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The Case of the Disappearing Improvement Standard


On January 24, 2013, the U. S. District Court for the District of Vermont approved a settlement agreement in the case of Jimmo v. Sebelius, in which the plaintiffs alleged that Medicare contractors were inappropriately applying an "Improvement Standard" in making claims determinations for Medicare coverage involving skilled care [e.g., the skilled nursing facility (SNF), home health (HH), and outpatient therapy (OPT) benefits]. The settlement agreement sets forth a series of specific steps for the Centers for Medicare & Medicaid Services (CMS) to undertake, including issuing clarifications to existing program guidance and new educational material on this subject. The goal of this settlement agreement is to ensure that claims are correctly adjudicated in accordance with existing Medicare statutes and policy, so that Medicare beneficiaries receive the full coverage to which they are entitled.

In the case of Jimmo v. Sebelius, the Center for Medicare Advocacy (CMA) alleged that Medicare claims involving skilled care were being inappropriately denied by contractors based on a rule-of-thumb "Improvement Standard"—under which a claim would be summarily denied due to a beneficiary's lack of restoration potential, even though the beneficiary did in fact require a covered level of skilled care in order to prevent or slow further deterioration in his or her clinical condition. In the Jimmo lawsuit, CMS denied establishing an improper rule-of-thumb "Improvement Standard." The Court never ruled on the validity of the Jimmo plaintiffs' allegations.

While an expectation of improvement would be a reasonable criterion to consider when evaluating, for example, a claim in which the goal of treatment is restoring a prior capability, Medicare policy has long recognized that there may also be specific instances where no improvement is expected but skilled care is, nevertheless, required in order to prevent or slow deterioration and maintain a beneficiary at the maximum practicable level of function. For example, in the regulations at 42 CFR 409.32(c), the level of care criteria for SNF coverage specify that the ". . . restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities." CMS Jimmo Fact Sheet

"Under this settlement, Medicare policy will be clarified to ensure that claims from providers are reimbursed consistently and appropriately, and not denied solely based on a rule-of-thumb determination that a beneficiary's condition is not improving," said Fabien Levy, a spokesman for the U. S. Department of Health and Human Services, which includes the Medicare program. (as quoted in The New York Times at:


Medicare covers items and services that are deemed "reasonable and necessary" for the diagnosis or treatment of an illness or injury. Medicare Administrative Contractors (MACs) interpret and apply the "reasonable and necessary" standard when developing Local Coverage Determinations (LCDs) for specific items and services. CMS Regulations state that LCDs may deny coverage for a particular item or service that is not "reasonable and necessary," but may not alter the statutorily required reimbursement for an item or service. [© 2008 Akin Gump Strauss Hauer & Feld LLP citing of 42 C.F.R. § 400.202 (2008)]


Although CMS has stated that "Nothing in this Settlement Agreement modifies, contracts, or expands the existing eligibility requirements for receiving Medicare coverage.", CMS plans include the updating of program manuals, a stakeholder educational campaign and a claims review, all to be completed by January 23, 2014. So far, at the time of writing this summary, only the following actions have been noted:

  1. November 21, 2013 Retirement of the Local Coverage Determination (LCD) Physical Medicine and Rehabilitation Policy (L33741) "on the basis that the material addressed in this Local Coverage Determination is represented by National Coverage Determinations and the CMS manuals. Medical Necessity requirements are still required for these services." No mention is made of the fact that this LCD contained many references to the "improvement standard" and the non-coverage of maintenance therapy that CMS denied were contained in their policies.
       "These uses may be necessary during the initial phase of treatment, but there must be an expectation of improvement in function, and must be utilized with appropriate therapeutic procedures (e.g., 97110) to effect continued improvement."
       "This therapy may be necessary during the initial phase of treatment, but there must be an expectation of improvement in function, and must be utilized with appropriate therapeutic procedures to effect continued improvement."
       "The patient must have a potential for restoration or improvement of lost functions, and must be expected to improve significantly within a reasonable and generally predictable amount of time. Rehabilitation services are not covered if the patient is unable to cooperate in the treatment program or if clear goals are not definable."
       "Therapy directed at maintenance of current function is not a Medicare benefit."
       "Maintenance therapy is not covered.
       "Maintenance therapy - services required to maintain a level of functioning - are not covered."
  2. December 19, 2013 Scheduled National Provider Call "Program Manual Updates to Clarify SNF, IRF, HH, and OPT Coverage Pursuant to Jimmo v. Sebelius". As part of the educational campaign, this call will provide an overview of the clarifications to the Medicare program manuals. These clarifications reflect Medicare's longstanding policy that when skilled services are required in order to provide reasonable and necessary care to prevent or slow further deterioration, coverage cannot be denied based on the absence of potential for improvement or restoration. In this context, coverage of skilled nursing and skilled therapy services "…does not turn on the presence or absence of a beneficiary's potential for improvement, but rather on the beneficiary's need for skilled care."


(From Frequently Asked Questions about Jimmo Settlement, Center for Medicare Advocacy,

Q: Is the Jimmo Settlement Retroactive?

A: Yes. The Settlement Agreement goes back to the date the case was filed, January 18, 2011. The Agreement establishes a process called "re-review" for Medicare beneficiaries who received a denial of skilled nursing facility care, home health care, or out-patient therapy services (physical therapy, occupational therapy, or speech therapy). After the government completes the revision of its policy and guidelines, and educates Medicare decision-makers, individuals will be able to get a re-review of these claims. The denial must have come from Medicare and must be for services that were actually received, but not paid for by Medicare. The Medicare denial must have become final and non-appealable after January 18, 2011 and before the end of the educational campaign (expected to be by the end of 2013). This means that claims must have been submitted to Medicare and denied, and the normal deadline for further appeal must have expired, The beneficiary may have tried appealing the denial through the regular Medicare appeal system; it does not matter at which level the beneficiary stopped as long as the outcome is a denial and the deadline for further appeal has passed.