The federal watchdog did not, however, decide to demand recoupments.

It is said that great minds think alike. And that proved to be true when the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) released its report (CMS improperly paid millions of dollars for skilled nursing facility (SNF) services when the Medicare three-day inpatient hospital stay requirement was not met) a day prior to the release of my article, “The Three-Day SNF Rule: A Legislative and Regulatory Analysis”.

In this audit, the OIG performed a review of a sample of Part A SNF claims submitted by SNFs between January 2013 to December 2015, for cases in which there was no corresponding inpatient hospital admission of three or more consecutive days. Of the 99 claims that underwent review, 65 were found to be improperly paid. Based on the universe of claims in that time period, the OIG estimated that the Centers for Medicare & Medicaid Services (CMS) improperly paid over $84 million over that span.

Although that amount may seem staggering, during that same time period, CMS paid over $86 billion for Medicare beneficiaries to receive SNF services, with the improper payments representing less than 0.1 percent of total expenditures. Nonetheless, any improper payment warrants scrutiny, so this audit was certainly warranted.

Most OIG audits end with a recommendation that CMS recoup the overpayments, but that was not the case here. As they describe, the regulations on limitation on liability, as specified in the Medicare Claims Processing Manual, Chapter 30, limit recovery when the provider or beneficiary is found to be without fault. In this case, the OIG could not determine if the SNFs were without fault, so they chose to waive liability and allow the SNFs to keep the payments.

The other option available to them would be to advise the recoupment of the funds from the SNFs. But in that case, it would subject the beneficiaries to financial liability for the costs, because if the stay was not covered by Part A, then the beneficiary would be responsible. In many instances a beneficiary must be given written notice of potential liability, such as when a patient receiving Part A SNF care no longer has skilled needs, but wishes to remain in the SNF. In that case, the SNF would present the Skilled Nursing Facility Advance Beneficiary Notice of Non-coverage (SNFABN), but an SNFABN is not required prior to a SNF stay that does not have a qualifying three-day inpatient stay, since that is a statutory exclusion, which do not require written notice of non-coverage.

In its report, the OIG concluded that it “attributes the improper payments to the absence of a coordinated notification mechanism among the hospitals, beneficiaries, and SNFs to ensure compliance with the three-day rule.” They go on to state that many of these errors could be attributed to hospitals that do not provide proper admission dates, SNFs that do not properly count the number of inpatient days, and SNFs that inappropriately bypass the common working file edit that stops submission of such claims. As I discussed in my article, the date of inpatient admission can certainly be an area of confusion for both hospital staff and the SNF.

But the controversy began when the OIG went on to point out the deficiencies in the system. The OIG seemed a bit bothered by the fact that this was its 28th report on Part A payments made for SNF stays without a qualifying inpatient stay, and yet the problem persists. Specifically, the OIG points out that Medicare regulations do not require hospitals to provide beneficiaries and SNFs with any written notification explicitly listing the dates of the inpatient hospital stay, to specify the information SNFs must use and retain to verify that their Medicare claims are for services that meet the three-day rule, or to provide written notice to beneficiaries if Medicare is expected to deny payment for the SNF stay when the three-day rule is not met. They go on to recommend that CMS develop a mandatory form for hospitals to notify both the beneficiary and the SNF of the number of inpatient days and whether the requirements for Part A SNF coverage are met – and that SNFs be required to notify beneficiaries if they expect the SNF claim to be denied because of lack of a qualifying three-day stay.

In its response, CMS disagreed with the OIG recommendations, noting that hospitals are already required to provide the Medicare Outpatient Observation Notice (MOON) to beneficiaries who spend over 24 hours as an outpatient with observation services. They also note that they “encourage” SNFs to use the SNFABN to notify beneficiaries of potential liability “as a courtesy.” While the MOON does notify beneficiaries in general that the days spent as outpatient with observation services do not count toward the SNF benefit, there are patients who spend a night in the hospital and subsequently get admitted as inpatients without receiving a MOON, such as patients who start their care in the emergency department late in the evening and are not admitted until the next calendar day, and patients who undergo outpatient surgery and spend a night in routine outpatient recovery and are admitted the next day due to a complication or delayed recovery.   

The official actions that will be taken in response to this audit and CMS’s comments are unknown, but that should not keep hospitals and SNFs from acting now. First, as I described in my article, the hospital staff should ensure that everyone is on the same page as far as the admission date goes. In the Medicare Claims Processing Manual, Chapter 3, Section 40.2.2.K, CMS states that “a patient of an acute-care hospital is considered an inpatient upon issuance of written doctor’s orders to that effect.” There is no reason to use anything other than the date of the admission order as the date of the admission on the claim, unless, of course, the order is written in advance of a scheduled admission. When a patient is going to transfer to a SNF, a paper copy of that (hopefully authenticated) admission order should be given to the SNF for their records. If that is done, the SNF cannot then come back several months or years later and claim they were given an incorrect admission date, expecting the hospital to pay for the stay rather than billing the beneficiary.  

If a patient does not have a qualifying three-day stay, SNFs would be wise to follow CMS’s encouragement and provide the SNFABN. The small bit of extra work is certainly better than the fallout from a patient getting an unexpected bill and complaining to CMS, their friends and neighbors, and the media.

Perhaps, if we all work to get this right, CMS will not be forced to mandate another form and more paperwork for everyone.

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