While the Recovery Audit Contractors (RACs) currently only are authorized to investigate a limited number of issues with regard to skilled nursing facilities (SNFs), recent audits by other Medicare contractors tasked with identifying overpayments may shed light on some potential future issues for RACs.

At the time of this writing, the only RAC-approved issues for SNF claims include consolidated billing in Region D, clinical social worker (CSW) services in Region A and ambulance service from one SNF to another in Regions C and D. The consolidated billing issue in Region D requires that the majority of SNF services provided to a beneficiary under a covered Part A SNF stay are included in a bundled prospective payment and are not billed separately.

In Region A, the RACs are reviewing SNF claims to ensure that CSW providers rendering care during a SNF stay are paid under arrangement with the facility and not billed separately under Medicare Part B.  RACs for Regions B, C and D have approved a similar issue related to CSW services, but so far the issue description refers only to services rendered in inpatient hospital stays.   Claims for SNF-to-SNF ambulance transfers, which are under review in RAC Regions C and D, are not payable separately under Medicare Part B. Rather, the SNF discharging the beneficiary is responsible for the cost of the transfer.

While the above issues are the only SNF issues the RACs presently can review, other Medicare contractors continue to audit SNFs on a variety of other matters. Ongoing audit activities by Medicare Administrative Contractors (MACs) and Program Safeguard Contractors/Zone Program Integrity Contractors (PSCs/ZPICs) highlight several areas that likely will receive increased scrutiny in the future: level-of-care issues, documentation and the three-day qualifying hospital stay requirement.

Need to Document Skilled Services

Recent audits of this nature have focused on the issue of whether SNFs are billing Medicare for the appropriate level of care based on the beneficiary’s medical condition and services to be rendered. Providers must be sure that they are documenting the beneficiary’s need for skilled services appropriately – whether it be skilled nursing, physical therapy, occupational therapy or speech/language therapy – and billing for the various disciplines only when the beneficiary’s condition warrants such services.

SNFs also should focus on keeping accurate and complete records in order to justify the resource utilization group (RUG) score billed. Medicare contractors are probing SNF minimum data set (MDS) documentation, as well as the corresponding medical records for the applicable lookback periods, to determine if the provider billed the correct RUG score. It likely is only a matter of time before RACs also mark this as an area of interest.

Three-Day Qualifying Stay

Contractors also are devoting significant time and resources to reviewing whether a beneficiary has met the mandatory three-day qualifying stay at a hospital, and whether he or she was transferred to an SNF within 30 days of discharge from the hospital. While ensuring that the documentation shows that the beneficiary met the three-day stay and 30-day transfer requirements is relatively straightforward, it may be more difficult to demonstrate that a beneficiary had a “qualifying” stay in a hospital.

To be “qualifying,” the treatment a beneficiary receives in a SNF must be for a condition for which the beneficiary was receiving inpatient hospital services, or one that arose while the beneficiary was in the SNF for treatment. Providers should be prepared to defend audit denials on this issue. Medicare contractors have been focusing attention on this, and they will deny a claim if the provider cannot show that SNF treatment was for a condition related to a hospital stay. It is also important to note that while Medicare guidance requires that skilled services be provided for a condition for which a beneficiary receives inpatient hospital care that condition does not have to be the primary diagnosis upon hospital admission.

Compliance efforts should be directed toward documenting in a manner that clearly links skilled services provided to a condition for which a beneficiary received inpatient services, or which arose during a hospitalization or associated SNF stay.

Psychiatric admissions raise special concerns with regard to the qualifying three-day stay issue. Medicare guidance states that a beneficiary with only a psychiatric condition is not eligible for Medicare coverage after being transferred from a psychiatric hospital. However, the relevant Medicare manual provision does not address specifically whether a beneficiary with a psychiatric condition can qualify for SNF services after being transferred from a non-psychiatric hospital.

SNF providers are well-advised to implement compliance measures addressing these issues not only to reduce the risk of audit by the MACs, PSCs and ZPICs, but also to reduce risk should the RACs gain approval for these issues in the future.


About the Authors

Amy K. Fehnis a partner at Wachler & Associates, P.C.  Ms. Fehn is a former registered nurse who has been counseling healthcare providers for the past eleven years on regulatory and compliance matters and frequently defends providers in RAC and other Medicare audits.

Jennifer Colagiovanni is an attorney at Wachler & Associates, P.C.  Ms. Colagiovanni graduated with Distinction from the University of Michigan and Cum Laude from Wayne State University Law School.  Upon graduation, Ms. Colagiovanni was nominated to the Order of the Coif. Ms. Colagiovanni devotes a substantial portion of her practice to defending Medicare and other third party payer audits on behalf of providers and suppliers.  She is a member of the State Bar of Michigan Health Care Law Section.

Christopher J. Laney is an attorney at Wachler & Associates, P.C. He graduated Cum Laude from Wayne State University Law School in 2010 where Mr. Laney served as an Associate Editor of The Wayne Law Review. Mr. Laney counsels clients in areas of healthcare law.

Contact the Authors

To read article entitled, “Don’t Let LOS Denials Turn Into LOSSES from RACs,” please click here

Share This Article