Proposed Medicare Settlement Clarifies CMS’s Position on “Skilled Maintenance Services”

Nov 05, 2012   
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On October 16, 2012, in the case of Jimmo v. Sebelius, Case No. 5:11-CV-17 (D. Vt. October 16, 2012), a class of Medicare beneficiaries and the United States Department of Health and Human Services agreed to a proposed settlement which clarifies the standards by which skilled nursing and therapy services for Medicare beneficiaries are to be covered and paid for by Medicare. Although the position of the government is that the settlement only clarifies existing Medicare policies and guidelines for payment by its contractors, the practical effect is that long term skilled maintenance care for beneficiaries with little to no restorative potential will now be covered. As a result, home health agencies and skilled nursing facilities will be able to care for beneficiaries suffering from chronic illnesses without fear of subsequent audits and overpayment findings based on lack of medical necessity. A copy of the proposed settlement agreement can be read here.

The Jimmo case centers on the so-called “Improvement Standard” which plaintiffs in the case, a class of Medicare beneficiaries with chronic illnesses, alleged affects coverage determinations for skilled nursing and therapy services. More specifically, according to the plaintiffs, under the Improvement Standard policy, coverage of skilled services was based on the presence or absence of a beneficiarys potential for improvement. Phrased differently, the plaintiffs alleged that Medicare coverage of skilled services was blanketly denied by Medicare contractors on the basis that a beneficiary was not improving, without an individualized assessment of the beneficiarys condition or the medical reasonableness and necessity of the treatment provided.

Plaintiffs further alleged that neither the Medicare Act nor its implementing regulations require that beneficiaries demonstrate restorative potential in order for skilled services to be covered. Rather, plaintiffs alleged that so long as the services provided have been ordered by a physician and are medically reasonable, coverage cannot be denied on the basis of restorative potential alone.

In reaching a proposed settlement, the Centers for Medicare & Medicaid Services (“CMS”), the agency with HHS that administers the Medicare Program, has agreed to revise the Medicare Benefit Policy Manual to clarify that coverage of skilled services should not be based on a beneficiarys potential for improvement. Instead, the manual will be revised to make clear that it is the beneficiarys need for skilled care.

As explained in the proposed settlement agreement:

The manual revisions will clarify that, under the [Skilled Nursing Facility], [Home Health Agency], and [Outpatient Therapy] maintenance coverage standards, skilled therapy services are covered when an individualized assessment of the patients clinical condition demonstrates that the specialized judgment, knowledge, and skills of a qualified therapist are necessary for the performance of a safe and effective maintenance program. Such a maintenance program to maintain the patients current condition or to prevent or slow further deterioration is covered so long as the beneficiary requires skilled care for the safe and effective performance of the program.

See Proposed Settlement Agreement at ¶ 6(a). The Proposed Settlement Agreement provides for a similar clarification for skilled nursing services. See Proposed Settlement Agreement at ¶ 7(a). Additionally, CMS has also agreed to certain accountability measures to ensure that the new guidance policy is followed by its fiscal intermediaries, the entities through which the Secretary performs the audit and payment functions of the Medicare program. For example, CMS has agreed to develop protocols for reviewing sample coverage decisions to determine overall trends and identify problems in the application of the maintenance coverage standards. See Proposed Settlement Agreement at ¶ 17.

Skilled nursing facilities and home health agencies which participate in the Medicare program as providers should take notice of CMSs clarified position. Under the Improvement Standard, beneficiaries with chronic debilitating conditions who rely on skilled services to maintain their current condition and prevent further deterioration are often left without providers because of the providers fear that payment for “maintenance” skilled services would be denied by Medicare contractors. With the impending policy change, so long as a beneficiary meets the requirements for home health or skilled nursing coverage, providers should be able to provide the skilled maintenance services needed by their patients.

Fuerst Ittleman David and Joseph will continue to monitor these developments. If you have questions pertaining to the Medicare Act or its implementing regulations and how to ensure that your business maintains regulatory compliance at both the state and federal levels, please contact us at