Medicare Overbilling Rampant in Nursing Homes

A report by the Office of Inspector General issued on November 13, 2012, found that one quarter of all claims billed by skilled nursing facilities in 2009 contained errors which resulted in 1.5 billion dollars in overcharges to Medicare.  (The report is entitled “Inappropriate Payments to Skilled Nursing Facilities Cost Medicare More than a Billion Dollars in 2009.”)

Medicare is billed based on what are referred to as “minimum data set reviews.”  The minimum data set (MDS) is used by the skilled nursing facilities to assess each resident.  The skilled nursing facilities use that information to classify beneficiaries into resource utilization groups (RUG).   The RUG score of the resident determines how much Medicare will pay the skilled nursing facility for that resident’s care, i.e., the sicker the resident the more the skilled nursing facility is reimbursed for their treatment.

The vast majority of the claims involved “up-coding,” i.e., the nursing home inflated the cost of its bill to Medicare by claiming more intensive services than were actually performed.  For example, one patient under hospice care refused physical therapy.  Nevertheless, the skilled nursing facility claimed it performed such physical therapy and Medicare was billed.  In another example the skilled nursing facility charged for speech therapy even though no such therapy had ever been provided.

For years insiders have told us that the RUG scores were being inflated by the skilled nursing facilities.  Indeed, seminars have been conducted around the country teaching skilled nursing personnel how to “maximize” their RUG scores.  Such “up-coding” is difficult to prosecute for criminal fraud because much of it depends on judgment calls by the medical provider.

Industry officials have claimed that the up-coded Medicare claims were needed to offset steep Medicaid cuts.  Even presuming this were true, you can’t lie to the federal government to cheat it out of money, and that’s exactly what skilled nursing facilities have been doing.

This is not a new trend.  Between 2006 and 2008 skilled nursing facilities continually increased their RUG scores.  Further, for-profit facilities were more likely to bill at higher RUG rates than any other facilities, and for-profit facilities owned by large chains (defined as those with 100 or more facilities) were most likely to bill at the highest rates.  (See Office of Inspector General, “Questionable Billing by Skilled Nursing Facilities” (December 2010.).

Simply shining a light on these corrupt practices does not appear to discourage those who treat the U.S. Government as a slot machine.  Until the government goes after the nursing homes for Medicare fraud or, more significantly, puts those involved in such fraud in jail, the practice will likely continue.

If you have information about “up-coding” at a nursing home facility and would like to help stop this practice, please give us a call.