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Officials question Medicare spending on nursing homes

California Watch
By Christina Jewett
December 27, 2010

The inspector general's office that oversees Medicare released a report late last week raising questions about more than $5 billion spent on nursing home care nationwide.

According to the report, from 2006 to 2008, nursing homes - including many in California - increasingly billed the government for "ultra-high" need residents and sent ultra-high bills to Washington.
For-profit nursing homes in large chains ran up the steepest tabs, the report found.

And even though the facilities reaped a windfall for caring for these purportedly fragile patients, the inspector general found little evidence that the age or condition of patients entering nursing homes had changed.

What this means, according to officials, is that patients did not become more costly to care for - nursing homes became increasingly skilled at raking in public money.

Medicare advisers have raised concerns in the past about the fact that nursing homes might be tempted to identify patients as having ultra-high needs to get ultra-high reimbursement.

The current system "encourages (nursing homes) to furnish therapy, even when it is of little or no benefit," Mark Miller, executive director of the Medicare Payment Advisory Commission, told federal lawmakers in 2007.

A Washington Post investigation in March revealed that nursing homes in California are some of the most aggressive at charging the government high rates.

The article, which I summarized here, explains that government authorities created the category of ultra-high needs residents, expecting that it would only apply to 5 percent of residents.

However, the inspector general report shows that the rate was up to 17 percent in 2006 and jumped to 28 percent by 2008. That hike in the purported intensity of patient needs cost taxpayers $5 billion, the report shows.

What's more, for-profit hospitals in large chains in 2010 categorized 43 percent of their patients as having ultra-high needs. That's more than twice as many residents as the 18 percent that nonprofit homes classified as having the greatest needs.

The Post wrote in its March story about the investigation that resulted in last week's inspector general report. It also described a probe that is focused specifically on a chain called North American Health Care that has a major California presence:

A separate division of the HHS inspector general's office is investigating North American Health Care, which operates 35 facilities, most of them in California.

Across the chain, 64 percent of NAHC patients are billed in the highest category; the national average is 9 percent. The category covers the most extensive medical care combined with the most intensive rehabilitation.

The pattern was discovered last year by the Service Employees International Union, which has been feuding with NAHC over efforts to organize the homes' employees. The Post independently analyzed an updated version of the data and confirmed the pattern. The Post also found that NAHC operated 21 of the top 30 facilities nationally with the highest percentage of residents billed in the most expensive category.

The union has published a web page dedicated to explaining the ultra-ultra-high billing by the health care chain, which has said that doctors prefer to send recovering patients to its facilities because of the care it renders.

The inspector general's office made several recommendations about the problem to Medicare. They include targeted reviews of chains that consistently bill the government at the highest rate for large numbers of patients.

And the report urged Medicare to require that an independent therapist - with no financial relationship to the nursing home - evaluate and classify residents. Medicare agreed with most suggestions.

Still, the inspector general was not fully satisfied with Medicare's commitment to tackling the problem:

We remain concerned that the payment system continues to provide incentives to (nursing homes) to bill for more therapy than is needed, and we strongly encourage (Medicare) to pursue the options we recommended to reduce this vulnerability.