Health care providers are always at risk of a payor audit, and contracted auditors seem to be more aggressive now than ever. While MIC, MAC, and ZPIC audits as well as pre-payment reviews of late have become more efficient with the use of rules of thumb to flag specific codes commonly misapplied, the U.S. District Court of Vermont’s ruling in Jimmo v. Sebelius puts the brakes on such fishing expeditions.   In holding that, in the case of skilled nursing services, there is no “improvement standard” and claims should be reviewed on a case by case basis, the court has limited CMS in its ability to apply arbitrary standards in denying reimbursement for covered services.

In early 2011, the Center for Medicare Advocacy filed suit on behalf of a class of Medicare beneficiaries. The lead plaintiff, Glenda Jimmo, was denied coverage for services provided by nurses and home health aides provided to her after losing her leg to diabetes complications. The denial was made because her condition was “unlikely to improve.” Six organizations joined Jimmo in the suit, including the Alzheimer’s Association, National MS Society, National Committee to Preserve Social Security and Medicare, Paralyzed Veterans of America, Parkinson’s Action Network, and United Cerebral Palsy.

CMS, claims processors and auditor, in particular, have historically applied a “rule of thumb” in deciding that nursing care and therapy services are not covered for beneficiaries whose condition is not “improving” (e.g., stable, chronic, plateaued). The improvement standard became the de facto policy, even though it does not appear within the Medicare rules and is at odds with Medicare’s general purpose of providing comprehensive, quality care. The improvement standard long resulted in denials of submitted claims or discontinued coverage, especially for those living with long-term, debilitating conditions. Further, documentation of improvement (or lack thereof) became a target for auditors in reviewing patient charts to ultimately determine if an overpayment had been made for a non-covered service.

As a result of the Jimmo settlement agreement, there will “no longer be any denials based on the improvement standard.” Rather, the standard has rightly shifted to whether a patient has demonstrated a need for skilled care, regardless of the recovery prognosis. Under the new “maintenance standard,” Medicare provides coverage when skilled care is needed to provide services that are reasonable and necessary to maintain the patient’s current condition or to prevent or slow further deterioration. Coverage cannot be denied based on a lack of potential for improvement or restoration.

The Jimmo settlement requires that CMS (1) revise Medicare policy manuals, guidelines, and instructions for skilled nursing facilities, home health care, and outpatient therapies; (2) clarify that skilled maintenance therapies and nursing are covered by Medicare; (3) eliminate conflicting CMS policies; and, (4) explain the settlement and new policies to providers, contractors, adjudicators, patients, and caregivers.

Providers should be relieved to learn that the improvement standard will no longer be a red flag for audits and that restoration potential is not the deciding factor. Medicare should not be denied at any care level because the beneficiary has a chronic condition or needs services to maintain his/her condition. Documentation to support the medical necessity and clinical appropriateness of a service remains paramount—individualized assessments are required and eligibility for coverage should be decided on a case by case basis because, contrary to past treatment by CMS and its auditors, there is no rule of thumb.