November 2008

Clock on Medicare's Three-Day Hospitalization Requirement for SNF Coverage Starts at Inpatient Admittance

The Second Circuit Court of Appeals rules that until a patient is formally admitted to a hospital as an inpatient, the clock does not begin to run on Medicare's three-day hospital stay requirement to qualify for skilled nursing facilitycoverage. Estate of Landers v. Leavitt (2nd Cir., No. 06-4921-cv, Oct. 1, 2008).

Marion Landers, along with several other Medicare recipients, brought a class action suit against the Centers for Medicare and Medicaid Services (CMS), alleging that the agency violated her civil rights by denying Medicare coverage for post-hospitalization skilled nursing facility (SNF) care. Specifically, CMS denied coverage because, under its own reading of federal law, it determined that Ms. Landers had not been admitted for inpatient hospital care for three full days before being transferred to the nursing home, a statutory prerequisite for Medicare coverage of nursing home care (colloquially known as the "three-midnights rule"). While Ms. Landers had received care in the hospital for three days, she had spent at least one midnight in the emergency room (ER) without being formally admitted. Ms. Landers claimed that CMS's policy of counting only days spent in the hospital after formal admittance when calculating the three-day requirement violated federal Medicare law and the equal protection clause of the Constitution. Both parties filed for summary judgment, and the district court found in favor of CMS. Ms. Landers appealed.

On appeal, Ms Landers claimed that the definition of an "inpatient" includes all people receiving care from a hospital, not just those formally admitted. Therefore, Ms. Landers argued that the three-day clock should have started running once she began receiving care in the ER, not when she was formally admitted. CMS claimed that the statutory definition of "inpatient" was vague, and therefore its use of the three-midnights rule was entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). In the alternative, CMS argued that its interpretation of the statute was persuasive on its face as outlined in Skidmore v. Swift & Co., 323 U.S. 134 (1944) because the agency had consistently used the rule for years while allowing periodic public comment on the policy.

The Second Circuit Court of Appeals finds in favor of CMS. The court rules that the agency's use of the three-midnights rule is not entitled to Chevron deference because the rule is only part of the CMS manual and does not count as a legislative rule. However, the court finds that because CMS adopted its interpretation of the rule more than 40 years ago and has consistently utilized the interpretation, its interpretation "is entitled to a great deal of persuasive weight." The court says that in "determining whether a Medicare beneficiary has met the statutory three-day hospital stay requirement needed to qualify for post-hospitalization SNF benefits under Part A, the time that the patient spends in the emergency room or on observation status before being formally admitted to the hospital does not count."

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