Nursing Homes Exploiting Billing System with Medicare


A recent article put out by the New York Times discussed a new report from the Department of Health and Human Services saying that nursing homes are exploiting the billing system with Medicare by filing claims for the highest, most expensive levels of therapy, regardless of whether patients actually need them. Thus, nursing homes are receiving much more in Medicare payments than it costs for them to provide care.

Unfortunately, this is really not a new problem. The inspector general of the department has documented this kind of over-paying in many studies over the last 15 years. For 14 years in a row now, Medicare payments to nursing homes have been about 10 percent higher than the actual cost of care. The inspector general stated that nursing homes have been increasingly classifying patients as needing the highest level of therapy and then providing the minimum amount of therapy required to qualify for the payments. The Medicare Payment Advisory Commission said that therapy payments are disproportionate to the costs, and rise faster than providers’ therapy costs. The report detailed that these payments to nursing homes are increasing for reasons unrelated to the condition or characteristics of patients.

So what does this mean for us tax payers? The commission stated that Medicare “essentially requires tax payers to continue to finance the high margins of this industry.” Between 2012 and 2013, these unnecessary extra billings cost Medicare $1.1 billion. Aren’t we lucky?

Because of Medicare’s current payment system, nursing homes have an incentive to provide as much therapy as possible in order to optimize their revenue. Medicare classifies nursing home residents into 66 groups depending on the patient’s condition and needs. More than one-third of these groups are for patients who require physical, occupational or speech therapy. Medicare pays more for patients who require the most therapy. Right now, Medicare pays for each day of care and payments are partly based on the minutes of the therapy provided. The nursing home industry suggests that instead of this payment model, Medicare should pay a lump sum for a patient’s entire nursing home stay based on the conditions and needs of the patient, in order to avoid fraudulent billing behavior.

The American Health Care Association, which lobbies for nursing homes, has recognized that nursing homes use therapy to over-bill for Medicare payments, and said that it supports efforts to shift “away from paying providers based solely on their volume of services.”

In what perhaps could be an effort to ease potential outrage over this issue, Greg Crist, a spokesman for the American Health Care Association, said that while Medicare is over-paying, Medicaid – the program for low-income people – consistently pays nursing homes much less than their costs and two-thirds of nursing home residents are on Medicaid. Thanks, Greg.

The DHHS recommended in its report that CMS evaluate how payment rates for therapy should be reduced, to change the payment method for therapy, to adjust payments to eliminate increases that are unrelated to beneficiary characteristics, and to strengthen oversight in skilled nursing facility billing.

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