Post-Acute Providers Draw Fire for How They Bill Uncle Sam

While providers in the senior housing sector have embraced specialized services like post-acute care, some operators are coming under fire for their Medicare billing practices and quality of care, casting a shadow over this growing part of the industry.

A Wall Street Journal report published Monday found that Medicare’s billing structure has created a rewards system that could encourage unscrupulous providers to bill for “Ultra High” levels of therapy, even for those near death who are not likely to benefit from this intensive level of care. On the heels of other recent news reports blasting the typical way post-acute care is provided in U.S. nursing homes, the Journal article highlights the need for more innovative post-acute options, an executive with Mainstreet—a company known for its focus on short-stay rehabilitation services—tells SHN.

In 1998, Medicare changed its billing practices, replacing its system of making payments based on cost of care with a reimbursement system including new incentives for certain services. Over the next few years, as these changes were being implemented, the type of care skilled nursing homes billed to Medicare for reimbursement changed, too, the WSJ reports.


Skilled nursing facilities now receive the largest Medicare payments from patients receiving Ultra High therapy up to 720 minutes per week. While Ultra High therapy is meant to be reserved for intensive rehabilitation treatment, providers have billed for more of this type of care over the years, possibly when patients don’t need it, according to the WSJ. The newspaper’s analysis found that nursing homes billed Medicare for Ultra High therapy for 54% of days in 2013. In 2002, nursing homes provided Ultra High therapy to patients on just 7% of days billed to Medicare.

The Wall Street Journal interviewed more than two dozen current and former workers, including rehab facility directors and therapists, and many stated that managers pressure caregivers to reach the upper time limits (720 minutes) of Ultra High therapy each week to maximize billing.

The Journal reported that the daily average rate for Ultra High therapy from Medicare was $560 in 2013. Patients were receiving at least 720 minutes per week of Ultra High therapy for this billing rate. For patients receiving between 500 and 719 minutes of “very high” therapy, the average daily rate in 2013 was $445. For “low” therapy, the rate was $325 per day in 2013.


“The system really rewards high-intensity care,” David Grabovski, a Harvard University professor who studies nursing home spending, told the Wall Street Journal. “There are patients being treated who aren’t appropriate.”

Managers have allegedly pressed caregivers even when patients refused therapy or were unresponsive. As a result of these alleged practices, the Justice Department joined a lawsuit against HCR ManorCare, one of the nation’s largest skilled nursing providers, in December, the Wall Street Journal reported.

“HCR billed for ultrahigh services 68% of the time in 2013, versus 8.8% in 2002,” according to the Journal’s report.

The Journal’s assessment that levels of therapy have gone up may be true, but it might not be the whole story, some industry experts told reporters, and there may be other reasons why these levels have increased outside of Medicare billing. For instance, health care patients may simply be more educated about their care and as a result, are demanding more therapy.

The WSJ article on post-acute billing practices comes after an April New York Times article alleging that nursing homes are providing poor care to post-acute patients, sometimes with fatal results.

The problems stem from the fact that traditional skilled nursing facilities—built to care for residents with relatively low-acuity over a long period of time—were not designed to maximize the effectiveness of this type of care.

Skilled nursing facilities also have had to rely on higher Medicare reimbursements to essentially subsidize the Medicaid payments they receive to care for long-term residents. Expanding post-acute rehabilitation is one route to maximizing Medicare reimbursements that an increasing number of these facilities have taken, as the Times reported; however, the buildings and the SNF business model were not purposely designed for this type of care.

It’s a point emphasized by David Stordy, chief operating officer at Carmel, Indiana-based Mainstreet, which develops purpose-built transitional care and short-term care properties.

“Existing, traditional nursing home facilities were not designed for the post-acute patient,” Stordy tells SHN.

The Mainstreet model, in which post-acute rehabilitation is paired with concierge-style services and high-end amenities, has presented a successful alternative, with the backing of a $2.3 billion partnership with Health Care REIT (NYSE: HCN) and five-year, $5 billion pipeline for future development.

But this type of innovative post-acute care faces serious obstacles, as well, which helps explain why traditional nursing homes continue to be primary sites for this type of service despite the controversies highlighted by the WSJ and New York Times. For instance: Many states have moratoria on new skilled nursing facilities. This is preventing Mainstreet from growing even more expansively, Stordy points out.

“Our properties are licensed under skilled nursing because no better category exists under which we can be licensed. And somewhere between one-half to three-fourths of the states in the U.S. have legacy health care laws that restrict any new skilled nursing development,” he says. “This means that the 40-year-old nursing home – with its shared rooms, centralized bathing and cafeteria-style dining – is the only therapy option that is, or ever will be, available in that state. These laws don’t just restrict new development, they also protect and prop up the 40-year-old properties.”

Written by Amy Baxter

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