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Skilled Nursing Facility Payments Increased by $2.1 Billion in 2011

July 18, 2011:

Regina Magnani, Clinical/Technical Editor

Because an expected shift in the balance of therapy services billed by skilled nursing facilities did not occur in 2011, Medicare ended up paying $2.1 billion more than expected. The shift was expected because of various changes in how the Centers for Medicare & Medicaid Services pays for SNF services.

CMS adopted a revised set of resource utilization groups (RUGs) IV effective October 1, 2010, the start of fiscal year (FY) 2011. At the same time, a number of other changes to the SNF payment system were made. One such change was in how SNFs bill for concurrent therapy, which involves the provision of services to two residents at the same time (group therapy is the provision of services to more than two residents at the same time). Based on CMS’s expectation that this change would decrease billing for higher levels of therapy, the agency increased the payment rates for therapy so that overall SNF payments would remain the same. CMS also changed how SNFs bill for extensive services, such as tracheostomy care and for assistance with activities of daily living.

The Office of the Inspector General reviewed SNF payments made during the first half of FY 2011 as compared with the last half of FY 2010. Although the FY 2011 changes were intended to be budget neutral, the OIG found that Medicare payments increased by $2.1 billion, or 16 percent, from the last half of FY 2010 to the first half of FY 2011. Among the surprises was that SNFs billed for less concurrent therapy than CMS expected. Beginning in FY 2011, SNFs were required to divide concurrent therapy minutes among beneficiaries, leading, CMS projected, to a decrease in the number of therapy minutes billed per beneficiary and in the levels of therapy billed. Instead, SNFs billed for far less concurrent therapy in FY 2011 than CMS expected, and the anticipated shift to lower levels of therapy did not occur.

When CMS determined the reimbursement rates for SNFs during FY 2011, it assumed that SNFs’ use of concurrent therapy would be approximately 25 percent of all therapy. Rather, the OIG found that less than 1 percent of all therapy minutes were for concurrent therapy during this period. SNFs’ use of concurrent therapy decreased each month, from 1.4 percent in October 2010 to 0.7 percent in March 2011.

SNFs billed for much more group and individual therapy in the first half of fiscal 2011 than CMS projected. The agency expected group therapy to account for less than 1 percent of all therapy, but it accounted for nearly 8 percent. Individual therapy was expected to be about 75 percent of the therapy provided, whereas it accounted for about 91 percent.

The OIG suggests that CMS adjust payment rates to address the significant increases in payments to SNFs and that the accounting for group therapy needs to be reviewed. The OIG further suggests that other changes be considered to make Medicare payments more consistent with beneficiaries’ care and resource needs.

The OIG plans to conduct a full review of SNF billing at the end of FY 2011 and may issue formal recommendations to CMS at that time. In the meantime, the office urges CMS to take immediate action. The full report (OEI-02-09-00204) is available at: http://go.usa.gov/Z6J.


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