Medicare to Pay $4 Billion More to SNF in 2011, Must Take Action says OIG

Despite changes made by the Centers for Medicare and Medicaid Services (CMS) in the way payments are made to skilled nursing facilities (SNFs), Medicare payments increased $2.1 billion, or 16% between the last six months of 2010 and the first half of 2011, according to a report from the Department of Human Services’ Office of the Inspector General (OIG).

Prior to FY 2011, CMS made changes to how skilled nursing facilities bill their time for concurrent therapy, with the expectation that they would see a decrease in billing for higher levels of therapy. CMS intended for the changes to be budget-neutral, but contrary to CMS’s expectations, skilled nursing facilities actually billed more for higher levels of therapy and for very little concurrent therapy during the first half of FY 2011.

“These unanticipated billing patterns contributed to the increase in payments,” the OIG report stated. “At the same time, several of CMS’s changes reduced billing for certain higher-paying resource utilization groups.”

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The report suggests that CMS take immediate action and adjust payment rates to address the significant increases made to skilled nursing facilities.

“Given the current trends, Medicare will pay over $4 billion more to SNFs in FY 2011 than in FY 2010,” said the report.

In addition, the data shows that CMS should make changes to how SNFs account for group therapy. Currently, SNFs have a financial incentive to choose group therapy over individual or concurrent therapy.

“By better aligning Medicare payments to SNFs’ expenditures for each type of therapy, SNFs will more likely choose the type of therapy that best meets the beneficiary’s needs,” said the OIG.

CMS has proposed a number of changes to the SNF payment system and will issue a final rule for FY 2012.

View the report.