## Facts

- Ruth Rapport, age 90, was a Medicare beneficiary enrolled in Preferred Care, a Medicare Advantage (MA) plan under Part C of the Medicare Act.
- In January 2006, Preferred Care sent Rapport an Evidence of Coverage (EOC) for the 2006 plan year describing benefits, limits, and conditions, including that skilled nursing facility (SNF) care would be covered only if immediately preceded by a three-day inpatient hospital stay.
- In December 2006, Rapport broke her ankle and received hospital treatment, but she was discharged the same day.
- Immediately after discharge, Rapport was admitted to the Jewish Home and Infirmary (an SNF).
- Rapport’s treating physician certified a plan of care requiring approximately four weeks of skilled nursing care.
- Preferred Care denied coverage for the SNF stay because Rapport did not have the required three-day inpatient hospital stay right before SNF admission.
- Rapport sought reconsideration and asked that the three-day prerequisite be waived due to medical necessity; Preferred Care affirmed the denial.
- An independent review organization also affirmed the denial.
- Rapport requested a hearing before an Administrative Law Judge (ALJ). The ALJ ruled for Rapport, reasoning that because MA regulations allow a plan to waive the three-day requirement, Preferred Care was required to waive it and cover the SNF services.
- Preferred Care appealed to the Medicare Appeals Council (MAC). The MAC reversed, concluding the waiver option is discretionary and that Preferred Care could enforce the three-day requirement because it had notified Rapport of that condition in the EOC.
- The MAC decision became the final decision of Michael O. Leavitt, Secretary of Health and Human Services. Rapport sought judicial review in federal district court, and both sides moved for judgment on the pleadings.

## Issues

1. Whether 42 C.F.R. § 422.101(c) requires an MA organization to waive the traditional three-day qualifying inpatient hospital stay requirement for SNF coverage.
2. Whether Preferred Care’s EOC provided sufficient notice of the three-day prerequisite so that the plan could deny SNF coverage when the prerequisite was not met.
3. Whether the Secretary’s final decision (through the MAC) was supported by substantial evidence and was not arbitrary, capricious, or contrary to law.

## Decision

- The court denied Rapport’s motion for judgment on the pleadings and granted the Secretary’s cross-motion.
- The court affirmed the Secretary’s final decision upholding the denial of SNF coverage.
- The court held that § 422.101(c) permits (but does not compel) an MA plan to offer SNF coverage without a prior three-day inpatient hospital stay.
- The court concluded Preferred Care could apply the three-day prerequisite because the plan had clearly disclosed that limitation to Rapport in its EOC.

## Legal Principles

- On judicial review of the Secretary’s Medicare coverage decision, the court upholds the agency’s findings if supported by substantial evidence and will set aside agency action only if it is arbitrary, capricious, or contrary to law.
- Traditional Medicare coverage for post-hospital SNF care generally requires a qualifying inpatient hospital stay of at least three consecutive days (not counting the discharge day). See 42 C.F.R. § 409.30(a).
- MA organizations must provide enrollees with clear information about plan benefits and any conditions and limitations, and must furnish this information at enrollment and at least annually. See 42 C.F.R. § 422.111.
- Under 42 C.F.R. § 422.101(c), an MA organization “may elect” to cover post-hospital SNF care without a prior qualifying hospital stay; the regulation’s text makes this optional rather than mandatory.
- A plan’s decision to offer the traditional Medicare three-day prerequisite, when plainly stated in plan materials such as the EOC, is enforceable against an enrollee who seeks SNF coverage without meeting that prerequisite.
- Medical necessity of SNF services does not eliminate the separate threshold requirement of a qualifying prior inpatient hospital stay when the plan has not chosen the optional waiver benefit.

## Conclusion

The district court upheld the Secretary’s denial of SNF coverage because Rapport lacked the required three-day inpatient hospital stay, the MA regulation allowing waiver made waiver optional rather than mandatory, and Preferred Care’s EOC clearly stated the three-day prerequisite for SNF coverage.


Rapport v. Leavitt, 564 F. Supp. 2d 186 (2008)