Health Medicare's Three-Day Rule Can Turn a Rehab Stay Into a Five-Figure Bill By Marvin Musick, Medicare's Three-Day Rule Can Turn a Rehab Stay Into a Five-Figure Bill A patient can spend three nights in a hospital, receive treatment from doctors and nurses and then be discharged to a rehabilitation facility, only to learn that Medicare will not pay for the next stage of care. The problem may not be the medical diagnosis, the need for therapy or the quality of the rehabilitation center. It may be a technical distinction the patient never knew to ask about: whether the hospital classified the stay as inpatient care or outpatient observation. Under Original Medicare’s general rules, Part A coverage for a skilled nursing facility ordinarily requires at least three consecutive inpatient hospital days before the patient enters the facility. The day of discharge does not count, and time spent under observation generally does not count because observation is classified as outpatient care even when the patient sleeps in a hospital bed for several nights. A qualifying skilled nursing admission must generally occur within 30 days after the hospital stay and relate to the condition treated during that hospitalization. That technical distinction can have major financial consequences. Medicare is not a general nursing-home benefit, and it does not promise 100 days of free rehabilitation simply because a physician recommends additional care. Coverage depends on the hospital stay, the type of services required, the facility’s Medicare certification and whether the patient continues to need skilled care. Families who misunderstand any one of those conditions may discover that an expected Medicare benefit has become a private bill. Three Nights in a Hospital May Not Satisfy the Three-Day Rule