Winning Denied Skilled Level-of-Care Claims: Skilled Nursing Facility Medicare Appeals Guide

The most common reason Medicare contractors deny skilled nursing facility (SNF) claims is that the documentation does not support a skilled level of care. Reviewers conclude that the services were custodial, that the beneficiary did not need daily skilled services, or that therapy did not require a therapist's skills. These denials can come from Medicare Administrative Contractors (MACs), Recovery Audit Contractors, the Supplemental Medical Review Contractor, Unified Program Integrity Contractors, and Targeted Probe and Educate reviews.

Level-of-care denials are also among the most winnable. They often rest on a reviewer's reading of the record rather than on a missing technical element, and the Medicare rules on skilled care are broader than many reviewers apply. SNFs that understand the coverage standards, build a complete record early, and present clear arguments at each appeal level can reverse many of these denials.

This article explains the coverage rules, how to analyze a denial, how to build the appeal record, each level of appeal, and the arguments that tend to succeed. It is educational and does not replace legal or professional advice.

The Coverage Standards Reviewers Apply

The Basic Requirements

Under 42 CFR 409.31, SNF care is covered when:

• The beneficiary requires skilled nursing or skilled rehabilitation services, or both, on a daily basis.

• The daily skilled services can, as a practical matter, only be provided in a SNF on an inpatient basis.

• The services are provided to address a condition for which the beneficiary received inpatient hospital services, or a condition that arose while receiving SNF care for such a condition.

What Makes a Service Skilled

Under 42 CFR 409.32, a service is skilled when it is so inherently complex that it can be safely and effectively performed only by, or under the supervision of, professional or technical personnel. The regulation also states that the restoration potential of a patient is not the deciding factor, and that a service that is ordinarily nonskilled may be considered skilled when, because of special medical complications, its performance or supervision requires skilled personnel.

Examples of Skilled Services

42 CFR 409.33 lists examples, including:

• Overall management and evaluation of a care plan, when the patient's condition requires skilled personnel to manage the combination of nonskilled services.

• Observation and assessment of the patient's changing condition, when the likelihood of change in condition requires skilled personnel to identify and evaluate the need for modification of treatment.

• Patient education services, when the patient's condition requires teaching by skilled personnel.

• Direct skilled nursing services, such as intravenous or intramuscular injections, certain tube feedings, nasopharyngeal and tracheostomy aspiration, certain catheter care, certain wound care, and others.

• Direct skilled rehabilitation services, such as therapeutic exercises requiring a therapist, gait evaluation and training, range of motion when part of active treatment, and maintenance therapy requiring a therapist's skills.

The Daily Requirement

Under 42 CFR 409.34, the daily requirement is met when skilled nursing services are needed and provided seven days a week, or when skilled rehabilitation services are needed and provided at least five days a week. A brief, temporary interruption may not break the daily requirement in some circumstances.

The Practical Matter Test

42 CFR 409.35 explains that services can, as a practical matter, only be provided in a SNF when, considering economy and efficiency, the daily skilled services can be provided only on an inpatient basis. Factors include the availability and feasibility of alternative settings, such as home health, and the patient's condition.

Jimmo and the Improvement Standard

Under the Jimmo v. Sebelius settlement, CMS clarified that coverage does not depend on whether a patient is improving. Skilled care to maintain the patient's condition or to prevent or slow deterioration may be covered when the patient needs skilled services. CMS revised the Medicare Benefit Policy Manual to reflect this, and reviewers must apply the correct standard. A denial that rests on a lack of improvement or a plateau, without considering the need for skilled maintenance, can be challenged.

Analyzing the Denial

Read the Decision Carefully

Before building an appeal, identify exactly why the claim was denied. Denial letters and review results typically state:

• Whether the entire stay or specific days were denied.

• The reason, such as care not skilled, daily requirement not met, or therapy not reasonable and necessary.

• The documents reviewed.

Classify the Denial

• Clinical: the reviewer concluded the care was not skilled or not needed daily.

• Documentation: the reviewer could not find documentation supporting skilled care on certain days.

• Technical: a missing certification, qualifying stay, or signature. Technical issues are generally harder to win on appeal, though some can be addressed, such as through signature attestations or delayed certifications with explanations.

• Mixed: a combination.

Identify the Days at Issue

Many SNF denials are partial. Reviewers may approve the early part of a stay and deny later days, concluding that skilled need ended at a certain point. Map the denied days and identify documentation for each.

Assess Strength

Compare the denial with the record. Ask whether the record shows daily skilled services, whether nursing notes describe skilled observation and assessment or management and evaluation, whether therapy notes describe skilled interventions, and whether the patient's condition supported the need for skilled care. Be honest about weaknesses. Not every denial should be appealed.

Building the Appeal Record

Gather the Complete Record

• Qualifying hospital stay records.

• Physician certifications and recertifications.

• Physician orders and progress notes.

• MDS assessments.

• Nursing notes, including all shifts, for every day at issue.

• Therapy evaluations, plans of care, treatment notes, and progress reports.

• Medication administration records and treatment records.

• Care plans and interdisciplinary team notes.

• Lab, imaging, and other diagnostic results.

• Beneficiary notices.

Fill Gaps Legitimately

If documentation existed but was not submitted originally, include it. If signatures are illegible, use signature logs or attestation statements as permitted by the Medicare Program Integrity Manual. Never create or alter records after the fact.

Write a Clinical Summary

A clinical summary or position statement written by a qualified clinician, such as a nurse or physician, can explain why the patient needed skilled care. It should:

• Summarize the hospital course and reason for SNF admission.

• Describe the patient's conditions and risks.

• Explain the skilled services provided each day or period, with page citations.

• Tie the services to the regulations, such as management and evaluation or observation and assessment.

• Address the reviewer's reasoning directly.

Physician Statements

A physician's statement explaining why skilled care was needed can strengthen the appeal, especially for management and evaluation or observation and assessment arguments. The statement should be based on the contemporaneous record and should not contradict it.

Arguments That Win

Management and Evaluation of the Care Plan

When a patient has multiple conditions and the combination of nonskilled services requires skilled oversight to ensure the patient's safety and recovery, management and evaluation can be skilled even if no single service is skilled. Show the complexity: multiple diagnoses, medications requiring adjustment, risks such as falls or skin breakdown, and the nurse's role in coordinating care.

Observation and Assessment

When the patient's condition was unstable or had a reasonable likelihood of complications, skilled observation and assessment can be covered until the condition stabilizes. Show the risk factors, the monitoring performed, the findings, and any changes in treatment that resulted. Point to evidence such as new orders, physician notifications, lab changes, or vital sign changes.

Teaching and Training

When the patient or caregiver needed skilled teaching, such as for new medications, diabetes management, ostomy care, or use of adaptive equipment, document the teaching provided and progress.

Skilled Maintenance

When the reviewer denied therapy because the patient plateaued, argue that skilled maintenance therapy was needed under Jimmo and the Medicare Benefit Policy Manual. Show why the patient's condition required a therapist to design or carry out the maintenance program safely and effectively.

The Totality of Circumstances

Medicare guidance directs reviewers to consider the patient's overall condition. A patient with several conditions may need skilled care even when each individual service seems routine. Present the complete picture.

Daily Need Across Disciplines

When nursing and therapy together provide daily skilled services, show how the combination meets the daily requirement.

The Appeal Levels

Level 1: Redetermination

A redetermination by the MAC must be requested within 120 days of receiving the initial determination. Submit a complete record and a clear position statement. For postpayment overpayments, filing within 30 days of the demand letter prevents recoupment during this level under 42 CFR 405.379. MACs generally issue decisions within 60 days.

Level 2: Reconsideration

A reconsideration by a Qualified Independent Contractor must be requested within 180 days of the redetermination decision. Filing within 60 days stops recoupment during this level. This level is critical because, under 42 CFR 405.1018 and related provisions, providers generally must submit all evidence by the reconsideration level. Evidence submitted later may be excluded unless there is good cause. Treat reconsideration as the last chance to build the record.

Level 3: Administrative Law Judge Hearing

An Administrative Law Judge (ALJ) hearing at the Office of Medicare Hearings and Appeals may be requested within 60 days of the reconsideration decision when the amount in controversy meets the annual threshold. For requests filed in calendar year 2026, the threshold is $200. CMS published the calendar year 2027 threshold amounts in a September 2026 Federal Register notice. Claims can be aggregated to meet the threshold in some circumstances. ALJ hearings allow testimony from clinicians, which can be powerful in level-of-care cases.

Recoupment can resume after the reconsideration decision even while an ALJ appeal is pending, and interest accrues. If the provider wins, Medicare repays the amount with interest in many circumstances.

Level 4: Medicare Appeals Council

The Medicare Appeals Council reviews ALJ decisions. Requests are due within 60 days of the ALJ decision.

Level 5: Federal District Court

Judicial review in federal district court is available when the amount in controversy meets the threshold, which is $1,960 for requests filed in calendar year 2026.

Preparing for an ALJ Hearing

• Prepare a concise prehearing brief that explains the coverage standard and how the record meets it.

• Prepare a clinician witness, such as the director of nursing, therapist, or physician, who can explain the patient's needs and the skilled services provided.

• Organize exhibits with page references.

• Anticipate the reviewer's reasoning and address it.

• Be prepared to explain Jimmo and the management and evaluation and observation and assessment provisions.

• If CMS or a contractor participates as a party or participant, prepare to respond to their arguments.

Limitation of Liability and Provider Without Fault

Limitation of Liability

Section 1879 of the Social Security Act can protect a provider from liability when it did not know, and could not reasonably have been expected to know, that services would not be covered. In SNF appeals, this argument may be raised for denials based on medical necessity or custodial care. Providers are generally expected to know Medicare coverage rules, so the argument has limits, but it can matter when the beneficiary received proper notice or in unusual circumstances. When a beneficiary was given a valid notice of noncoverage, liability may shift to the beneficiary.

Provider Without Fault

Section 1870 of the Social Security Act can protect providers from repaying overpayments when they were without fault. This defense is often limited in practice, but it can be raised in appropriate cases, especially when the denial is based on a technical issue the provider reasonably believed was satisfied.

Beneficiary Notices and Expedited Reviews

When a SNF determines that a beneficiary no longer needs skilled care, it must provide the Notice of Medicare Non-Coverage at least two days before covered services end, allowing the beneficiary to request an expedited determination from the Beneficiary and Family Centered Care Quality Improvement Organization. When the beneficiary wants to remain and the SNF believes Medicare will not pay, the SNF must provide the Skilled Nursing Facility Advance Beneficiary Notice and, if requested, submit a demand bill. Proper notices protect beneficiaries' rights and can affect liability in appeals.

Building an Appeals Program

• Track all denials by reason, contractor, and outcome.

• Assign an appeals coordinator.

• Use templates for position statements and clinical summaries.

• Calendar every deadline, including recoupment protection dates.

• Use clinicians to review and draft appeals.

• Analyze results and feed lessons back into documentation training.

• Consider whether to involve counsel for large or complex appeals.

Preventing Level-of-Care Denials

• Train nurses to document the skilled need in the patient's specific terms each day.

• Document management and evaluation and observation and assessment explicitly when they are the basis for skilled care.

• Train therapists to document skilled interventions, clinical reasoning, and maintenance needs.

• Hold weekly Medicare meetings to review each patient's skilled need and documentation.

• Issue notices promptly when skilled need ends.

• Audit a sample of charts monthly.

A Hypothetical Example

A MAC denies the last 18 days of a 35-day SNF stay, concluding that the patient's care became custodial after therapy goals were met. The SNF's review finds that the patient had heart failure with fluctuating weights, new diuretic adjustments, and a pressure injury requiring treatment, and that nursing documented daily assessments and physician notifications. The SNF prepares a clinical summary explaining skilled observation and assessment and management and evaluation, with page citations, adds a physician statement, and requests reconsideration with the complete record after an unfavorable redetermination. The Qualified Independent Contractor reverses the denial for all 18 days.

Common Myths About SNF Level-of-Care Appeals

Myth: The Reviewer's Decision Is Hard to Overturn

Level-of-care denials are frequently reversed when the record supports skilled care and the appeal explains it clearly. Each level of appeal is a new review.

Myth: The Redetermination Can Be Filed Quickly With Minimal Documentation

The redetermination is an opportunity to win early. A thin appeal wastes that opportunity and pushes the case toward later levels, where evidence limits apply.

Myth: Therapy Ending Means Skilled Care Ended

Skilled nursing, including management and evaluation or observation and assessment, may continue to support coverage after therapy ends, if documented.

Myth: A Plateau Ends Coverage

Under Jimmo, a lack of improvement does not by itself end coverage when skilled maintenance services are needed.

Questions Leadership Should Ask

• What percentage of our denials are level-of-care denials, and what is our appeal success rate at each level?

• Are we meeting the 30-day and 60-day deadlines that stop recoupment?

• Do our appeals include clinical summaries tied to the regulations?

• Do we submit complete records by reconsideration?

• Do our nurses document management and evaluation and observation and assessment explicitly?

• Are we using denial patterns to target training?

Key Takeaways

• Level-of-care denials often turn on how well the record shows daily skilled need.

• Management and evaluation, observation and assessment, teaching, and skilled maintenance are recognized skilled services.

• Build the full record by reconsideration, and use clinician summaries and physician statements.

• The 2026 thresholds are $200 for ALJ hearings and $1,960 for federal court.

• Timely filing protects against recoupment during the first two levels.

Choosing Which Denials to Appeal

Appeals take staff time, so SNFs should set priorities. Factors to weigh include the dollar amount, the strength of the record, whether the denial reflects a pattern that could recur in future reviews, and whether a favorable decision would help educate the contractor. Weak cases with missing documentation may be better used as training examples than as appeals.

Documenting the reasons for each appeal decision also helps leadership understand where documentation is weakest.

Working With the Beneficiary

Beneficiaries and their families can also appeal, and their perspective can help. When a beneficiary disagrees with the end of coverage, the expedited determination process through the Quality Improvement Organization provides a fast review. SNFs should explain these rights clearly and document that notices were delivered on time.

Frequently Asked Questions

What is the most common reason for SNF level-of-care denials?

Documentation that does not show daily skilled services, often because nursing notes describe custodial care or therapy notes do not describe skilled interventions.

Does a patient need to improve for SNF care to be covered?

No. Under the Jimmo settlement, skilled maintenance care may be covered when the patient needs skilled services.

When should all evidence be submitted?

By the reconsideration level, because evidence submitted later is generally limited without good cause.

What is the 2026 threshold for an ALJ hearing?

$200 for requests filed in calendar year 2026, and $1,960 for federal district court review.

How can a SNF stop recoupment during appeal?

By filing a redetermination within 30 days and a reconsideration within 60 days of the applicable notices under 42 CFR 405.379.

Conclusion

Skilled level-of-care denials can often be reversed when SNFs understand the coverage rules, build complete records, explain the skilled need clearly, and use each appeal level effectively. Management and evaluation, observation and assessment, teaching, and skilled maintenance arguments, supported by the contemporaneous record and clinician statements, are powerful tools. SNFs that combine strong appeals with better daily documentation will both recover revenue and prevent future denials.

How HealthBridge Can Help

HealthBridge is a healthcare management consulting firm that helps SNFs analyze denials, prepare clinical summaries and position statements, build complete appeal records, prepare for ALJ hearings, and strengthen documentation to prevent future level-of-care denials. If you are facing skilled level-of-care denials, please get in touch with us. We will be happy to help you with this topic.

References

• Electronic Code of Federal Regulations. 42 CFR Part 409, Subpart D, Requirements for Coverage of Posthospital SNF Care. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-409/subpart-D

• Electronic Code of Federal Regulations. 42 CFR Part 405, Subpart I, Determinations, Redeterminations, Reconsiderations, and Appeals Under Original Medicare. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-405/subpart-I

• Electronic Code of Federal Regulations. 42 CFR 405.379, Limitation on Recoupment of Provider and Supplier Overpayments. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-405/subpart-C/section-405.379

• Centers for Medicare & Medicaid Services. Medicare Benefit Policy Manual, Chapter 8, Coverage of Extended Care (SNF) Services Under Hospital Insurance. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c08.pdf

• Centers for Medicare & Medicaid Services. Jimmo Settlement. https://www.cms.gov/medicare/coverage/jimmo-settlement

• Centers for Medicare & Medicaid Services. Medicare Program Integrity Manual, Chapter 3, Verifying Potential Errors and Taking Corrective Actions. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/pim83c03.pdf

• Federal Register. Medicare Program; Medicare Appeals; Adjustment to the Amount in Controversy Threshold Amounts for Calendar Year 2026 (December 4, 2025). https://www.govinfo.gov/content/pkg/FR-2025-12-04/html/2025-21879.htm

• Federal Register. Medicare Appeals; Adjustment to the Amount in Controversy Threshold Amounts for Calendar Year 2027. https://www.federalregister.gov/d/2026-19016

• U.S. Social Security Administration. Social Security Act, Section 1879, Limitation on Liability of Beneficiary Where Medicare Claims Are Disallowed. https://www.ssa.gov/OP_Home/ssact/title18/1879.htm

• U.S. Social Security Administration. Social Security Act, Section 1870, Overpayment on Behalf of Individuals. https://www.ssa.gov/OP_Home/ssact/title18/1870.htm

• U.S. Department of Health and Human Services. Office of Medicare Hearings and Appeals. https://www.hhs.gov/about/agencies/omha/index.html