Skilled Nursing Facility Therapy Services Are the Next RAC Target

Jessica C. Forster, Esq.
Wachler & Associates, P.C.

This spring the Centers for Medicare and Medicaid Services (CMS) released a public data set containing detailed information on Skilled Nursing Facility (SNF) utilization, charges and payments. Although CMS and the Health and Human Services Office of Inspector General (OIG) have monitored trends in therapy utilization and billings by SNFs for years, the recently released data set strengthened CMS’ suspicions that certain SNFs overbilled for therapy services. [i] As a result, CMS referred the issue to Recovery Audit Contractors (RACs) for further investigation.

Dr. Shantanu Agrawal, Deputy Administrator for Program Integrity and Director for the Center of Program Integrity, stated, “CMS strives to ensure that patient need, rather than payment system incentives, are driving the provision of therapy services. These concerns have prompted us to refer this issue to the Recovery Audit Contractors for further investigation, and our hope is that data transparency will facilitate real changes.” [ii]

The data set, known as the Skilled Nursing Facility Utilization and Payment Public Use File (SNF PUF), contains information regarding 15,055 SNFs nationwide, 2.5 million stays and almost $27 billion in Medicare payments in 2013.[iii] The data set is organized by provider, state of service and resource utilization group (RUG).

To obtain payment under Medicare’s SNF prospective payment system (SNF PPS), SNFs classify each beneficiary into a group according to each beneficiary’s care and resource needs. The groups are called RUGs and each RUG has a per diem Medicare payment rate. The intensity and duration of therapy services and the time required to assist a beneficiary with activities of daily living (ADL) determine to which RUG a beneficiary is assigned. In general, Medicare pays more for RUGs with higher level therapy and longer duration therapy and ADL services.

Data revealed that the two most frequently billed RUGs in 2013 were for ultra-high rehabilitation services with 6 to 10 minutes of ADL assistance (RUB) and ultra-high rehabilitation services with 11 to 16 minutes of ADL assistance (RUC).[iv] Ultra-high rehabilitation services is the highest level rehabilitation contemplated under the SNF PPS, requiring a minimum of 720 minutes of therapy. Total Medicare payments for RUGs RUB and RUC in 2013 totaled over 13 billion dollars.[v] In another context, RUGs RUB and RUC accounted for nearly half of the total Medicare payment amount of 27 billion dollars in SNF PUF data set. These statistics confirmed CMS’ suspicions of SNFs’ heavy utilization of the highest paying RUGs under the SNF PPS in calendar year 2013.

To further examine SNF billing trends, CMS organized data by therapy minutes to determine the percentage of billings that fell within ten minutes of the minimum therapy minute threshold to qualify for each RUG category. As stated above, to qualify for an “ultra-high” rehabilitation RUG a patient must receive at least 720 minutes of therapy. To qualify for a very-high rehabilitation RUG, which is the second highest level of rehabilitation, a patient must receive at least 500 minutes of therapy. Data revealed that 65% of all ultra-high rehabilitation assessments reflected therapy services lasting between 720 and 730 minutes. In other words, 65% of all ultra-high rehabilitation assessments lasted just long enough to qualify for the ultra-high rehabilitation RUG payment. 51% of all very high rehabilitation assessments reflected therapy services lasting between 500 and 510 minutes. As the majority of therapy minutes for the two highest paying RUGs fell within ten minutes of the minimum-qualifying threshold for payment, CMS determined that payment incentives rather than patient care needs may be driving the provision of SNF therapy services.

CMS further stratified the data by state. Texas, Arkansas, Mississippi and Indiana had the highest percentages in the nation of both very high and ultra-high rehabilitation services that fell within the ten minute threshold. Iowa, Illinois, Nebraska and Mississippi had the highest percentages in the nation of very high rehabilitation services within the ten minute threshold. Michigan, California, Nevada, New Mexico and Louisiana had the highest percentages in the nation of ultra-high rehabilitation services within the ten minute threshold. It should be anticipated that RACs may target their initial SNF therapy investigation on providers located in these states.

The SNF PUF identifies individual SNFs using their six-digit identification number and for each SNF lists the therapy minutes billed and the RUG counts. SNFs should review the SNF PUF to determine how they compare to other SNFs in the data set and in their state. If data reveals heavy utilization of the very high and ultra-high RUGs, a SNF should implement practices to prospectively review the underlying medical records for factors to justify the RUGs billed, such as disease severity, quality of care, and patient population characteristics. Additionally, SNFs should determine what percentage of their therapy services fall within the ten minute minimum billing threshold for the higher level RUGs as this will certainly be a focus of any RAC when conducting a SNF therapy review and audit. Lastly, SNFs should review their compliance plans or develop a compliance plan if one is not already in place.

[i] See December 2010 OIG Report OEI 02-09-00202 “Questionable Billing by Skilled Nursing Facilities.” Available at: See also November 2012 OIG Report OEI 02-09-00202 “Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More Than a Billion Dollars in 2009.” Available at:

[ii] CMS Media Release, March 9, 2016, “CMS Releases Skilled Nursing Facility utilization and payment data.” Available at: .

[iii] CMS’ Medicare Skilled Nursing Facility (SNF) Transparency Data (CY2013) Fact Sheet, located at: .

[iv] Id .

[v] Id .

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