Questionable Billing by Skilled Nursing Facilities

Skilled nursing facilities (SNF) categorize beneficiaries into resource utilization groups (RUG) based on their care and resource needs. Medicare generally pays the most for ultra high therapy RUGs. Medicare also pays more for RUGs for beneficiaries who require more assistance with certain activities of daily living, such as eating.

We found that SNFs increasingly billed Medicare for higher paying RUGs from 2006 to 2008, even though beneficiary characteristics remained largely unchanged. Specifically, we found large increases in RUGs for ultra high therapy, with payments to SNFs for ultra high therapy increasing by nearly 90 percent from 2006 to 2008, rising from $5.7 billion to $10.7 billion. In addition, RUGs for high levels of assistance with daily activities increased. We also found that for-profit SNFs were far more likely than nonprofit or government SNFs to bill for higher paying RUGs, and we found that a number of SNFs had questionable billing in 2008. Taken together, these findings raise concerns about the potentially inappropriate use of higher paying RUGs, particularly those for ultra high therapy.

We recommend that CMS: (1) monitor overall payments to SNFs and adjust rates, if necessary; (2) change the current method for determining how much therapy is needed to ensure appropriate payments; (3) strengthen monitoring of SNFs that are billing for higher paying RUGs; and (4) follow up on the SNFs identified as having questionable billing. CMS concurred with three of the four recommendations. It did not concur with the recommendation to change the current method for determining how much therapy is needed, but stated that it is committed to pursuing additional improvements to the SNF payment system.