Hail the Return of the Three-Midnight Rule

The Three-Day Rule has returned and it’s causing confusion.

When Medicare was enacted in 1965, the “Three-Midnight Rule” came with it via Section 1861(i) of the Social Security Act and 42 CFR 409.30.  This stipulated that for Medicare to cover services provided in a skilled nursing facility (SNF), the patient required at least three, consecutive midnights of inpatient care in an acute hospital setting. 

However, this rule was waived during the Public Health Emergency (PHE) associated with the COVID-19 pandemic in early 2020.  As such, there are thousands of case and utilization managers across the country who are either out of practice with managing this Medicare requirement or have never in their careers had to address it.  That is, until May 11 when the PHE ends.

Via the flexibility under Section 1812(f) of the Social Security Act, one of the waivers associated with the PHE involved the Three-Midnight Rule.  This means statutorily, patients covered by Fee-For-Service (FFS) Medicare have had their SNF stays covered even after an acute hospitalization in Outpatient status with Observation services, an inpatient stay for less than three midnights, or even after being referred to a SNF from their home setting or that of a clinician’s office.  For those who started their careers in case or utilization management in 2020 or later, this has been the norm.  For those who were working long before that, this Three-Midnight Rule may be a vague memory.  As such, let’s review the basics here in preparation for the PHE ending on May 11^th.

While CMS refers to a “3-day rule,” the clearer way to conceptualize the rule is to identify the need for three midnights to pass while the patient is in inpatient status.  This removes the need to remember the discharge day doesn’t count and avoids confusion involving patients who spend the first half of a calendar day as Outpatient with Observation services and the second half converted to Inpatient.  As with the “Two-Midnight Rule,” patient status is agnostic to location.  A patient who crosses a midnight with an inpatient status order in place while being cared for in the Emergency Department or an operative recovery room before a bed opens up on a unit, is still considered Inpatient.

Along with SNF coverage, this rule also applies to Critical Access Hospitals (CAHs) and other hospitals which utilize “swing beds” – hospital unit beds which are specially identified as appropriate for use in an acute care setting or for post-hospital skilled nursing services.  In these instances, a patient can technically move from acute hospital care to SNF care within the same facility and perhaps even in the same hospital room.  But, without the passage of three midnights in Inpatient status while identified as an acute hospital patient, Medicare will not cover the stay involving SNF care.

Prior to the PHE waiver, there were other situations where the Three-Midnight Rule was not required to be followed, such as certain Shared Savings Program (SSP) participation options and CMS Innovation Center models such as the Next Generation ACO Model, the Comprehensive Care for Joint Replacement Model, and the Bundled Payments for Care Improvement Advanced Model. However, these programs and models are outside of the scope of this article.

The published reason CMS waived the Rule during the PHE was to provide temporary SNF services to patients experiencing dislocation related to COVID-19 or to those otherwise affected by COVID-19, such as patients whose caregiver was ill or had died.  However, it also aimed to alleviate hospital burden as their units filled with COVID-19 patients.  The idea was to allow a less hindered flow of patients out of hospitals and into SNFs by providing an assurance to the SNFs in regard to payment.  But, from the very start many found this not to be the case as SNFs were not obligated to accept these patients.  Report after report from case/utilization managers across the country emerged that many SNFs chose not to trust the waiver, and continued to insist on accepting only patients with the previously-required three, consecutive inpatient midnights.

What’s going to happen now that the waiver will cease to be?  Essentially, things go back to the way they were, much to the chagrin of those who hoped the pandemic would finally eliminate this rule which many feel is unfair to Medicare beneficiaries. 

You can be sure lobbying efforts will continue to work against the Three Midnight Rule but in the meantime, here’s what you need to understand starting May 11 when the PHE ends:

• Medicare will cover SNF costs for patients who have passed at least three midnights in an acute hospital setting in Inpatient status and the patient requires skilled services…
  • …for a medical condition which is either related to the hospital stay or was being treated in a SNF before the hospitalization
  • …which must be given by or under the supervision of skilled nursing or therapy staff
  • …which are needed daily
• If a patient does not immediately transfer to a SNF from the hospital at discharge, they have 30 days to utilize the benefit (e.g., SNF care would be covered if the patient realizes after discharge to home that they do require SNF care)

From a discussion standpoint, it’s important for case/utilization managers to grasp the intricacies of the Rule.  Not only should staff understand these points, but they should educate patients and families, accordingly.  Here are some tricky situations to consider:

1. A patient has passed two midnights in Inpatient status and medically no longer requires hospital care.
   • If there are no accepting SNFs (within the confines of a reasonable search) resulting in passage of a third Inpatient midnight in the hospital, the Three Midnight Rule has been fulfilled.
   • If there is at least one available SNF but the patient/family does not accept it, instead, requesting a wider search or waiting for another facility to have an open bed resulting in passage of a third Inpatient midnight in the hospital, the Three Midnight Rule has not been fulfilled. 
     
2. The issue is not whether a patient can transfer to a SNF for further care, it’s whether Medicare will cover the cost. 
   • If a patient is determined in the hospital to require SNF care but they have not met the qualifications for Medicare to cover the cost, the patient will be responsible for the cost of the SNF care.
   • If the patient elects to remain hospitalized because they do not wish to pay for SNF care but they are also not willing to discharge to home, this could be grounds for issuance of a Hospital Notice of Non-Coverage (HINN) to allow the hospital to charge the patient for continued but medically-unnecessary care in the hospital setting.

If you are in hospital case/utilization management, make sure you are prepared for the re-institution of the Medicare Three-Midnight Rule.  If you are a physician advisor, be proactive and ensure your team is comfortable with this upcoming change. 

REFERENCE:

MLN Fact Sheet from May of 2022 (MLN9730256)
https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/SNF3DayRule-MLN9730256.pdf