The Denial Problem

Elderpride: Chapter 4


To quote myself in a previous post, “avoiding denials is a topic all by itself because it adds another layer of complexity; this will be our topic for the next post. We will discuss the definition of a denial, the appeal process for a denial, the avoidance of a denial and what a denial means to the patient and the facility.”

Today we are discussing the denial of a Medicare claim by CMS Fiscal Intermediaries. For comparison sake, Medicaid also denies claims that do not meet their criteria for payment.

Just to recap the relevance of this topic for a moment – a systemic problem has been created by the claim review process which causes some claims to be “denied” because it isn’t clear that the care was medically necessary or required a licensed professional to deliver it. When a claim is “denied” that means it is not paid. The facility who delivered the care in good faith is punished by not receiving any payment until the matter is resolved. The facility still has to meet their expenses for the staff, supplies and other things that were used to care for the patient in their facility and they have to meet those expenses with no revenue. Obviously, this cannot go on for very long.

According to Jerry Rhoads, CPA, and CEO of Caregiver Management Systems, a consultant to the Long Term Care Industry, when SNFs work to return a patient to their highest level of functioning it takes on average 55 days to do so. A patient is entitled to 100 days of skilled care for every episode of illness as defined by a physician order and a three day hospital stay. However, the FI begins to scrutinize claims after 21 days (a rule of thumb) and if the facility is in the mode of “avoiding denials”, it is common practice to discharge the patient from Medicare at that point. Therefore, on average the patients are only getting 22 days of skilled care leaving a 33 day variance. For many patients, these 33 days mean the difference between spending the rest of their days in the nursing home on Medicaid instead of returning to their home or other community based program such as Home Health Care.

The “denial” equation includes several components. Another is that Fiscal Intermediaries look for “reasons to deny” a claim based on “rules of thumb”; in a 1987 landmark case Fox v Bowen, the judge ruled that both of these practices were a violation of the Medicare Law. Yet the practice is still prevalent today. According to the judge who ruled on Fox v Bowen, the fiscal intermediary is to look for reasons to pay. The implication is that the FI is only to issue a “denial” when they cannot find a reason to pay. This split of hairs (theirs, not mine, as I am only explaining it) makes the difference between a few denials and many denials.

When a claim is denied, the SNF can appeal the denial on behalf of the patient. In order to appeal the denial, the SNF will have to write a letter stating why they are appealing the denial and offer new information proving that the skilled care was medically necessary. If the fiscal intermediary denies the claim again, the SNF can request a hearing. All the work involved in the appeal process is overwhelming for a SNF and there is no guarantee that the denial will be overturned. It is easier for the SNF to encourage the patient to be discharged from Medicare on the 22nd day and state that the patient can’t meet their goals, or set the goals lower than the patient is capable of achieving than to take a chance on the system working properly

When the FI is looking for “reasons to deny” by using “rules of thumb” here is an example of what happens. Let’s say a patient who is in a SNF is progressing reasonably well however on the 21st day has not achieved his or her highest level of functioning. Since the facility knows the fiscal intermediary will begin scrutinizing claims on the 22nd day because that is the “rule of thumb”, they often discharge the patient from Medicare to avoid the scrutiny and accept that Medicare will “only” pay for the first 21 days of skilled care. By avoiding the scrutiny, the SNF will receive their payment promptly and not have to go through the burdensome appeal process.

This discharge from Medicare is most frequently initiated by the therapists. Most SNF facilities consider therapists the experts in determining which patients qualify for Medicare benefits. This is backwards, it should be the registered nurse who qualifies the patient for skilled care, initiates a comprehensive care plan that includes therapies and then supervises the accomplishment of the care plan. It is my experience that nurses do not understand the Medicare definition of “skilled care” leading to the therapists driving the process by default. This is yet another element of the problem and adds a subtle layer of complexity to an already complex process.

The truth of the matter is that the patient is entitled to their full Medicare benefits which means Medicare is obligated to pay for the beneficiary’s care until they reach the highest level of functioning of which they are capable.

When SNF facilities habitually discharge patients from Medicare before they have achieved their highest level of functioning, the patient goes directly into paying for their care on their own (spend down) and ultimately to go on Medicaid (welfare) when their money is gone. Since Medicaid pays a nursing home a lot less money than Medicare, the patient’s skilled care is truncated; the patient who can't pay for their own skilled care is doomed. And even patients with resources are sometimes doomed in this way because they don’t understand the intricacies of Medicare and opt not to pay on their own for skilled care once they are discharged from Medicare on the 22nd day because they are told it is unlikely they will meet their goals. These things all happen frequently enough to be labeled “systemic”.

From the perspective of the patient, accepting or avoiding the denial deprives the patient of their entitled benefits that they and others worked all their lives to have available in the form of Medicare coverage. Since the additional 33 days of “skilled care” can be crucial to the patient’s ability to survive and thrive it is a significant problem that instead the patients are discharged from Medicare early.

From the perspective of the government, they falsely think they have saved money. Hold that thought. We will revisit it later in this series because, in actuality, the government could save billions by restoring patients.

Please feel free to post questions, I will do my best to answer them or refer you to the correct place for the information.