Skilled Nursing Facilities: Providers Have Responded to Medicare
Payment System By Changing Practices (23-AUG-02, GAO-02-841).
In 1998, the Health Care Financing Administration implemented a
prospective payment system (PPS) for skilled nursing facility
(SNF) services provided to Medicare beneficiaries. PPS is
intended to control the growth in Medicare spending for skilled
nursing and rehabilitative services that SNFs provide. Two years
after the implementation of PPS, the mix of patients across the
categories of payment groups has shifted, as determined by the
patients' initial minimum data set assessments. Although the
overall share of patients classified into rehabilitation payment
group categories based on their initial assessments remained
about the same, more patients were classified into the high and
medium rehabilitation payment group categories, and fewer were
initially classified into the most intensive (highest paying) and
least intensive (lowest paying) rehabilitation payment group
categories. Two years after PPS was implemented the majority of
patients in rehabilitation payment groups received less therapy
than was provided in 199. This was true even for patients within
the same rehabilitation payment group categories. Across all
rehabilitation payment group categories, fewer patients received
the highest amounts of therapy associated with each payment
group.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-841
ACCNO: A04664
TITLE: Skilled Nursing Facilities: Providers Have Responded to
Medicare Payment System By Changing Practices
DATE: 08/23/2002
SUBJECT: Beneficiaries
Health care cost control
Health care planning
Health care programs
Health care services
Payments
Skilled nursing facilities
Medicare Program
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GAO-02-841
Report to Congressional Requesters
United States General Accounting Office
GAO
August 2002 SKILLED NURSING FACILITIES
Providers Have Responded to Medicare Payment System By Changing Practices
GAO- 02- 841
Page i GAO- 02- 841 SNF Responses to Payment System Letter 1 Results in
Brief 3 Background 4 Distribution of Patients Across Payment Categories
Has Changed 11 Since PPS, SNFs Provide Fewer Minutes of Therapy 15
Concluding Observations 16 Agency Comments 17 Appendix I Scope and
Methodology 18
Appendix II Therapy Minutes, Activities of Daily Living, and Medicare
Payment Rates to SNFs 20
Appendix III Comments from the Centers for Medicare & Medicaid Services 22
Tables
Table 1: Share of Medicare Patients at Initial Assessment By Category and
Percent Change, First Quarters 1999, 2000, and 2001 13 Table 2: Share of
Medicare Patients at Initial Assessment in
Rehabilitation RUGs and Percent Change, Before and After BBRA Payment
Increases 14 Table 3: Median Therapy Minutes Per Week Provided on or
Before
the Initial Medicare Assessment By Rehabilitation Category, 1999 and 2001
16 Table 4: Therapy Minutes, Activities of Daily Living, and Medicare
Payment Rates to SNFs in Fiscal Year 2002 a 20 Figure
Figure 1: Resource Utilization Group (RUG) Classification Scheme 6
Contents
Page ii GAO- 02- 841 SNF Responses to Payment System Abbreviations
ADL activity of daily living CMS Centers for Medicare & Medicaid Services
BBA Balanced Budget Act of 1997 BBRA Medicare, Medicaid, and SCHIP
Balanced Budget
Refinement Act of 1999 BIPA Medicare, Medicaid, and SCHIP Benefits
Improvement
and Protection Act of 2000 HCFA Health Care Financing Administration MDS
minimum data set PPS prospective payment system RUG resource utilization
group SNF skilled nursing facility
Page 1 GAO- 02- 841 SNF Responses to Payment System August 23, 2002 The
Honorable Charles E. Grassley
Ranking Minority Member Committee on Finance United States Senate
The Honorable Larry Craig Ranking Minority Member Special Committee on
Aging United States Senate
In 1998, the Health Care Financing Administration (HCFA) implemented a
prospective payment system (PPS) for skilled nursing facility (SNF)
services provided to Medicare beneficiaries. 1 Mandated in the Balanced
Budget Act of 1997 (BBA), PPS is intended to control the growth in
Medicare spending for skilled nursing and rehabilitative services that
SNFs provide. 2 Medicare pays SNFs a daily rate to cover most services
provided to a patient during each day of a covered SNF stay. Because each
patient differs in the amount of care required, the rate is adjusted for
the patient*s
expected care needs and therapy based on information gathered by SNFs
using a uniform clinical assessment instrument known as the nursing home
minimum data set (MDS). Information from the MDS* such as a patient*s
diagnoses, the amount of rehabilitative therapy, 3 and ability to perform
activities of daily living (ADL)* is used by SNFs to assign each patient
to a Medicare payment group.
Patients assigned to the same Medicare payment group exhibit similar care
needs, so Medicare*s daily payment rate is the same for each patient
within a group. The payment rate is based on the national average cost of
1 On July 1, 2001, the Secretary of Health and Human Services changed the
name of the Health Care Financing Administration (HCFA) to the Centers for
Medicare & Medicaid Services (CMS). In this report, we will continue to
refer to HCFA where our findings apply to the organizational structure and
operations associated with that name.
2 Pub. L. No. 105- 33, S: 4432( a), 111 Stat. 251, 414 (codified as
amended at 42 U. S. C. S: 1395yy( e) (2000)). 3 This report uses therapy
to refer to rehabilitation therapy, which includes physical, speech, and
occupational therapies.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 02- 841 SNF Responses to Payment System providing care to
patients in each group, not the actual costs for any given patient. As a
result, a SNF profits when its costs are below the payment rate and loses
if its costs are above it. A SNF can control its costs by
treating less expensive patients within a group, providing care more
efficiently, or providing fewer or a less expensive mix of services
compared to the national average. A SNF can maximize its payments by
admitting patients who are likely to be classified into particular payment
groups or by modifying its patient assessment and documentation practices
to support higher payment group assignments.
The implementation of PPS raised providers* concerns about whether
payments would cover their costs. 4 Our work and the work of others
indicated that the payment groups may not adequately identify high- cost
patients and distribute payments accordingly. The Congress addressed these
concerns by increasing Medicare payments across all payment groups. At the
same time, the Congress mandated additional increases for selected payment
groups in response to concerns that payments for some types of patients
were too low. Payments were increased for some of the payment groups for
patients receiving primarily rehabilitation therapy and all payment groups
for patients requiring extensive or special care and for
clinically complex patients. Given possible provider responses to PPS, you
asked us to analyze (1) shifts in the mix of Medicare beneficiaries across
payment groups and (2) the amount of therapy services provided to patients
within payment groups. To do so, we examined MDS data to determine the mix
of patients treated and the services that Medicare beneficiaries received
across and
within payment groups for three points in time* early in PPS (January
through March 1999), 1 year later and 2 years later. (For more details,
see app. I, Scope and Methodology). We also interviewed staff from the
Centers for Medicare & Medicaid Services (CMS) responsible for SNF payment
policy and we reviewed regulations, literature, and other documents
relating to SNF PPS and MDS. We performed our work from March 2000 through
June 2002 in accordance with generally accepted
government auditing standards. 4 U. S. General Accounting Office, Nursing
Homes: Aggregate Medicare Payments are Adequate Despite Bankruptcies, GAO/
T- HEHS- 00- 192 (Washington, DC: Sept. 5, 2000), U. S. General Accounting
Office, Skilled Nursing Facilities: Medicare Payment Changes Require
Provider Adjustments But Maintain Access, GAO/ HEHS- 00- 23 (Washington,
DC: December 14, 1999), and Medicare Payment Advisory Commission, Report
to Congress: Medicare Payment Policy (Washington, DC: March 2001).
Page 3 GAO- 02- 841 SNF Responses to Payment System Two years after the
implementation of PPS, the mix of patients across the categories of
payment groups has shifted, as determined by the patients*
initial MDS assessments. Although the overall share of patients classified
into rehabilitation payment group categories based on their initial
assessments remained about the same, more patients were classified into
the high and medium rehabilitation payment group categories, and fewer
were initially classified into the most intensive (highest paying) and
least intensive (lowest paying) rehabilitation payment group categories.
This shift is consistent with industry assertions that payments in
relation to the cost of caring for patients in the high and medium
rehabilitation payment group categories were more favorable than those for
other categories of payment groups. Further, the share of patients
initially assigned to the
selected rehabilitation payment groups for which the Congress gave
additional payment increases grew, while the share of patients assigned to
almost all of the other rehabilitation payment groups remained the same or
declined. Among patients who were not in rehabilitation payment groups,
the share that was initially classified into categories requiring more
extensive services increased almost 12 percent. SNFs changed two patient
assessment practices that could have contributed to the shift in patients,
at admission, across payment groups. First, SNFs increasingly used
estimates of therapy needed, rather than actual therapy delivered, to
assign patients to payment group categories. Second, SNFs conducted
their initial patient assessments later in the stays of patients needing
therapy, expanding the period of time over which they could receive
therapy and increasing the likelihood that they would be classified into
categories with the highest possible payments. Two years after PPS was
implemented the majority of patients in rehabilitation payment groups
received less therapy than was provided in 1999. This was true even for
patients within the same rehabilitation payment group categories. The
patients categorized into the two most common (high and medium)
rehabilitation payment group categories typically received 30 minutes less
therapy during their first week of care, a 22 percent decline. Across all
rehabilitation payment group categories, fewer patients received the
highest amounts of therapy associated with each payment group.
In its written comments on a draft of this report, CMS agreed with our
findings and noted that they were generally consistent with its analyses
of provider responses to the PPS. Results in Brief
Page 4 GAO- 02- 841 SNF Responses to Payment System Generally, Medicare
covers SNF stays for patients needing skilled nursing and therapy for
conditions related to a hospital stay of at least 3 consecutive calendar
days, if the hospital discharge occurred no more
than 30 days prior to admission to the SNF. For qualified beneficiaries,
Medicare will pay for medically necessary services, including room and
board, nursing care, and ancillary services such as drugs, laboratory
tests, and physical therapy, for up to 100 days per spell of illness. 5
For more than a decade beginning in 1986, Medicare SNF spending rose
dramatically* averaging 30 percent annually. During this period, Medicare
payments to each SNF were based on the costs incurred by the SNF in
serving its Medicare patients. There was minimal program oversight,
providing few checks on spending growth. Although Medicare imposed payment
limits for routine services, such as room and board, it did not limit
payments for capital and ancillary services, such as therapy. Cost
increases for ancillary services averaged 19 percent per year from 1992
through 1995, compared to a 6 percent average increase for routine service
costs.
To curb the rise in Medicare SNF spending, BBA required a change in
Medicare*s payment method. HCFA began phasing in the SNF PPS on July 1,
1998. 6 Under PPS, SNFs are paid a prospectively determined rate intended
to cover most services provided to a patient during each day of a
Medicare- covered SNF stay. 7 The SNF payment rate is based on the 1995
national average cost per day, updated for inflation. Because the costs of
treating patients vary with their clinical conditions and treatments,
daily payments for each patient are adjusted for the patient*s expected
care needs depending on the patient*s assignment into one of 44 different
payment groups, also called resource utilization groups (RUG). A RUG
5 A spell of illness is a period that begins when a Medicare beneficiary
is admitted to a hospital or a SNF and ends when a beneficiary has not
been an inpatient of a hospital or a SNF for 60 consecutive days. A
beneficiary may have more than one spell of illness per year and maintain
Medicare coverage.
6 SNFs came under PPS beginning with their new fiscal year. Over 90
percent of SNFs came under PPS before or during January 1999. The
remainder came under PPS later in 1999. 7 Payments are adjusted for the
local variation in wages. Certain high- cost, infrequently provided
services, such as cardiac catheterizations and radiation therapy, are paid
for separately outside the daily SNF rate. See U. S. General Accounting
Office, Skilled Nursing Facilities: Services Excluded From Medicare*s
Daily Rate Need to be Reevaluated,
GAO- 01- 816 (Washington, DC: Aug. 22, 2001). Background SNF PPS
Page 5 GAO- 02- 841 SNF Responses to Payment System describes patients
with similar therapy, nursing, and special care needs and has a
corresponding payment rate.
The RUG classification system is hierarchical. The first distinction made
is whether the patient has received (or is expected to receive) at least
45 minutes a week of therapy (see fig. 1). For these rehabilitation
patients, further divisions* into ultra high, very high, high, medium, and
low therapy categories* are made based on the total minutes and type of
physical, occupational, and speech therapy provided over 7 days. Each of
these categories is defined by a range of therapy minutes and the type of
therapy provided. For example, patients in the very high category receive
between 500 and 719 minutes of therapy over 7 days. Each category is
further subdivided into RUGs, based on a patient*s dependency in
performing ADLs, such as eating, transferring from a bed to a chair, or
using the toilet. There are 14 rehabilitation RUGs, which account for
threefourths of Medicare- covered stays.
Page 6 GAO- 02- 841 SNF Responses to Payment System Figure 1: Resource
Utilization Group (RUG) Classification Scheme
a For patients classified based on estimates of care needs, patients are
expected to receive at least 45 minutes of therapy a week. b Care
generally not paid by Medicare because patient does not require skilled
nursing care.
Source: Medicare Program: Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities, 64 Federal Register 41,644 (July
30, 1999) and Department of Health and Human Services, Health Care
Financing Administration, Payment Safeguard Review of Skilled Nursing
Facility Prospective Payment Bills, Program Memorandum Transmittal A- 99-
20 (Baltimore, MD: May 1999).
Page 7 GAO- 02- 841 SNF Responses to Payment System Among patients who
have not received (or are not expected to receive) 45 minutes a week of
therapy, the system distinguishes between patients
requiring extensive or special care or who are clinically complex (12
RUGs) and those receiving custodial care (18 RUGs). 8 The classification
system uses specific medical conditions (such as having multiple sclerosis
or being comatose) and special care needs (such as
requiring tracheostomy care or ventilator support) within the past 14 days
to group patients into extensive services, special care, and clinically
complex categories. Patient characteristics such as the ability to perform
ADLs, signs of depression, and conditions requiring more technical
clinical knowledge and skills are used to assign patients into RUGs within
these categories.
Since 1991, SNFs have carried out a requirement to periodically assess and
plan for residents* care using the MDS, 9 which documents 17 aspects of a
patient*s clinical condition, including the amount of therapy provided or
planned, diagnoses, certain care needs, and the ability to perform ADLs at
the patient*s most dependent state. In addition to determining Medicare
payments, these data are used to measure patient needs, develop a plan of
care, and monitor the quality of care.
To gather the MDS, an in- house interdisciplinary team assesses each
patient*s clinical condition at established intervals throughout the
patient*s stay. The Medicare assessment schedule requires that the initial
assessment be performed during days 1 through 5 of a patient*s stay, but
may be performed as late as days 6 through 8, termed *grace days,* which
give staff additional flexibility in conducting the assessments. The
initial assessment is used to assign patients to a RUG that establishes
payments
for the first 14 days of care. For patients staying longer than 14 days, a
second assessment must be conducted during days 11 through 14 that
determines the RUG assignment and payment rate for days 15 through
30 of the patient*s stay. An additional assessment is performed prior to
the 30th day of care and every 30 days thereafter; each of these
assessments establishes the payment for the next 30 days up to the 100th
day.
8 Patients in the custodial RUGs are divided into three broad categories*
impaired cognition, behavior only, and physical function reduced* based on
the need for nursing services and the patient*s ability to perform ADLs.
Patients classified into a custodial care
RUG typically do not meet the skilled nursing care requirements for
Medicare coverage. 9 42 U. S. C. S:S: 1395i- 3( b)( 3)( A) and 1396r( b)(
3)( A) (2000). MDS Patient Assessments
Page 8 GAO- 02- 841 SNF Responses to Payment System SNFs can classify
patients primarily needing therapy into the high, medium, or low
rehabilitation payment group categories for the initial
assessment using either actual minutes of therapy provided or an estimate
of the amount that will be provided over the 2 weeks covered by the
initial assessment. If a patient is classified into one of these
rehabilitation
categories using an estimate, but actually receives less than the amount
of therapy to qualify into that category, payments to the SNF for the
initial assessment period are not reduced. To classify patients into the
very high or ultra high payment group categories on the initial
assessment, SNFs
must have already provided the minimum amount of therapy that defines
these categories when the assessment is done. 10 The accuracy and
completeness of the patient assessment information are
critical to ensure appropriate categorization of patients into payment
groups. For example, to distinguish between different levels of assistance
required in performing ADLs, a SNF needs to document how often and how
much assistance was provided to a patient during the past 7 days. For a
patient receiving over 720 minutes of therapy a week (the ultra high
rehabilitation category), the difference between assessing a patient as
needing *extensive* versus *limited* assistance in performing one ADL,
such as eating, may result in an additional payment of up to $48 per day
to the SNF. (See app. II for a comparison of ADLs and payment rates for
each
RUG.) Thus, a SNF might respond to the PPS by increasing the resources
devoted to completing the MDS.
This possible SNF response to the new payment system may be similar to how
hospitals responded to the inpatient hospital PPS. Under the inpatient
PPS, hospitals are paid a prospectively determined rate per patient stay,
which is adjusted for expected resource needs based on factors such as
patient diagnoses and treatment. After the implementation of the inpatient
PPS in 1983, hospitals expanded the number of diagnoses they reported to
describe patients. These changes in documentation resulted in some
patients being classified into higher payment categories, which increased
hospital payments.
10 For the second and all subsequent assessments, a SNF must have provided
the minimum amount of therapy in the range to classify a patient into any
of the therapy categories. This categorization establishes payment for the
next period. Possible SNF Responses to PPS Incentives
Page 9 GAO- 02- 841 SNF Responses to Payment System A SNF also has an
incentive to change the amount of care provided to minimize its costs and
maximize its payments. Because the amount of
therapy provided is key to classifying the majority of patients into RUGs,
a SNF benefits when it provides an amount of therapy on the low end of the
range of therapy minutes associated with that RUG. For example, furnishing
1 additional minute of therapy a week could move a patient from the very
high to the ultra high category. The SNF would receive an additional $63
or $99 more per day, depending on the patient*s ADL needs, but there may
not have been a proportionate increase in costs.
To ensure that its patients are grouped into the highest possible payment
groups, a SNF may adjust the timing of its initial patient assessments.
Grace days are intended to give SNFs the flexibility to delay care until
patients are ready to receive therapy, while ensuring that payments
reflect the treatment levels that are provided to the patient. SNFs may
opt to use grace days when conducting the initial assessment of patients
who may be grouped into the payment group categories that require actual
minutes of therapy (ultra and very high rehabilitation). Otherwise, if
initial assessments are done before the grace days, patients may not have
received enough therapy to reach the weekly threshold for placement into
one of these categories.
Since the implementation of the SNF PPS, some nursing home chains have
claimed that payments are inadequate and that this has caused their
financial condition to erode. We have reported that total SNF PPS payments
are likely to be adequate and may be excessive given that the payment
rates include the costs of inefficient delivery, unnecessary care,
and improper billings. 11 But the Medicare Payment Advisory Commission and
we have raised concerns that the payment rates for certain types of
patients may be inadequate because the patient classification system may
not appropriately reflect the differing needs of patients who require
multiple kinds of health care services, such as extensive or special care,
rehabilitative therapy, and ancillary services. 12 We have also expressed
11 GAO/ T- HEHS- 00- 192 and GAO/ HEHS- 00- 23. 12 See Medicare Payment
Advisory Commission, Report to Congress: Medicare Payment Policy
(Washington, DC: March 2001) and U. S. General Accounting Office, Skilled
Nursing Facilities: Medicare Payments Need to Better Account for
Nontherapy Ancillary Cost Variation, GAO/ HEHS- 99- 185 (Washington, DC:
Sept. 30, 1999). Refinements to the SNF
PPS
Page 10 GAO- 02- 841 SNF Responses to Payment System concern that the use
of therapy minutes provided to patients as a way to classify patients
might encourage the provision of unnecessary services. 13 In response to
concerns about the overall adequacy of Medicare payments
and their distribution across different types of patients, the Congress
has raised payments twice since the PPS implementation. These actions
increased payments across- the- board for all RUGs and, in addition, for
certain RUGs. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (BBRA) temporarily increased Medicare*s payments for all RUGs
by 4 percent, beginning in fiscal year 2001 through the end of fiscal year
2002. 14 In addition, BBRA increased payments for
15 RUGs (3 rehabilitation RUGs and all extensive services, special care,
and clinically complex RUGs) by 20 percent beginning in April 2000. 15 The
Congress intended this increase to be temporary* until refinements to the
RUGs patient classification system were implemented. However, refinements
have not been implemented and the Congress again revised the payment
rates. 16 The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA) temporarily increased the portion of the
payment related to nursing costs by 16.66 percent for all payment groups,
17 which raised the overall payment rates from 4 to 12 percent, depending
on the RUG, beginning April 1, 2001, through September 30, 2002. In
addition, BIPA replaced the 20 percent BBRA
increase that applied to 3 out of the 14 rehabilitation RUGs with a 6.7
percent increase for all rehabilitation RUGs. 18 CMS has also responded to
concerns about PPS. In July 2001, CMS
awarded a contract to determine the feasibility of refinements to PPS,
including alternatives to the RUGs patient classification system. To date,
this contract has not resulted in proposed refinements to the RUGs system
and the contractor*s preliminary report is not due until fall 2004. CMS
has
13 U. S. General Accounting Office, Medicare Post- Acute Care: Better
Information Needed Before Modifying BBA Reforms, GAO/ T- HEHS- 99- 192
(Washington, DC: Sept. 15, 1999). 14 Pub. L. No. 106- 113, App. F, S: 101(
d), 113 Stat. 1501, 1501A- 325. 15 BBRA S: 101( a) and (b). This 20
percent increase is calculated separately from the 4 percent increase. 16
65 Fed. Reg. 46, 770 (July 31, 2000).
17 Pub. L. No. 106- 554, App. F, S: 312( a), 114 Stat. 2763, 2763A- 498.
18 The remaining 12 RUGs* extensive services, special care, and clinically
complex* retained the 20 percent increase. BIPA S: 314.
Page 11 GAO- 02- 841 SNF Responses to Payment System also supported work
to assess and verify the MDS data that underlie PPS. However, we recently
reported that CMS*s proposed on- site and off- site
review of MDS assessments may not be sufficient to ensure the accuracy of
MDS assessments in most nursing homes or to systematically evaluate the
performance of state efforts to do so. 19 In September 2001, CMS awarded a
contract to determine if there are differences between the documentation
of patient care needs and actual patient care needs and to detect
irregularities in MDS assessments. The contractor began these data
monitoring activities in the spring of 2002, which include checking that
the RUGs reported on the Medicare claims match those on the MDS
assessments and examining the distribution of patients across the payment
groups.
Among patients primarily receiving rehabilitation care, more were
classified at their initial assessment into moderate rehabilitation
payment group categories and fewer into the intensive and low
rehabilitation categories since the implementation of PPS. Providers
reported that the payments for the moderate rehabilitation payment groups
were more
favorable, relative to their costs, than other payment groups. Further,
the share of patients initially classified into the rehabilitation RUGs
whose payments were increased by BBRA provisions grew, while the share of
patients initially classified into most of the other payment groups
declined or stayed the same. Across patients initially assigned to the
extensive,
special care, or clinically complex categories, more were classified as
requiring extensive services* the highest paying category* and fewer into
the special care or clinically complex categories. SNFs changed two
patient assessment practices that could have contributed to these shifts
in patients* initial payment group assignments. First, SNFs increased
their use of estimated* rather than actual* therapy minutes to assign
patients to rehabilitation categories. Second, SNFs assessed patients
later in their stays, making it more likely that they received more
therapy and therefore would be classified into categories with higher
payments.
19 For more information on CMS and state efforts to monitor the accuracy
of the MDS data see U. S. General Accounting Office, Nursing Homes:
Federal Efforts to Monitor Resident Assessment Data Should Complement
State Activities, GAO- 02- 279 (Washington, DC: Feb. 15, 2002).
Distribution of
Patients Across Payment Categories Has Changed
Page 12 GAO- 02- 841 SNF Responses to Payment System Although the
proportion of SNF Medicare patients initially classified into
rehabilitation payment group categories remained the same overall, the
distribution of patients within these categories changed considerably from
first quarter 1999 to first quarter 2001 (see table 1). 20 By 2001, more
Medicare patients receiving therapy were initially classified into the two
moderate rehabilitation categories* medium (16 percent more) and high (17
percent more), which made up about two- thirds of Medicare SNF admissions.
21 The share of patients initially classified into ultra high* the most
intensive rehabilitation category* decreased to comprise just 3 percent of
all Medicare SNF patients at their initial assessment in 2001. This shift
is consistent with the industry*s assertions that the high and medium
categories have more favorable payments, relative to their costs, than
other categories. We do not know if this shift reflects a change in the
care needs of patients from 1999 to 2001.
20 Over three- quarters of Medicare SNF patients were classified into
rehabilitation categories, while a little less than one quarter were
classified into extensive services, special care, or clinically complex
categories.
21 Our findings about the share of rehabilitation versus extensive,
special care, and clinically complex patients and the distribution of
patients across rehabilitation categories are consistent with other
analyses of claims data. See Department of Health and Human Services,
Office of the Inspector General, Trends in the Assignment of Resource
Utilization Groups by Skilled Nursing Facilities, OEI- 02- 01- 00280
(Washington, DC: HHS,
July 2001). More Patients Initially
Categorized into Payment Groups with Payment Increases
Page 13 GAO- 02- 841 SNF Responses to Payment System Table 1: Share of
Medicare Patients at Initial Assessment By Category and Percent Change,
First Quarters 1999, 2000, and 2001 Predominant
type of care Category JanuaryMarch
1999 (percent)
JanuaryMarch 2000 (percent)
JanuaryMarch 2001 (percent)
Percent change 1999- 2001
Ultra high 6.6 3.8 3. 2 -51.5 Very high 15.6 14.1 11.8 -24.4 High 37.1
42.1 43.5 17.3 Medium 15.9 16.9 18.5 16.4 Rehabilitation therapy
Low 0.5 0.3 0. 2 -60.0 Extensive services 11.9 13.1 13.3 11.8 Special care
5.8 5.1 4. 9 -15.5 Extensive,
special care, and clinically complex Clinically complex 4.1 3.1 2. 9 -29.3
Custodial care Other 2.6 1.6 1. 5 -42.2
Total 100 100 100 *
Note: Percentages do not add to 100 due to rounding. Source: GAO analysis
of the nursing home MDS, Medicare initial assessments, first quarters of
1999, 2000, and 2001. Some of the shifts in the distribution across
individual rehabilitation RUGs
paralleled changes in payment rates made by the Congress. Within the high
and medium rehabilitation payment group categories, the shares of patients
initially classified into RUGs that received congressionally mandated
payment increases in 2000 grew substantially more than the shares of
patients classified into rehabilitation RUGs that did not (see
table 2). For 8 of the 11 rehabilitation RUGs without this special
increase, the shares of patients at their initial assessment declined and
only one experienced an increase.
Page 14 GAO- 02- 841 SNF Responses to Payment System Table 2: Share of
Medicare Patients at Initial Assessment in Rehabilitation RUGs and Percent
Change, Before and After BBRA Payment Increases
Rehabilitation RUG Share
January- March 2000 (percent)
Share JanuaryMarch 2001 (percent)
Percent change 2000- 2001
RUGs with payments increased 20 percent by BBRA RHC 17.4 19.3 11 RMC 5.2
5. 6 8 RMB 8.4 9. 5 13
RUGs with payments not increased 20 percent by BBRA RUC 0.6 0. 5 -17 RUB
2.5 2. 2 -12 RUA 0.6 0. 5 -17 RVC 1.8 1. 3 -28 RVB 9.2 7. 8 -15 RVA 3.2 2.
7 -16 RHB 18.2 18.1 -1 RHA 6.4 6. 2 -3 RMA 3.4 3. 5 3 RLB 0.1 0. 1 0 RLA
0.2 0. 2 0
Note: The payment increases mandated by BBRA applied to services furnished
on or after April 1, 2000. Beginning April 1, 2001, BIPA replaced the 20
percent BBRA increase with a 6.7 percent increase for all rehabilitation
RUGs. Source: GAO analysis of the nursing home MDS, Medicare initial
assessments, first quarters of
2000 and 2001.
Among the patients initially classified into the extensive and special
care or clinically complex categories (all of which were increased 20
percent by BBRA), the share of patients initially assessed as requiring
the most intensive care* those in the extensive services category*
increased to become about two- thirds of patients in these categories,
while the share of patients in the special care and clinically complex
categories decreased.
Since the introduction of PPS, changes in SNF patient assessment practices
have made it easier to classify patients into some categories with higher
payments. When performing their initial patient assessments, SNFs have
increasingly opted to use estimates of the amount of therapy they expect
to provide (rather than actual therapy given during the first week of
care) to categorize patients into the high, medium, and low therapy
categories for the first 14 days of care. Because payments are based on
these estimates, payments for some patients were higher than they would
Changes in Assessment
Practices May Contribute to Different Classifications and Higher Payments
Page 15 GAO- 02- 841 SNF Responses to Payment System have been if the
payments were based on actual therapy provision. Comparing the first
quarters of 1999 and 2001, the practice of using
estimated therapy minutes, rather than actual therapy provided, to
classify patients into therapy categories increased more than 35 percent,
becoming the mechanism for classifying nearly two- thirds of all patients
in high, medium, and low rehabilitation categories. Of the patients who
could be evaluated, 22 one quarter of the patients classified using
estimated minutes of therapy did not receive the amount of therapy they
were assessed as needing, while three- quarters eventually did. 23 SNFs
increasingly performed initial patient assessments later in patient
stays, during the grace days, for patients in the highest paying therapy
categories* ultra high and very high. Because classification into these
categories is based on the actual amount of care provided, conducting the
patient assessments during the grace days allows additional time for more
therapy services to be provided, making it likelier that patients would be
classified into the ultra high and very high categories. To classify
patients into these categories, the use of grace days increased more than
40 percent from the first quarter of 1999 to the first quarter of 2001.
In the 2 years following the implementation of PPS, SNFs provided less
therapy to almost two- thirds of all Medicare SNF patients* those in the
medium and high rehabilitation payment group categories. The typical
patient in these categories received 22 percent less therapy, at least 30
fewer minutes, per week during the initial assessment period between the
first quarters of 1999 and 2001. Indeed, in 2001 half of the patients
initially categorized in these two groups did not actually receive the
amount of therapy required to be classified into those groups, due in part
to the use of estimated therapy minutes for classification (see table 3).
Further, during their initial assessment period, fewer patients received
therapy near the higher end of the range that defines each category. For
example, to be assigned to the high rehabilitation category, patients are
assessed as needing between 325 and 499 minutes of therapy a week. In 22
Only patients who stay long enough to have a second assessment done (where
the actual minutes of therapy provided in the past 7 days are recorded)
could be evaluated. For the
largest share of patients, however, we do not know if they received the
projected services because these patients did not stay in the facilities
long enough for a second assessment. 23 It is possible that between the
initial assessment and the end of the second assessment period the care
needs of some patients changed and they no longer required the amount of
therapy that had been originally estimated. Since PPS, SNFs
Provide Fewer Minutes of Therapy
Page 16 GAO- 02- 841 SNF Responses to Payment System 1999, 20 percent of
patients in the high rehabilitation payment group category received 390
minutes or more of therapy per week during their
initial assessment period. Two years later, less than 13 percent received
this much therapy. In 1999, 5 percent of patients initially assessed in
the high rehabilitation payment group category received 480 minutes or
more of therapy per week. Two years later, only 2 percent of patients
received
this level of therapy.
Table 3: Median Therapy Minutes Per Week Provided on or Before the Initial
Medicare Assessment By Rehabilitation Category, 1999 and 2001 Minutes per
week provided in Rehabilitation category
(required therapy minutes per week) 1999 2001 Percent change
1999- 2001
Ultra high (720 or more) 735 737 0 Very high (500- 719) 525 525 0 High
(325- 499) 325 255 -22 Medium (150- 324) 150 117 -22 Low (45- 149) 80 77
-4
Source: GAO analysis of the nursing home MDS, Medicare initial
assessments, first quarters of 1999 and 2001.
Across all therapy patients, the median amount of therapy provided during
the initial assessment period also declined from 1999 through 2001. The
declines in therapy service use and resultant reductions in costs were not
uniform across the rehabilitation payment group categories. Consequently,
payments for some categories of RUGs are likely to be higher than their
service costs, compared to other categories of RUGs. For patients in the
more intensive rehabilitation payment group categories, where estimated
minutes cannot be used to classify patients, median therapy minutes did
not decline. Our work indicates that SNFs have responded to PPS in two
ways that
may have affected how payments compare to SNF costs. SNFs have (1) changed
their patient assessment practices and (2) reduced the amount of therapy
services provided to Medicare beneficiaries. The first change can increase
Medicare*s payments and the second can reduce a SNF*s costs. CMS*s ongoing
efforts to refine the payment system are particularly important in light
of these provider responses to the PPS. Concluding
Observations
Page 17 GAO- 02- 841 SNF Responses to Payment System In its written
comments on a draft of the report, CMS agreed that ongoing evaluations of
PPS are important. CMS stated that our findings are
generally consistent with its analyses and with its expectations regarding
provider responses to the incentives of the PPS. CMS noted that it intends
to examine whether therapy provided is consistent with payment levels and
ADL coding accuracy through its program safeguard contractor project. CMS
stated that reporting the percentage change of relatively small shares of
patients across payment categories may overemphasize the
changes and is somewhat misleading. However, the percentage changes
reported in table 1 demonstrate that the shifts in shares of patients
across payment categories are consistent with the industry*s assertions
that high and medium categories have the most favorable payments, relative
to costs. In addition, the percentage changes reported in table 2
demonstrate that the shifts among RUGs parallel the congressionally
mandated payment increases. CMS also provided technical comments, which we
incorporated as appropriate. CMS*s comments are in appendix III.
We are sending copies of this report to the Administrator of CMS,
appropriate congressional committees, and other interested parties. We
will also provide copies to others upon request. In addition, the report
is available at no charge on the GAO Web site at http:// www. gao. gov.
If you or your staff has any questions, please call me at (202) 512- 7114.
Laura Sutton Elsberg, Leslie Gordon, and Walter Ochinko prepared this
report under the direction of Carol Carter.
Laura A. Dummit Director, Health Care* Medicare Payment Issues Agency
Comments
Appendix I: Scope and Methodology Page 18 GAO- 02- 841 SNF Responses to
Payment System We used data from the 1998 Medicare cost reports to
identify SNFs that began participating in PPS on or before January 1,
1999. Facility
ownership and other characteristics were taken from HCFA*s end- of- year
Provider of Services file for 1999. We included in our analysis only those
SNFs that had transitioned to PPS before or during January 1999, were
active in 1999, and submitted Medicare MDS assessments in the three
periods used in this study. This cohort comprised approximately 80 percent
of all SNFs that filed a 1998 cost report and was representative of the
universe of SNFs in terms of bed size, location (rural and urban), and
ownership characteristics.
For the SNFs in our sample, we analyzed data from the nursing home MDS
national repository to compare differences in patient classification and
therapy services across three points in time* early in PPS (January- March
1999), 1 year later (January- March 2000), and 2 years later (JanuaryMarch
2001). 1 Data to examine the distribution of Medicare patients after the
implementation of BIPA- mandated changes (applied to services on or after
April 1, 2001) were not available in time for this analysis. Our sample
included over 350,000 MDS assessments for Medicare beneficiaries for each
time period. To examine the differences in patient classification, we
grouped patient assessments into 11 major categories* the 5 major
rehabilitation categories (ultra high, very high, high, medium, and low),
3 categories for patients requiring extensive or special care or who are
clinically complex, and 3 categories for patients requiring custodial
care, based on the RUG reported on the initial assessment.
To examine the differences in the provision of therapy services, we
aggregated the reported physical, occupational, and speech therapy minutes
for each assessment. We calculated the number of initial assessments that
had used estimated minutes to qualify patients into a rehabilitation
category by counting the number of first assessments that reported actual
therapy minutes below the minimum number of minutes required in the three
rehabilitation categories (high, medium, and low). To determine the extent
to which patients received the estimated therapies, we calculated, for the
patients who had a second assessment, the percent who had received less
than the minimum number of therapy minutes required for the RUG reported
on the initial assessment. We also
1 The national repository contains resident assessment information for
every resident of a Medicare- or Medicaid- certified long- term care
facility. Appendix I: Scope and Methodology
Appendix I: Scope and Methodology Page 19 GAO- 02- 841 SNF Responses to
Payment System interviewed CMS staff responsible for SNF policy and we
reviewed regulations, literature, and other documents relating to SNF PPS
and MDS.
Appendix II: Therapy Minutes, Activities of Daily Living, and Medicare
Payment Rates to SNFs
Page 20 GAO- 02- 841 SNF Responses to Payment System Table 4: Therapy
Minutes, Activities of Daily Living, and Medicare Payment Rates to SNFs in
Fiscal Year 2002 a Predominant type of care Category Therapy minutes
per week ADLs b Resource utilization group Medicare daily
payment rate
16- 18 RUC $441.18 9- 15 RUB $392.78 Ultra high 720+ 4- 8 RUA $369.27
16- 18 RVC $342.67 9- 15 RVB $330.22 Very high 500- 719
4- 8 RVA $298.41 13- 18 RHC $318.68
8- 12 RHB $291.02 High 325- 499
4- 7 RHA $264.74 15- 18 RMC $315.94
8- 14 RMB $279.99 Medium 150- 324
4- 7 RMA $262.01 14- 18 RLB $252.39 Rehabilitation therapy
Low c 45- 149 4- 13 RLA $209.52 Extensive services d N/ A 7- 18 3 RUGs
$234.06-$ 307. 35 Special care e N/ A 7- 18 3 RUGs $211.93-$ 228. 53
Extensive or special care or clinically complex
Clinically complex f N/ A 4- 18 6 RUGs $175.98-$ 227. 14 Impaired
cognition c N/ A 4- 10 4 RUGs $145.55-$ 167. 68 Behavior only c N/ A 4- 10
4 RUGs $138.64-$ 166. 30 Custodial g Physical function reduced c N/ A 4-
18 10 RUGs $135.87-$ 181. 51
a The payment rates in the table became effective October 1, 2001, for
SNFs located in urban areas and include the 16. 66 percent increase for
the nursing component as required by BIPA, but do not include the add- on
payments for individual RUGs. There are separate payment rates for
facilities located in rural areas.
b ADL scores range from 4 (least dependent) to 18 (most dependent). c The
low rehabilitation RUG and some of the custodial RUGs require at least two
nursing rehabilitation activities, 6 days a week. Some examples include:
passive or active range of motion, amputation care, and splint or brace
assistance. d The extensive services category includes patients who have
had the following specific medical or
skilled nursing care needs in the past 14 days* intravenous medications,
tracheostomy care, ventilator/ respirator support, suctioning, or
intravenous feeding in the last 7 days. e The special care category
includes patients who have any of the following clinical conditions:
multiple
sclerosis, cerebral palsy, quadriplegia with high ADL dependency, surgical
wounds or open lesions, pressure or stasis ulcers on two or more body
sites or have a fever in combination with dehydration, pneumonia,
vomiting, weight loss, or tube feeding. It also includes patients who
require specific medical and skilled nursing care, such as radiation
therapy and respiratory therapy. f The clinically complex category
includes patients who have any of the following clinical conditions:
comatose, burns, systemic infection (septicemia), pneumonia, internal
bleeding, dehydration, dialysis, or paralysis on one side (hemiplegia) in
combination with a high ADL dependency. It also includes patients
receiving chemotherapy, tube feeding of at least 26 percent of daily
calorie intake and 501 milliliters of fluid, being treated for foot wounds
or transfusions, receiving injections 7 days per week for diabetes while
their condition is somewhat unstable, or those who have received oxygen
therapy in the last 14 days. The group also includes patients with
unstable conditions.
Appendix II: Therapy Minutes, Activities of Daily Living, and Medicare
Payment Rates to SNFs
Appendix II: Therapy Minutes, Activities of Daily Living, and Medicare
Payment Rates to SNFs
Page 21 GAO- 02- 841 SNF Responses to Payment System g Patients are
classified into the custodial categories according to their need for
nursing services and assistance with ADLs. These patients typically do not
meet the criteria for Medicare coverage because they generally do not
require skilled nursing care.
Sources: Medicare Program: Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities, 63 Federal Register 26, 252 (May
12, 1998), table 2C and Medicare Program: Prospective Payment System and
Consolidated Billing for Skilled Nursing Facilities, 66 Federal Register
39,562 (July 31, 2001), table 3.
Appendix III: Comments from the Centers for Medicare & Medicaid Services
Page 22 GAO- 02- 841 SNF Responses to Payment System Appendix III:
Comments from the Centers for Medicare & Medicaid Services
Appendix III: Comments from the Centers for Medicare & Medicaid Services
Page 23 GAO- 02- 841 SNF Responses to Payment System (201016)
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