Nursing homes and loopholes, a love story

John O'Connor
John O'Connor

To really understand what is going on in the wacky world of Medicare therapy billing, here's all you really need to know:

A recent Wall Street Journal analysis of federal financial reports found that nursing homes gave Ultra-High therapy to 7% of the days they billed Medicare in 2002. Yet by 2013, the figure was up to 54%.

I'm willing to acknowledge that residents may have been a bit sicker in 2013 than a decade prior. But more than seven times sicker on average? Not likely.

So what's the deal here? It's simple really: The industry found another loophole and cashed in. It certainly wasn't the first time we've witnessed this phenomenon, nor is it likely to be the last.

The loophole in this instance was discovered in the changing way Medicare paid for care. Rules passed just before the turn of the century shifted payments from costs to levels. The idea was to get away from a system where Uncle Sam was getting nickeled-and-dimed for every little thing a facility did in the name of rehab. Under the new system, a set price would be paid at predetermined levels (or to use a more familiar term, Resource Utilization Groups).

That would seem to be a logical progression, except for a tiny matter that was overlooked: Operators would now have built-in incentives to give residents as much high-end therapy as possible.

Thus, a cottage industry was born. And it quickly became apparent how to win under new management: Max out on Medicare. Soon we saw almost every facility placing help wanted ads for “MDS Coordinators.” Turns out these were the people who could best leverage admissions and care plans to take full advantage of what Medicare had to offer.

Many skilled care operators who formerly considered themselves in the convalescent care business were now competing strictly for post-acute rehab patients.

One can argue whether the response was ethical. What can't be argued was whether it was legal. It was (except in cases of provable fraud). And in hindsight, did CMS really expect a field that had historically survived by finding Medicaid and Medicare loopholes to suddenly change its spots?

Right now, some miffed CMS officials are taking a “just-you-wait” attitude toward skilled operators. Regulators' new ace in the hole? Managed care and bundled payments.

To be sure, both may collectively put facilities on an austerity fiscal diet, at least compared to the gorging at the Medicare trough we've seen recently.

But here's the thing: You can bet that industry-hired actuaries, lawyers, consultants and other assorted bean counters are going over new rules with a fine-tooth comb. They are looking for the next generation of potential revenue streams. If they exist, they will be found, and implemented.

Why? Let's just say there must be billions of reasons.

John O'Connor is McKnight's Editorial Director.

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McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Emily Mongan.

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