Nursing Home Billing Problems Highlighted in New Report

A new federal investigation into Medicare payments suggests that nursing homes may be regularly over-billing for therapy services provided to residents.

The Office for the Inspector General (OIG) for the Department of Health and Human Services (DHHS) issued a report (PDF) this week, calling for a reevaluation of Medicare payments provided for skilled nursing facilities (SNFs).

According to the report, many nursing homes are abusing the Medicare payment system by filing claims seeking reimbursement for the most expensive forms of therapy, even when they are not needed by their residents.

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“We found that Medicare payments for therapy greatly exceeded SNFs’ costs for therapy,” the report warns. “We also found that under the current payment system, SNFs increasingly billed for the highest level of therapy even though key beneficiary characteristics remained largely the same. Increases in SNF billing — particularly for the highest level of therapy — resulted in $1.1 billion in Medicare payments in FY 2012 and 2013.”

This latest study involved an analysis of Medicare cost reports from nursing homes over a 10-year period, a search of paid nursing home claims from the National Claims History file, and claims made for hospital stays and beneficiary assessments.

The findings indicate that, on average, Medicare payments were 29% more than the therapy costs, a rate of overpayment which has doubled since 2012.

“The difference between therapy payments and costs, combined with the current method of paying for therapy, creates a strong financial incentive for SNFs to bill for higher levels of therapy even when beneficiaries do not need such levels,” the investigators determined.

Some cases of nursing home billing problems have already been successfully pursued by federal regulators, the report notes. One nursing home chain had to pay a $3.75 million settlement for committing Medicare fraud by billing for therapy that was medically unnecessary, while another paid $3.5 million to settle similar claims.

A Longstanding Problem with Nursing Home Billings

The report also notes that the concerns are nothing new. In addition to the OIG, the Medicare Payment Advisory Commission, the American Health Care Association, and other groups have “longstanding concerns” about the system used to distribute Medicare payments to nursing homes.

The findings in this latest report echo concerns from a similar report by the OIG done five years, the new report notes. In December 2010, the OIG also warned of a trend of nursing homes increasingly billing for the highest level of therapy. In addition, that report indicated that one-quarter of all claims filed in 2009 were in error, which resulted in $1.5 billion in inappropriate Medicare payments.

“For the vast majority of these claims, SNFs billed for higher levels of therapy than they provided or were reasonable or necessary. Such billing can create quality of care concerns,” the report notes. “For example, a beneficiary — who received hospice care before and after her SNF stay — received physical therapy 5 days a week for 5 weeks, even though her medical records indicated that she asked that the therapy be discontinued.”

The report estimates that, of the $1.1 billion, in increased Medicare payments, $900 million were due to the price of ultra high therapy.

The OIG report made a number of recommendations to the Centers for Medicare and Medicaid Services (CMS). It calls for CMS to reduce the base rate for therapy, based on actual beneficiaries’ needs, and changing the current method of paying for therapy, also based on actual beneficiary needs. In addition, the report calls for stronger oversight of nursing home billing and payments.


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