Updated on: June 22, 2012

Questionable Skilled Nursing Billings Could Top $500 Million

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Original story posted on: December 27, 2010
More than a quarter of Medicare Part A claims filed by skilled nursing facilities (SNFs) nationwide were not supported by medical documentation in a recent review conducted by the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG), prompting the proposed acceleration of efforts to guard against what were estimated as potential overpayments approaching $500 million.

The revelation was part of a December OIG report entitled “Questionable Billing by Skilled Nursing Facilities.” The findings of the report also indicate that the current Medicare payment system for SNFs “provides incentives … to bill for ultra-high therapy and for high levels of assistance when these levels of care may not be needed.” The Medicare Payment Advisory Commission likewise has raised concerns about SNFs improperly billing for therapy to obtain
additional Medicare payments, the report added.
Under the Medicare system, SNFs classify each beneficiary into a classification based on his or her care and resource needs. These classifications are called resource utilization groups (RUGs), and each of the eight RUGs has a different Medicare per diem payment rate. The OIG report was released as the federal Centers for Medicare & Medicaid Services (CMS) is preparing to make “several changes” to the RUG classification system.

“The OIG findings in this report continue to support the contention that a major source of compliance risk in skilled nursing facilities is directly related to the RUGs (Resource Utilization Group) assigned rate, and much of that risk is most certainly therapy” says Nancy Beckley, president and CEO of Nancy Beckley & Associates. “Communication and training of therapy staff is essential, but more importantly the establishment of an internal monitoring and auditing system to validate the assigned RUG rate and ensure documentation supporting medical necessity. 

According to the report, from 2006 to 2008 SNFs increasingly billed for higher-paying RUGs even though beneficiary characteristics remained mostly unchanged: during that time, the percentage of RUGs for ultra-high therapy increased from 17 to 28 percent. Likewise, the percentage of RUGs with high ADL (activities of daily living) scores increased from 30 percent in 2006 to 34 percent in 2008, the report indicated.

The report also found that for-profit SNFs were significantly more likely than nonprofit or government-managed SNFs to bill for higher-paying RUGs. Thirty-two percent of RUGs from for-profit SNFs were for ultra-high therapy, compared to just 18 percent from nonprofit SNFs and 13 percent from government SNFs. In addition, for-profit SNFs had a higher use of RUGs with high ADL scores than both for-profit and government SNFs: the for-profit facilities also had longer lengths of stay, on average, compared to the other types.

The report also noted a wide degree of variance in inappropriate billing patterns. The patterns indicate that certain SNFs may be routinely placing beneficiaries into higher-paying RUGs regardless of the beneficiaries’ care and resource needs or keeping beneficiaries in Part A stays longer than necessary, according to the report. The OIG identified 348 SNFs that were in the top 1 percent for the use of ultra-high therapy, RUGs with high ADL scores, or long average lengths of stay.

Prompted by the report findings, the OIG made four recommendations to CMS, three of which it tentatively agreed to implement. One, going forward CMS likely will adjust RUG rates annually, if necessary, to ensure that changes to the payment groups do not significantly affect payments. Two, CMS agreed to instruct its contractors to strengthen monitoring of SNFs that are billing for higher-paying RUGs, in part by developing thresholds for certain indicators and conducting additional reviews of SNFs that exceed them. And three, CMS will be targeting the SNFs cited by the OIG for questionable billing in its report. 

But CMS declined to implement the final OIG recommendation: to change the current method for determining how much therapy is needed in order to ensure appropriate payments. The OIG even recommended that CMS consider requiring that therapists with no financial relationship to a SNF determine the amount of therapy needed throughout a beneficiary’s stay. CMS, despite its disagreement, stated that it is committed to pursuing additional improvements to the SNF payment system, noting “several concerns with relying on information from the beneficiary’s hospital stay to determine the beneficiary’s therapy needs during a SNF stay.”

“This OIG report should serve as another ‘early warning’ sign for skilled facilities in preparation for RAC activity in post-acute care,” warns Beckley.

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