Report Focuses on Nursing Facilities' Payments, Quality

Rebecca Robichaud, Esq.
Kevin R. Miserez, Esq.
Wachler & Associates, P.C.

In November 2012, the Office of Inspector General ("OIG") released a report entitled "Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More Than a Billion Dollars in 2009", which is the second in a series of reports about Skilled Nursing Facilities ("SNF") payments and quality of care. In this particular study the OIG reviewed the medical records of a stratified random sample of SNF claims from 2009 to determine the extent to which SNFs misreported information and the effects such misreporting had on the Medicare trust funds.

The significance of this report lies not only in the findings by the OIG of potential improper payments, but also in the recommendations and CMS' response to the recommendations. According to its report, the OIG found that 24.9% of SNF claims were billed in error in, resulting in potential improper payments of $1.5 billion of the total $26.9 billion paid to SNFs in 2009. The OIG determined that 22.8% of the total SNF claims billed in 2009, or $1.2 billion of the alleged $1.5 billion in improper payments, was attributable to SNFs incorrectly billing resource utilization groups ("RUGs"). SNFs use Minimum Data Sets (MDS) to evaluate the medical condition of each beneficiary in addition to his or her current and anticipated service needs. The items contained on the MDS are then used to classify beneficiaries into RUGs. The beneficiary's RUG is used to determine how much Medicare pays the SNF, with each RUG having a different per diem rate. There are eight RUG categories, of which two categories include therapy services (i.e., physical, occupational or speech therapy). In addition, these therapy RUGs are further divided into five levels based on the amount of therapy a beneficiary requires, which is predominantly based on the number of therapy minutes provided to the beneficiary during the look-back period. Typically, higher therapy-level RUGs receive higher Medicare payments (e.g., RUC, a rehabilitation RUG with an ultrahigh therapy level, received a $277 higher per diem rate in FY 2010 than RLA, a rehabilitation RUG with a low therapy level). The OIG found that 20.3% of all claims consisted of SNFs having billed higher paying RUGs than were appropriate, nearly half of which were billed as ultrahigh therapy RUGs when the SNF should have billed at lower or non-therapy RUGs, according to the OIG.

The OIG proceeded to make six recommendations to CMS about the necessary actions needed to be taken to reduce the allegedly inappropriate billings, which include: (1)increasing and expanding CMS's review of SNF claims by conducting more medical reviews; (2) utilizing CMS's fraud prevention system to identify SNFs that persistently bill for higher paying RUGS; (3) instructing CMS contractors to more closely monitor SNFs' compliance with the new therapy assessments, and to identify and target for review SNFs that are using these assessments less frequently in order to ensure they are being completed; (4) changing the current method for determining the amount of therapy a beneficiary needs as to minimize incentives for SNFs to provide unnecessary or excessive amounts of therapy; (5) improving accurate reporting of MDS items by instructing surveyors to monitor the accuracy of MDS items more closely, with specific focus on MDS categories that the OIG has identified as problematic, and instructing MACs to provide education and training to SNFs in order to improve accurate reporting; and (6) following up on the SNFs which the OIG found billed in error during its study.

In her September 27, 2012 response to the OIG report, Marilyn Tavenner, Acting CMS Administrator concurred with each of the six OIG recommendations. In this letter, CMS indicated it will issue a Technical Direction Letter ("TDL") to Medicare Administrative Contractors ("MAC") and request that MACs choosing to increase and expand reviews of SNFs more closely scrutinize the MDS items most commonly misreported and focus reviews on SNFs with reoccurring issues. CMS is also developing an SNF Model to identify aberrant billing practices.

It is important for SNFs to be cognizant of CMS's new and preexisting areas of focus. An effective method for SNFs to identify and mitigate their exposure risk is to have a detailed and effective compliance program in place. Compliance programs for SNFs were recommended, but optional in the past. However, with the passage of the Affordable Care Act (ACA), SNFs are now required to have a compliance and ethics program that is "effective in preventing and detecting criminal, civil, and administrative violations...and in promoting quality of care" as a condition of participation in the Medicare and Medicaid programs. The ACA requires CMS, working jointly with the OIG, to publish regulations defining core elements of an effective compliance plan. Pursuant to the ACA, as of March 23, 2012, nursing homes must begin certifying they have an effective compliance plan in place. The challenge is that to date, CMS has not released regulations regarding the core elements, despite the ACA's deadline. It is uncertain whether CMS's delay in promulgating the compliance regulations will bring about a delay in SNFs' implementation deadline, however, SNFs should not postpone establishing their compliance programs. Fortunately for SNFs, the ACA lists eight required components to be included in a SNF's compliance and ethics program, which include:

1. Adoption of compliance standards and procedures to be followed by its employees that are reasonably capable of reducing the prospect of criminal, civil and administrative violations;
2. Responsibility for overseeing compliance must be assigned to high-ranking individuals within the organization who have sufficient resources and authority to assure such compliance;
3. The organization must have exercised due care to ensure that substantial discretionary authority is not delegated to an individual who the organization knew or should have known has the propensity to engage in criminal, civil and administrative violations;
4. Steps must be taken to effectively communicate its standards and procedures to all employees within the organization;
5. Reasonable steps must be taken by the organization to achieve compliance with its standards, such as by implementing monitoring and auditing systems reasonably designed to detect violations and by having a reporting system;
6. Implementation of appropriate disciplinary actions that ensures consistent enforcement of the standards and procedures;
7. Take reasonable steps to appropriately respond to a detected offense and prevent similar offenses in the future; and
8. Periodically reassess the compliance program and undertake any necessary modifications to reflect changes within the organization.

Given the commitment by the OIG and CMS to scrutinize SNFs, providers should use the information in these reports, along with the recommendations, to either create the ACA required compliance plans or review and revise compliance plans already in place. Pending the release of the regulations related to the core elements, providers will also want to review the OIG Compliance Program Guidance for Nursing Facilities released in 2000 and the 2008 Supplemental Guidance for Nursing Homes.