OIG: CMS improperly paid $84M to nursing facilities that failed to follow its 3-day rule

HHS ordered a review of CMS payments made for skilled nursing facility services. (Sarah Stierch/CC BY 4.0)

The Centers for Medicare & Medicaid Services (CMS) paid millions of dollars for skilled nursing facility services that did not meet proper guidelines, according to a new report.

The Department of Health and Human Services Office of Inspector General (OIG) estimated in a brief that CMS paid $84 million for SNF services not meeting its three-day rule between 2013 and 2015. Medicare will only pay for nursing stays if a patient was admitted to a hospital for at least three days prior to referral.

OIG sampled 99 SNF claims from that time period and found 65 did not meet the three-day requirement—yet CMS paid out $481,035 for nursing care to those facilities. OIG attributes the improper payments to a lack of coordination among the hospitals, beneficiaries and SNFs. 


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As a next step, the OIG recommends that CMS should be more careful at monitoring compliance with the rule as SNF claims are processed. In addition, hospitals should provide Medicare beneficiaries a written notification of the number of inpatient days, so they're aware if they'll be required to cover a significant portion of the nursing care themselves.

These changes would require CMS to educate both hospitals and SNFs about document verification as relative to supporting Medicare claims, OIG said. 

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“After reviewing CMS’s comments, we maintain that our findings and recommendations are valid. Without a coordinated notification mechanism, CMS will continue to make improper payments when the 3-day rule is not met,” OIG said.

OIG said that CMS agreed to better educate hospitals and nursing facilities on compliance, but that it did not sign on to better coordinate a more effective tool to notify beneficiaries, hospitals and SNFs about compliance.

Providers have criticized the three-day rule, saying it inflates length of stay. A 2015 study supported this argument, finding that the three-day rule may not be necessary in determining SNF stays and may be costing Medicare plans more money. 

CMS issued guidance earlier this year that would ease the three-day admission restriction for accountable care organizations, which would have to seek an exemption waiver. The agency wants to push providers into its higher risk-bearing tracks in the Medicare Shared Savings Program, so the change would be a boon for providers running ACOs. Approved waivers would go into effect on July 1.

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