Gary HerschmanThis past November, the Office of Inspector General (OIG) published an alarming report detailing a widespread issue of billing inaccuracies by skilled nursing facilities (SNFs). Specifically, OIG found that SNFs billed for inaccurate, medically unnecessary, and fraudulent claims 25 percent of the time in 2009.
As a result, OIG estimated that Medicare inappropriately expended $1.5 billion on SNF claims in 2009, representing 5.6 percent of the entire $26.9 billion paid to SNFs that year.
According to OIG, this study is a part of a larger examination by the government of SNF payments and quality of care.

Study Methodology

OIG conducted the study by first identifying all Medicare Part A claims from SNFs during the year 2009. Claims were grouped into three strata based on the length of stay and number of claims. A random sample of 245 SNF stays was chosen, with 499 claims relating to these stays analyzed.
Reviewers were tasked with determining whether the information reported in the minimum data set (MDS) was consistent with reported medical records. The reviewers used a standardized data collection instrument based on Medicare coverage requirements, CMS guidance for completing the MDS, and CMS guidance to Medicare Administrative Contractors (MACs) for reviewing SNF claims.
The reviewers determined whether each claim met Medicare coverage requirements, including whether the SNF stay was related to a condition that was treated in a prior hospital stay, whether the beneficiary needed and received daily skilled nursing or therapy, and whether the beneficiary had a documented physician order in the medical record for skilled nursing or rehabilitation therapy.
If a claim met these Medicare requirements, the reviewers then looked at the MDS sections used to determine the resource utilization groups (RUGs) for these claims. This review focused on whether the information reported was supported by the medical record.
For MDS sections related to therapy, the medical record was scrutinized for information related to the number of days and minutes of therapy provided to the beneficiary during the look-back period and whether the therapy provided was reasonable and necessary.

Study Results

Based on the medical record review, OIG estimated that SNFs erroneously billed 25 percent of the claims. In particular, the reviewers found that SNFs had incorrectly upcoded 20 percent of the claims into higher RUGs, over half of which involved SNFs reporting the provision of more therapy than was indicated in the medical record and about a quarter of which involved therapy that was reflected in the beneficiaries’ medical records but was not medically reasonable or necessary.
 Anjana Patel
Extrapolating these findings to the universe of SNF claims for 2009, the report estimated that claims for errors in coding alone accounted for $1.2 billion of the $1.5 billion Medicare inappropriately paid to SNFs in 2009.
The new report set forth six recommendations for CMS to better curb the inappropriate billing practices by SNFs. In response, CMS has agreed with all the recommendations and states that it will be proactive in attempting to eliminate inaccurate and fraudulent SNF claims. The recommendations are:
1.) Increase and expand skilled nursing facility claims reviews;
2.) Use CMS’ fraud prevention system to identify facilities that bill for high-paying categories of care;
3.) Monitor compliance with new therapy assessments;
4.) Alter the method for determining how much therapy is needed to ensure appropriate payments;
5.) Improve the accuracy of SNF reporting; and
6.) Follow up with facilities that billed in error.
These recommendations could be implemented by the government seeking return of overpayments through expanded audits of SNFs and possibly the commencement of investigations or proceedings seeking to impose more substantial penalties and remedies for intentional or systemic overbilling.
Gary W. Herschman is chair of the Health Care Practice Group at Sills Cummis & Gross and may be reached at Anjana D. Patel is vice-chair of the Health Care Practice Group and may be reached at The authors would like to thank John Barry and Jonathan Keller, law clerks with the firm, for their assistance with preparing this article. The views and opinions expressed in this article are those of the authors and do not necessarily reflect those of Sills Cummis & Gross.