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Nursing Homes Reap Billion Dollar Windfall by ExploitingMedicare Billing System for Therapy

On September 30, 2015, the Inspector General of the Department of Health and Human Services issued a new report on wasteful payments to skilled nursing facilities (SNFs) for therapy services. The report, The Medicare Payment System for Skilled Nursing Facilities Needs to be Reevaluated, stated that Medicare payments for therapy greatly exceed SNF’s costs for therapy.

The Office of Inspector General (OIG) found that nursing homes are increasingly billing Medicare for the most expensive level of therapy – known as “ultra high therapy” – regardless of residents’ needs. According to the OIG, resident needs have not changed while Medicare therapy payments to SNFs have exploded. On average, nursing homes now receive $29 more than their therapy costs for every $100 in Medicare payments for therapy. The OIG reports this exploitative billing cost Medicare and taxpayers $1.1 billion in fiscal years 2012 and 2013.

It is not exactly breaking news that skilled nursing facilities are gaming the Medicare payment system, especially as it relates to therapy. The OIG has reported this finding previously and the Department of Justice has filed false claims act cases against nursing home chains for fraudulent therapy billing practices, including a lawsuit against HCR ManorCare earlier this year. Nonetheless, the revelations and recommendations in the new report make a strong case for Medicare payment reform.