Feds Call for Revamp of Post-Acute Rehab Payments

Skilled nursing facilities again are taking fire for patterns of Medicare billing related to therapy services. SNFs’ Medicare payments for therapy greatly exceed their costs, and the federal government should reevaluate the way that these providers are reimbursed, according to a report issued Wednesday by the Department of Health and Human Services Office of Inspector General.

Increases in SNF billing accounted for $1.1 billion in Medicare payments in fiscal years 2012 and 2013, and this was driven in particular by billing for the highest level of therapy, according to the report.  In addition to the fact that these reimbursements exceeded the costs to SNFs for providing this therapy, skilled facilities increasingly billed for the highest level even though key characteristics of the beneficiaries under their care remained the same.

The study was based on a variety of data, including Medicare claims and cost reports and beneficiary assessments, according to the OIG.


The OIG has previously investigated SNFs’ therapy billing patterns and turned up the same findings. Specifically, the agency found that the facilities increasingly billed for higher levels of therapy between 2006 and 2008, even though patient characteristics remained steady. Another previous finding was that $1.5 billion in SNF Medicare reimbursements in 2009 were inappropriate, largely due to SNFs billing for therapy at higher levels than they provided or was reasonably necessary.

The media also has delved into the issue of skilled nursing facilities pursuing aggressive therapy programs and what is behind this—including the need to subsidize inadequate Medicaid margins. Medicaid is the primary payor for the long-term, custodial care that SNFs historically have provided. As nursing homes that were not designed for post-acute rehabilitation have taken on more of these patients, stories have surfaced of inadequate care as well as fraudulent billing.

It’s an issue hovering over the post-acute sector as private-pay senior housing owners and operators increasingly are eyeing opportunities. Analysts with Green Street flagged the potential problems related with billing a recent research note examining the overall skilled nursing sector. Analysts identified the skilled nursing space as a $100 billion opportunity for real estate investment trusts and other entities that could drive consolidation in the sector.


Just weeks after the Green Street note was issued, Trilogy Health Services LLC was acquired in a $1.125 billion joint venture by Griffin American Healthcare REIT III and NorthStar Healthcare Income Inc. The high valuation was informed in part by the fact that Trilogy’s portfolio was about 10% skilled nursing and rehab assets, which are currently seen as highly desirable, analysts stated.

In the report issued Wednesday, the OIG made four recommendations: (1) evaluate the extent to which Medicare payment rates for therapy should be reduced, (2) change the method for paying for therapy, (3) adjust Medicare payments to eliminate any increases that are unrelated to beneficiary characteristics, and (4) strengthen oversight of SNF billing.

CMS concurred with all the recommendations.

Written by Tim Mullaney

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