Rehab care reimbursement under renewed fire from OIG

A majority of frail Medicare patients who enter nursing homes in need of rehabilitation therapy now receive higher-paying intensive therapy before they leave, a major shift from just years ago, despite no evidence that such therapy is needed. The shift makes the rehab arena an attractive target for Congress and federal health officials looking to save billions of dollars.

HHS' Office of Inspector General last week called on federal policymakers to cut reimbursement for skilled-nursing facilities that deliver rehabilitation therapy, which “could save Medicare billions of dollars.”

The OIG said the use of intensive therapy, which is triggered when physical, occupational, speech or cognitive rehab reaches 720 minutes per week, rose sharply from 2011 to 2013.

While policymakers have been looking at a fundamental overhaul of how Medicare pays for skilled nursing and other post-acute care, many observers now believe Congress could move to make cuts long before those efforts bear fruit. “We're moving toward a tipping point” for reform, said David Grabowski, an expert in long-term care and a health policy professor at Harvard University. Yet more immediate cuts are likely. “We're bound to see some decease in the generosity of payments,” especially for highly profitable, intensive therapy services.

In recent years, government investigators have documented how Medicare overpays for rehabilitation therapy in nursing homes after hospitalization. Last week's OIG report echoed previous conclusions and could pose an immediate financial threat to major skilled-nursing companies like HCR ManorCare, Life Care Centers of America and Genesis HealthCare.

Some firms already face civil challenges for the alleged overpayments. The U.S. Justice Department in April said it would join a civil lawsuit that accused HCR ManorCare of pressuring employees to deliver more therapy than patients needed to boost revenue. HCR ManorCare declined to comment last week. Officials denied the allegations earlier this year. Other nursing homes have settled similar cases in recent years.

The latest report adds urgency to calls for reform in a sector with well-documented variations in quality and spending, much of which are believed to be avoidable. Use of aggressive therapy added $1.1 billion to Medicare's $53 billion skilled-nursing budget in 2012 and 2013.

The OIG report attributed the rising use of intensive therapy to a loophole in Medicare policy, which bumps up payments once the 720-minute rehab threshold is crossed. The report noted that nursing homes “increasingly provided exactly 720 minutes” to qualify for the higher reimbursement and then cut off therapy. The OIG called for the CMS to slash payments and change how it pays for skilled nursing.

Medicare currently pays $231 a day for intensive therapy, compared to $37 per day for patients who receive the least amount of therapy. (There are increments where rates increase between 45 minutes to 720 minutes.) The average nursing home saw profits of $66 per day at the higher rate, which therapy patients received for more than half the days (57%) in 2013. That's compared with 7% in 2002, the Wall Street Journal reported earlier this year.

The advocacy group AARP called the inquiry's results troubling. “Medicare should pay appropriately to ensure that beneficiaries who need therapy have access to quality therapy services, but it should not overpay or inappropriately pay for services beneficiaries do not need,” said Rhonda Richards, senior legislative representative with AARP. “The payment system should encourage improved quality, value and appropriate use of services.”

Changes to how Medicare pays skilled-nursing homes are likely, although the shift away from payment tied to volume will be gradual if the industry continues to get its way on Capitol Hill. Under legislation passed last year, nursing homes must begin reporting Medicare spending per beneficiary, hospitalization rates for potentially preventable readmissions and other quality measures, but the first reports aren't due until next October.

The Improving Medicare Post-Acute Care Transformation Act of 2014 also called on the Medicare Payment Advisory Commission to study alternative payment models for the post-acute sector. But that report isn't due to Congress until 2022.

That slow pace of reform has been welcomed by the skilled-nursing industry, which has lagged other healthcare sectors in its efforts to standardize and collect data on care quality and patient outcomes. Officials with the American Health Care Association, a nursing home trade group, urged Congress and the CMS to delay making payment changes until federal officials can analyze new patient and quality data after it comes in next year.

“The question is, do we have the right information to make a surgical adjustment cut at this time, and I am not sure there is,” said Dan Ciolek, senior director of therapy advocacy for the AHCA. Funding cuts made without the latest information risk harm to the most efficient providers, he said. The data will help answer questions about whether nursing home patients receive too much rehab therapy or too little.

However, the industry could become a target if Congress decides it needs money to pay for other priorities, such as repealing the so-called Cadillac tax or device tax, which helps pay for insurance expansion under healthcare reform. “Paying less is easier than paying differently,” said Dan Mendelson, CEO of consulting group Avalere Health. For health policymakers and Congress, the healthy Medicare margins for skilled nursing are an attractive target.

Overall, skilled-nursing margins under Medicare were more than 10% between 2002 and 2012. But they were significantly higher (25% to 42% over the decade) for patients who received therapy services, according to the OIG report.

Not everyone fears that patients receive too much therapy, a central concern of the OIG report. Some argue that many nursing home patients don't receive enough rehabilitation therapy. “I don't see skilled nursing doing enough therapy, and they're certainly not giving it to people who don't need it,” said Cindy Hasz, a geriatric nurse care manager who founded Grace Care Management in San Diego.

But the latest OIG report has raised the odds of near-term payment changes and clearly has the industry worried. “We reviewed the report and we will continue to closely monitor changes in reimbursement that may come from the OIG's suggestions,” officials with Brookdale Senior Living, Brentwood, Tenn., said in a statement.