admission.

CMS said MA plans cannot deny admission to a post-acute care setting, or redirect care to a different setting, if the patient’s attending physicians orders post-acute care in a specific type of facility, and the patient meets all applicable medicare coverage criteria for admission into that setting.

But, the agency added that MAOs could deny admission if Traditional Medicare coverage criteria can’t be met, or internal coverage criteria, when applicable, is unable to be met.

“MA plans are permitted to offer coverage of alternatives to Medicare covered post-acute care services in a particular setting and an enrollee is permitted to elect different treatment,” CMS added. “The requirement for MA plans to cover all basic benefits consistent with Traditional Medicare coverage criteria does not prohibit discussions with the enrollee of other treatment options that are covered by the MA plan.”

Still, the flexibility for MA plans to cover and deliver care in a cost-effective way doesn’t replace the obligation to cover all basic benefits consistent with Traditional Medicare criteria, agency officials noted.

In the event that coverage is denied or terminated, the SNF provider would need to enter an appeals process, according to the FAQ.

“Burden of proof” rests with the MAO, CMS stated, during the appeals process to demonstrate that termination of coverage is the correct decision based on medical necessity, or Medicare coverage policies.

“The MA organization must supply a specific and detailed explanation why services are either no longer reasonable and necessary or are no longer covered, including a description of the applicable coverage criteria and rules,” CMS said.

Post-claim audits and interrupted stay

CMS also touched on “interrupted stays.” Within the context of MA plans, an MAO can’t ask for another prior authorization again if the patient returns to the SNF no more than three consecutive calendar days after having been discharged.

The FAQ defined an interrupted stay as follows: “If a patient in a covered Part A SNF stay is discharged from the SNF but returns to the same SNF no more than three consecutive calendar days after having been discharged, then this would be considered a continuation of the same SNF stay.”

This policy is meant to avoid disruptions in care, CMS said, and not impact or change payment or rates set between the MAO and SNF provider.

If an MAO pre-authorized admission, they wouldn’t be able to later deny payment based on a determination that the level of care was not medically necessary, CMS noted, except for “good cause,” or if there is evidence of fraud.

“We have heard frequently that MA organizations utilize post-claim review audits and examinations that routinely result in the denial of payment for the inpatient care that was provided to the enrollee,” CMS officials said in the FAQ. “Further, we have heard that MA organizations characterize these reviews as ‘payment’ reviews and that these reviews are ‘not organization determinations’ or ‘level of care or medical necessity reviews.’”

CMS disagreed with these characterizations of denials made by MAOs. The agency reiterated that if an MAO expects to issue a partial or full denial of services for medically necessary claims, that decision needs to be reviewed by a physician or other appropriate health care professional with expertise tied to the type of service.

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