In September, the United States Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) issued a report, “The Medicare Payment System for Skilled Nursing Facilities Needs To Be Reevaluated,” in which the OIG was very critical of SNF therapy billing and reported its findings as follows:

  • Medicare payments for therapy “greatly exceeded” SNFs’ costs for therapy;
  • SNFs are increasingly billing at the highest level of therapy even though patient health characteristics remain generally the same over time; and
  • These increases in SNF billing alone, especially at the highest level of therapy, resulted in $1.1 billion in Medicare payments in fiscal years 2012 and 2013. Total Medicare payments to SNFs were $53.1 billion in 2012 and 2013.

OIG indicated that it conducted the study because of its own as well as the Medicare Payment Advisory Commission (MedPAC) and other entities’ long-standing concerns regarding Medicare’s SNF payment system. OIG also noted some of its prior findings including that SNFs billed one quarter of all 2009 claims in error, primarily by billing for higher levels of therapy than they provided or were reasonable or necessary, which resulted in $1.5 billion in inappropriate Medicare payments.

The study was based on a number of data sources, including Medicare Part A SNF claims, Medicare cost reports, and patient assessments over a ten-year period.

OIG asserts that there is need for CMS to reevaluate the Medicare SNF payment system. It suggests that payment reforms could save Medicare billions of dollars and encourage SNFs to provide services that are better aligned with patient needs.  OIG’s specific recommendations are that CMS:

  • Evaluate the extent Medicare rates for therapy should be reduced;
  • Change the method for paying for therapy;
  • Address Medicare payments to eliminate any increases that are not related to patient health conditions; and
  • Strengthen oversight of SNF billing.

Particularly noteworthy to SNF providers, OIG indicates that the Centers for Medicare and Medicaid Services (CMS” “concurred with all four of our recommendations.”

Does the OIG’s report necessarily mean more downward pressure on rates/more therapy billing scrutiny? Commenting in media coverage on the OIG report, acting CMS Administrator Andrew Slavitt stated that the current system incentivizes SNFs to “provide as much therapy to a resident as that resident can tolerate” and that Medicare therapy rates should be reduced. Slavitt acknowledged that CMS will need “additional statutory authority” from Congress to reduce rates, but at the same time he also stated that CMS will be stepping up its efforts to prevent fraud and detect “suspicious billing behavior” by nursing homes.