Nonpayment as a Reason for Involuntary Discharge

Jeannine LeCompte, Compliance Research Specialist

Facility initiated resident discharges are a legal minefield and compliance demands strict adherence to the specific rules set by the authorities.

Nonpayment for a stay in a facility occurs when:

The resident has not submitted the necessary paperwork for third party (including Medicare/Medicaid) payment; or
After the third party payor denied the claim and the resident refused to pay.

It is the direct responsibility of the facility to notify the resident of their change in payment status, and the facility should ensure that the resident has the necessary assistance to submit any third party paperwork.

In situations where a resident representative has failed to pay, the facility may discharge the resident for nonpayment; however, if there is evidence of exploitation or misappropriation of the resident’s funds by the representative, the facility should take steps to notify the appropriate authorities on the resident’s behalf before discharging the resident.

For a resident who becomes eligible for Medicaid after admission, the facility may only charge a resident for allowable charges under Medicaid. Additionally, conversion from a private pay rate to payment at the Medicaid rate does not constitute nonpayment.

Residents who are sent to the hospital in emergency circumstances are considered facility initiated transfers because the resident’s return is generally expected. Residents who are sent to the emergency room must be permitted to return to the facility, unless the resident meets one of the criteria under which the facility can initiate discharge.

In a situation where the facility initiates discharge while the resident is in the hospital following emergency transfer, the facility must have evidence that the resident’s status is not based on his or her condition at the time of transfer, and meets one of the criteria related to the facility’s inability to adequately care for the resident.

When a resident chooses to appeal his or her discharge from the facility, the facility may not discharge the resident while the appeal is pending. This also applies when a resident’s initial Medicaid application is denied but appealed. In such cases, the resident is not considered to be in nonpayment status, as an appeal suspends a finding of nonpayment.

If the resident, or if applicable, their representative, appeals his or her discharge while in a hospital, facilities must allow the resident to return pending their appeal, unless there is evidence that the facility cannot meet the resident’s needs, or the resident’s return would pose a danger to the health or safety of the resident or others in the facility.