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Nursing homes reap $2b in Medicare slip

US report cites a loophole left by rule change

By Drew Armstrong
Bloomberg News / July 12, 2011

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WASHINGTON - Nursing homes collected $2.1 billion in added Medicare payments in the first half of this year, an unintended side effect to a rule change that aimed to clamp down on overbilling, according to a government report.

The federal health care program for the elderly and disabled blocked companies in January from assigning therapists to treat groups of patients simultaneously and billing each individually for the total time of the session.

Operators responded by reclassifying patients in smaller group settings and still billed the government as if therapy was provided on a one-on-one basis, according to the unpublished report by the Department of Health and Human Services inspector general. The report didn’t single out companies, but recommended the federal government block further overpayments.

Nursing homes “have a financial incentive to choose group therapy,’’ according to the report, a copy of which was obtained by Bloomberg. It recommended Medicare “take immediate action.’’

Medicare pays $430 to $699 a day for nursing home patients, depending on the amount of therapy. Circumventing the rule change lets operators bill more patients at the highest rate, the report said.

The inspector general’s office declined to comment on the report.

For-profit nursing homes argue that Medicare should keep paying them under the current system until the end of the year to figure out the extent of the issue, said Mark Parkinson, chief executive of the American Health Care Association, the Washington lobbying group for for-profit nursing homes.

“We know that the sector was overpaid,’’ Parkinson said by phone. “All parties also know that there’s no way to know the exact amount of overpayment. With all of the other changes going on, it’s probably best not to make these additional changes,’’ he said, referring to new rules arising from the national health care overhaul.

“While we understand that CMS doesn’t want to wait an entire year because the amount of money is quite large, we think it’s prudent,’’ Parkinson said, referring to the Centers for Medicare and Medicaid Services.

Leading for-profit nursing home chains include Kindred of Louisville, Ky.; Skilled Healthcare of Foothill Ranch, Calif.; Carlyle Group’s HCR ManorCare Inc. in Toledo, Ohio; and Sun Healthcare, based in Irvine, Calif.

Federal officials should close a loophole that’s enabling publicly traded companies to profit and may make the industry a target for broader federal reimbursement cuts, say representatives of nonprofit nursing homes.

Nursing home overpayments have been cited as a concern before by the Medicare Payment Advisory Commission that advises Congress, Medicare administrators, and federal investigators. The January rule change was designed to slow long-term spending on therapy services.

Medicare administrators restricted the way nursing homes bill for concurrent therapy, in which workers simultaneously treat 10 or more patients recovering from strokes or hip replacement surgeries.

The health program didn’t make a similar change to billing for group therapy sessions involving as many as four patients at a time, or one-on-one therapy.

The inspector general’s office is still investigating and plans to issue a full report this year, according to the report.

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