Opportunities to Bypass Existing Three-Day Inpatient Stay Requirement

  • Regulations
  • 3/30/2023
Modern Hospital Building

Key insights

  • Medicare requires a three-day inpatient hospital stay before qualifying for skilled nursing care.
  • During the public health emergency (PHE), the Centers for Medicare and Medicaid Services (CMS) waived this requirement.
  • The PHE waiver flexibility ends May 11, but there are still ongoing opportunities for health care providers like hospitals and nursing homes to consider.

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Flexibilities and waivers to end along with PHE

Three years into the COVID-19 pandemic and we finally have an official end date for the public health emergency (PHE) — May 11, 2023. We know this doesn’t mean COVID goes away, but it does mean it is no longer considered an "emergency" situation. With the PHE ending, so, too, will many flexibilities and waivers. One of those is waiving the qualifying three-day inpatient hospital stay before a discharge to a skilled nursing facility (SNF).

The required three-day stay started when Medicare began some 50 years ago. The three-day rule requires that to qualify for extended SNF care, a patient in traditional Medicare must have a medically necessary three-day, consecutive inpatient hospital stay. The three-day-consecutive stay count does not include the day of discharge, or any pre-admission time spent in the emergency room or outpatient observation. Come May 11, the three-day stay requirement will be reinstated.

Public Health Emergency Waiver

Three-Day Prior Hospitalization — Using the statutory flexibility under Section 1812(f) of the Social Security Act, CMS temporarily waived the requirement for a three-day prior hospitalization for coverage of a SNF stay. This waiver provides temporary emergency coverage of SNF services without a qualifying hospital stay. In addition, for certain beneficiaries who exhausted their SNF benefits, it authorizes a one-time renewed SNF coverage without first having to start and complete a 60-day “wellness period” (that is, the 60-day period of non-inpatient status that is normally required to end the current benefit period and renew SNF benefits). This waiver will terminate at the end of the COVID-19 PHE.

[See COVID-19 Flexibilities]

Ongoing opportunities waive the three-day stay

While the broad flexibility goes away May 11, there are opportunities to consider for the future. Those include participation in certain value-based payment models, Medicare Advantage (MA), and Special Needs Plans.

What is the commonality among these options? Risk.

What Is Risk?

When looking at payments outside of Fee-for-Services (FFS), alternative payment models can be generally categorized on risk. Risk can be one or two-sided:

  • One-sided or upside risk means you share in the savings but aren’t held financially accountable for excess cost.
  • Two-sided or downside risk means you share in the savings but also are held financially accountable when costs run too high.

In general, CMS provides more latitude for those participating in two-sided risk payment models. Two-sided risk boils down to financially benefiting from doing well in a model (high-quality, cost-efficient care) while also being held financially accountable for poorer results.

If we consider the largest accountable care organization (ACO) to date — the Medicare Shared Savings Program (MSSP) — it currently has six risk tracks, Basic Levels A – E and the Enhanced. Only Basic Levels C – D and the Enhanced are two-sided risk and, therefore, qualify for the waiver flexibility. Under the REACH ACO, since some form of capitation payments are required under all REACH ACO models, they are all considered two-sided risk and allowed waiver flexibilities.

Other models from the Center for Medicare and Medicaid Innovation (CMMI) include the Comprehensive Care for Joint Replacement model (CJR) and the Bundled Payments for Care Improvement – Advanced (BPCI-A). They are both two-sided risk. Finally, MA plans are paid per member, per month capitation rates. They are allowed by law to waive the three-day stay requirement, and many do.

A look at ACOs and waiver flexibility

Over the years, there have been some concerns raised with eliminating the three-day stay requirement: potential for increased cost, increased SNF length of stay, and lower quality outcomes. Due to the use of the waiver over the past decade, there is growing experience, comfort, and research.

Recently the CMMI — CMS’s innovation hub — released a study on three-day stay waiver use in several ACO models. The study reviewed outcomes for the years 2014 and 2019. While use of the waiver was low in the early years, it had begun to tick up in 2017. Even so, the results from those early years are positive:

  • Use of the waiver did not increase Medicare costs
  • Beneficiaries had lower or similar adverse outcomes rates when compared to those not under waiver
  • Beneficiaries under the waiver had shorter SNF length of stays, but SNF discharges to home health or to the home also increased
  • Direct waiver admissions (from the community) were most common compared to those from shorter hospital stays (1 – 2 days)
  • Two-thirds (65%) of waiver stays were due to one of five conditions: injuries including falls (22.2%), musculoskeletal conditions (13.4%), circulatory conditions (12.7%), other symptoms (10%), and nervous system conditions (7.6%)

An ACO must elect to use the three-day stay, and statistics show more are selecting this option. In 2022, 155 MSSP ACOs selected this option and had executed agreements with 2,270 “SNF affiliates.” In 2023, 80% of REACH ACOs elected to use this waiver flexibility with SNFs.

It stands to reason that ACOs (or anyone taking on two-sided risk) are looking to partner with higher performing providers since high quality and cost-efficient care is the goal.

That’s why it’s important to understand two things:

  1. Underlying requirements for waivers. For the three-day stay waiver, for example, SNFs must have at least a three star or better rating on Nursing Home Compare and then maintain that rating. Hospitals with swing beds, on the other hand, do not because star ratings don’t apply to them. Certain patient eligibility requirements apply as well.
  2. Your value proposition. To show your value proposition and position your organization for success, it’s vital to understand your own data, quality measures, clinical capabilities, staffing and financial performance.

When you know your data, you can show your value.

To show your value proposition and position your organization for success, it’s vital to understand your own data, quality metrics, clinical capabilities, staffing and financial performance. When you know your data, you can show your value.

How we can help

As the PHE winds down, it will be important for hospitals, physicians, and senior living providers to assess use of all CMS waiver flexibilities and have a plan for transitioning back to normal operations. This includes use of the three-day stay waiver.

While there is growing consensus the three-day stay requirement is antiquated and does not reflect hospital care in today’s environment, Congress will need to pass legislation to remove it. In the meantime, hospitals, SNFs, and other providers can assess existing opportunities that afford them this waiver flexibility today.

If you have questions on improving your star ratings, understanding your key financial metrics, making sense of disparate data sets, participating in value-based models, or more — CLA can help.

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