The report says changes in billing patterns by skilled-nursing facilities contributed to an overall increase in payment by the Medicare program and the CMS should reduce reimbursement accordingly when the agency releases its final rule for fiscal 2012, which is due for release on or before Aug. 1.
The inspector general's office report makes essentially the same case for cuts as the CMS when it issued a proposed reimbursement rule for skilled-nursing facilities in April. The CMS estimated that the cost of recalibrating payments over a full year would be $4.47 billion.
The proposed rule suggested two courses of action: Reduce payments by 11.3% to adjust for the change in billing or ignore that for the next fiscal year and increase payments by 1.5 percentage points, according to a CMS news release. Officials for LeadingAge, an association that represents not-for-profit nursing homes, argue that an industrywide cut of 11.3% would be unfair, given some skilled-nursing facilities did not participate in the kind of billing changes that produced the extra reimbursement.
In addition, some providers likely received payment increases well above the 11.3% proposed by the CMS, which means they would be paying back less, said Dr. Cheryl Phillips, senior vice president of advocacy for Leading-Age. The better course of action would be to close the loopholes and move on from there, Phillips said. “The ship will right itself if you fix the leaks,” she said.
The American Health Care Association, which represents all types of long-term-care facilities, also argued in a statement against a reimbursement cut. “In thinking about the report's recommendation of an immediate repayment, such a move would result in a harmful ripple effect throughout the economy, threatening jobs in our facilities, potentially impacting the quality caregivers provide. Further, that effect would extend indirectly into other industries that service our sector such as trucking and food prep. This is too important to get wrong, and we want CMS to carefully weigh all of those factors.”
In the first option proposed by the CMS, the agency would provide a reimbursement increase of 1.5 percentage points, or about $530 million, which the agency calculated by applying the 2012 marketbasket index of 2.7 percentage points and reducing it by 1.2 percentage points “to account for greater operational efficiencies,” as outlined in the Patient Protection and Affordable Care Act.
In the second option, the CMS would adjust for the agency's unexpected spike in nursing-home payments during fiscal 2011 with the 11.3% cut, which would require reducing payments to skilled-nursing facilities in fiscal 2012 by $3.94 billion.
The CMS' changes that led to the shift in billing were intended to make reimbursement more reflective of the cost of care. Expecting payments to remain level, instead the CMS saw reimbursement climb 16% to $14.8 billion in the first six months of fiscal 2011 from $12.7 billion in the last six months of fiscal 2010.
Most of the $2.1 billion increase—$1.8 billion—came from changes to therapy payments within Resource Utilization Groups, which Medicare uses to pay skilled-nursing facilities for therapy.
Providers shifted billing into higher-paying RUGs and out of lower-paying RUGs as a result of the new billing choices, according to the report. The choices gave nursing homes a financial incentive to choose group therapy, which is similar therapy offered to two to four patients, over two other types, concurrent therapy, which is when two patients with differing care needs get therapy at the same time, and individual therapy. The CMS has a fix for that and should implement it right away, Phillips said.
The inspector general's report also found some problems regarding the time frame for when a skilled-nursing facility can calculate which RUG a patient belongs in and recommends that skilled-nursing facilities recalculate a beneficiary's RUG whenever his or her level of therapy changes substantially.
The report notes that the inspector general intends to conduct a full skilled-nursing facility billing review at the end of the current fiscal year, which concludes Sept. 30. “However, based on the data in this report, CMS should take immediate action,” using its pending skilled-nursing facility final rule to do so, according to the report.