Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
The Effect of Financial Screening and Distinct 
Part Rules on Access to Nursing Facilities 
JUNE GIBBS BROWN 
Inspector General 
JUNE 2000 
OEI-02-99-00340  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's New York regional office prepared this report under the direction of John I. Molnar, 
Regional Inspector General, and Renee C. Dunn, Deputy Regional Inspector General.  Principal 
OEI staff included:

REGION
 HEADQUARTERS

Jodi Nudelman, Project Leader
 Susan Burbach, Program Specialist

Nancy Harrison
 Linda Moscoe

Natasha Besch

Lucille Cop

Judy Lin

Christi Macrina

To obtain copies of this report, please call the New York Regional Office at 212 264-2000. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E  S U M M A R Y  
PURPOSE 
To assess the extent to which financial screening and distinct part rules limit access to 
nursing facilities for Medicare and Medicaid beneficiaries. 
BACKGROUND 
The Health Care Financing Administration (HCFA) requested that the Office of Inspector 
General (OIG) conduct a study about nursing home certification and admissions practices 
that may limit access to care for Medicaid and Medicare beneficiaries.  These practices are 
distinct part certification and financial screening. 
In recent years, HCFA and the Office of Civil Rights (OCR) have been alerted by nursing 
home advocacy groups and beneficiaries that nursing homes may be using financial 
screening and distinct part rules to limit access for Medicare and Medicaid applicants. 
Facilities can request financial information from beneficiaries as part of their admissions 
process and can designate a distinct part by certifying a specific number of their beds for 
Medicare and/or Medicaid.  There is some concern, however, that facilities are using these 
practices to deny access to Medicare and Medicaid beneficiaries. 
To address these concerns, we interviewed State Long Term Care Ombudsmen, State 
Medicaid officials, a sample of hospital discharge planners, and a sample of nursing home 
administrators.  We also contacted several oversight agencies about complaints they have 
received related to these issues.  Additionally, we analyzed data from the National 
Ombudsman Reporting System (NORS) and the Online Survey Certification and 
Reporting System (OSCAR) to assess complaints and the nursing home bed supply. 
FINDINGS 
Distinct Part Certification 
Overall, distinct part rules do not appear to limit access for Medicaid or Medicare 
beneficiaries.  Twenty-nine States allow nursing homes to certify a portion of their beds 
for Medicaid.  The remaining 22 States have a one bed, all beds policy that requires 
nursing homes that participate in Medicaid to certify all of their beds for Medicaid. 
Irrespective of these rules, about 97 percent of all beds that are certified nationwide are 
for Medicaid.  In addition, Medicaid officials report no significant problems with distinct 
part.  Ombudsmen generally concur, although some express concerns. 
1 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Regarding Medicare, all but one State allow nursing homes to certify a portion of their 
beds for Medicare.  However, access to Medicare beds does not appear to be a problem 
according to respondents and previous OIG studies. 
Financial Screening 
Nursing facilities commonly request financial information as part of the admissions 
process.  Ombudsmen, Medicaid officials, and nursing home administrators report that 
facilities commonly ask for financial information, often about a persons assets, income, 
and insurance. 
When financial screening occurs, it primarily affects access for Medicaid 
beneficiaries.  While no Medicaid officials and only eight ombudsmen report that 
Medicaid beneficiaries are very often denied access to a nursing home because of 
financial screening, one-third of discharge planners say that nursing homes refuse patients 
very often for financial reasons.  Many discharge planners note that Medicaid patients 
are most likely to be affected by these practices. 
Complaints 
Oversight agencies receive relatively few complaints about financial screening or 
distinct part practices.  The Office of Civil Rights (OCR) and the OIG Hotline could 
document virtually no complaints about financial screening or distinct part practices. 
Ombudsmen from 24 States estimate receiving an average total of 339 complaints related 
to financial screening per year.  Over two-thirds of these complaints come from 7 States. 
Regarding distinct part practices, ombudsmen in 20 States estimate receiving an average 
total of 334 complaints per year.  Similarly, three-quarters of these complaints are from 6 
States.  The total number of complaints represents less than one percent of all complaints 
reported by ombudsmen in a year. 
CONCLUSION 
Distinct part rules do not appear to limit access for Medicaid or Medicare beneficiaries. 
Financial screening may cause access problems for some Medicaid beneficiaries, but these 
problems do not appear to be widespread.  At this time, any potential effects of distinct 
part rules and financial screening are being tempered by a bed supply that generally 
exceeds demand and by State initiatives that promote access.  The dynamics of the nursing 
home bed supply, however, could change in the future. 
2 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  The Department can respond to these findings with a number of options. 
<	 It can do nothing new at this time and continue to monitor access and changes in 
nursing home occupancy rates, as well as the factors that affect nursing home bed 
supply and demand; 
<	 It can strengthen its oversight efforts by alerting survey and certification and 
ombudsman staff to potential abuses and by using public service announcements to 
alert consumers to common financial screening practices; 
<	 It can issue new regulations or legislation that eliminates Medicare distinct part 
and/or prohibits financial screening; or 
<	 It can study the effects on access of the practices adopted by 23 States to promote 
access to nursing facilities. 
AGENCY COMMENTS 
We received comments on the draft report from the Health Care Financing Administration 
(HCFA), the Administration on Aging, and the Assistant Secretary for Planning and 
Evaluation (ASPE).  The HCFA agreed with our recommendation to strengthen oversight 
and listed a number of steps they were taking to implement that recommendation. 
Additionally, at ASPEs request we have forwarded a memorandum to HCFA containing a 
State-specific discussion of access.  The ASPE also asked for a discussion of the variance 
in responses listed in Table 2.  We believe the variance is due to perspective.  While the 
State officials take a policy or oversight view of the problem, the discharge planners' view 
is that of a caseworker focusing on the process of placing beneficiaries.  We elaborate on 
this on page 16 of the report with our follow-up interviews with discharge planners. 
Technical comments have also been included in the report.  The full text of the agencies' 
comments are contained in Appendix B. 
3 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  T A B L E   O F   C O N T E N T S  
PAGE

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

FINDINGS 
Distinct Part Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Financial Screening  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

Overall Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

CONCLUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21

APPENDICES 
A: Point Estimates and Confidence Intervals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

B: Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

4

The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  I N T R O D U C T I O N  
PURPOSE 
To assess the extent to which financial screening and distinct part rules limit access to 
nursing facilities for Medicare and Medicaid beneficiaries. 
BACKGROUND 
The Health Care Financing Administration (HCFA) requested that the Office of Inspector 
General (OIG) conduct a study about nursing home certification and admissions practices 
that may limit access to care for Medicaid and Medicare beneficiaries.  These practices are 
distinct part certification and financial screening. 
In recent years, HCFA and the Office of Civil Rights (OCR) have been alerted by nursing 
home advocacy groups and beneficiaries that nursing homes may be using financial 
screening and distinct part rules to limit access for Medicare and Medicaid applicants. 
These groups have also been concerned that such limitations may have a disparate impact 
on minorities because they are less likely to have financial resources. 
Medicare Program 
Title XVIII of the Social Security Act, entitled "Health Insurance for the Aged and 
Disabled," is commonly known as Medicare.  Medicare provides insurance to people who 
are 65 years and older; people who are disabled; and people with permanent kidney 
failure. 
Medicare consists of two primary parts:  Hospital Insurance (HI), also known as Part A, 
and Supplementary Medical Insurance (SMI), also known as Part B.  Medicare Part A 
provides coverage of inpatient hospital care, skilled nursing facility care, home health 
services, and hospice care.  Medicare Part B pays for the cost of physician services, 
outpatient hospital services, medical equipment and supplies, and other health services and 
supplies with a coinsurance. 
Skilled nursing facility (SNF) care is covered by Part A only if the care is generally within 
30 days of a hospitalization of 3 or more days, and is certified as medically necessary.  The 
number of SNF days provided under Medicare is limited to 100 days per benefit period, 
with a co-payment required for days 21 through 100.  Medicare Part A does not cover 
nursing facility care at all if the patient does not require skilled nursing or skilled 
rehabilitation services. 
5 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Medicaid Program 
Medicaid was established under Title XIX of the Social Security Act and is the principle 
payer of nursing home care.  The program is administered by the States, but is funded 
jointly by the States and the Federal Government.  A State must present a State Medicaid 
plan to HCFA for approval in order to obtain Federal funding. 
Medicaid is designed to provide assistance for medical care to low-income people. 
Medicaid pays for nursing facility care for recipients who meet a State-determined poverty 
level, provided the nursing facility is certified for the program.  The amount paid is 
determined by each State and covers room, board, and nursing care.  Although it is 
voluntary, the majority of facilities participate in the Medicaid program. 
Distinct Part Certification 
Facilities use distinct part certification to define the extent of their participation in the 
Medicaid or Medicare program.  To do this, they can certify a specific number of their 
beds for either or both of these programs.  Distinct part rules for Medicare and Medicaid 
differ somewhat and are described below. 
Medicare 
Under Medicare, a facility can certify a part or all of its facility for Medicare.  The part has 
to be a physically identifiable unit of an institution such as a separate wing or a floor of the 
facility. 
The practice of distinct part has been used primarily for cost reporting purposes.  Until 
recently, SNFs were reimbursed based on a retrospective, reasonable cost basis.  Under 
this system, some nursing homes perceived a financial incentive to limit their program 
participation by establishing a distinct part.  Specifically, facilities could track their costs 
for their distinct part and their non-distinct part separately.  Their Medicare distinct part 
costs, which were likely to be higher than their non-distinct part costs because of the care 
required for skilled services, was a factor in determining a facilitys reimbursement. 
The Balanced Budget Act of 1997 (BBA97) changed SNF reimbursement to a prospective 
payment system (PPS).  Under this system, SNFs are paid through per diem, prospective, 
case-mix adjusted payments.  Each resident is categorized into one of  44 resource 
utilization groups and payment is based on the level of care that each resident requires. 
The system is currently being phased in over a 3 year transition period.  Under this new 
system, distinct part is no longer a factor in determining the reimbursement rates for SNFs. 
6 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Prior to this year, SNFs were allowed to change the size of their distinct part as needed. 
As of January 1999, a SNF can change the size of its distinct part only once during its cost 
reporting year. 
Medicaid 
Distinct part rules for Medicaid vary by State.  Some States require facilities that choose 
to participate in the Medicaid program to certify all of their beds for Medicaid.  Other 
States mirror the Federal rule for Medicare in that individual facilities can determine the 
size of their distinct part. 
The use of Medicaid distinct part has been challenged.  In April 1990, the District Court 
for the Middle District of Tennessee ruled, in Linton v. Tennessee Commissioner of 
Health and Environment, that Tennessees practice of allowing a nursing facility to certify 
some, but not all, of its beds for Medicaid participation violated both the Medicaid statute 
and Title VI of the Civil Rights Act of 1964.  In July 1990, the court approved a plan that 
requires certification of all available licensed nursing home beds in facilities that participate 
in Medicaid.  The plan also requires participating nursing facilities to admit residents on a 
first-come, first-serve basis and prohibits involuntary transfer or discharge based upon 
source of payment. 
Financial Screening 
Facilities may request financial information from applicants as part of their admissions 
process.  As part of the Omnibus Reconciliation Act of 1987 (OBRA 87), Congress 
passed the comprehensive Nursing Home Reform Act (PL 100-203) which provides some 
protections to Medicaid beneficiaries with respect to nursing home admission practices. 
The statutes and  regulations, however, do not explicitly address whether nursing facilities 
may financially screen applicants and base admissions on their ability to pay.  The law does 
not prohibit facilities from rejecting potential admissions, except to the extent that the 
practice violates the Civil Rights Act or Rehabilitation Act requirements, which prohibits 
discrimination against individuals with disabilities. 
The discussion about financial screening has centered around several requirements.  These 
include provisions of the Social Security Act titled  Equal Access to Quality Care --
(1819(c)(4) and 1919 (c)(4)(A)) .  They state that  a facility must establish and maintain 
identical policies and practices regarding transfer, discharge, and the provision of services 
under the State plan for all individuals regardless of source of payment (42 CFR 483.12 
(b)(c)(1)).  Additional requirements state: 
(d) Admissions policy (1)The facility must- (i) Not require residents or potential 
residents to waive their rights to Medicare or Medicaid;  and  (ii) the facility must 
not require oral or written assurance that residents or potential residents are not 
7 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  eligible for, or will not apply for, Medicare or Medicaid benefits...(3) In the case of 
a person eligible for Medicaid, a nursing facility must not charge, solicit, accept, or 
receive, in addition to any amount otherwise required to be paid under the State 
plan, any gift, money, donation, or other consideration as a precondition of 
admission, expedited admission or continued stay in the facility. 
General Concerns 
In recent years, some beneficiaries and advocacy groups have complained that facilities are 
using distinct part and financial screening to limit the number of Medicaid and Medicare 
beneficiaries they admit. 
Specifically, facilities allegedly use distinct part to inform applicants that they do not 
have a Medicaid or Medicare bed available and that the person can only be admitted if he 
or she pays privately.  (Facilities prefer private pay residents largely because they can 
charge these patients higher rates than the amount they are reimbursed for patients under 
Medicare or Medicaid.)  Reportedly, facilities may also use distinct part to limit access to 
residents who initially pay privately for care and later become eligible for Medicaid.  In 
this situation, facilities may tell these beneficiaries that there is no Medicaid bed available 
and that they must move. 
Similarly, facilities allegedly use financial screening to deny access to Medicaid patients or 
persons who will be eligible for Medicaid in the near future.  Reportedly, some facilities 
require applicants to submit information about their finances so that they can determine 
whether or not and for how long the person will be able to pay privately before they 
become eligible for Medicaid. 
Nursing Home Industry Concerns 
The American Health Care Association and the American Association of Homes and 
Services for the Aging, the primary associations for nursing homes, have strongly objected 
to any limitations on financial screening and on their ability to have distinct parts.  Their 
arguments hinge on the need for financial solvency and their desire to avoid additional 
regulation. 
Additionally, nursing homes have raised concerns about the new PPS reimbursement 
system for Medicare beneficiaries. They believe that the system is causing considerable 
stress on the industry.  They claim that the prospective payment system is reducing 
payments to SNFs and may cause some SNFs to go out of business. 
8 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Nursing Home Surveyors 
Nursing Home surveyors carry out the State survey and certification process for 
determining nursing home compliance with Federal standards.  The HCFA contracts with 
States to perform routine facility surveys for Medicare and dually-certified nursing homes. 
The State is also responsible for surveying  its Medicaid certified nursing homes. 
Surveyors perform unannounced visits to all facilities no later than every 15 months of the 
previous survey.  During their visits, they review compliance with residents rights and 
audit residents assessments and plans of care for a sample of residents to determine 
accuracy and adequacy. When a facility fails to meet a specific requirement, they cite the 
facility for noncompliance. 
Long Term Care Ombudsman Program 
The State Long Term Care Ombudsman Program is a federally mandated program 
established in 1978 in the Older Americans Act.  The program began in response to 
concerns about poor quality of care in nursing homes.  The program operates in all 50 
States, the District of Columbia, Puerto Rico, and in hundreds of local communities.  The 
program has multiple functions, many of which are closely tied to ensuring residents 
rights and quality care.  These functions include: 
<	 Identifying, investigating, and resolving complaints made on behalf of long 
term care residents; 
<  protecting the legal rights of residents; 
<  advocating for systemic change; 
<  providing information and consultation to residents and their families, and; 
<  publicizing issues of importance to residents. 
In 1996, all programs began to collect and report data under the National Ombudsman 
Reporting System (NORS).  This system includes information about complaints made on 
behalf of residents about residents rights, resident care, quality of life, administration, and 
other complaints not against the facility. 
METHODOLOGY 
This inspection is based on information gathered from several different sources.  As 
described below, we conducted interviews with a broad range of stakeholders who have 
experience with beneficiary access to nursing homes.  We also analyzed data from the 
Online Survey Certification and Reporting System (OSCAR) and data about complaints 
from several different sources. 
9 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Interviews 
First, we interviewed the State Long Term Care Ombudsman from each State (except 
Alaska who was not available at the time) and the District of Columbia to identify any 
complaints they have received about financial screening and distinct part practices.  We 
also asked about the extent to which access to nursing home care is a problem in their 
State. 
Second, we contacted State Medicaid officials in each State and the District of Columbia 
to obtain information about their distinct part requirements and policies that promote 
nursing home access.  We also discussed the extent to which financial screening and 
distinct part may limit access for Medicaid beneficiaries in their State. 
Third, we conducted interviews with 180 randomly selected hospital discharge planners in 
eight States.  We asked them about their experiences with placing Medicare and Medicaid 
patients in nursing homes and about any reasons why access to nursing home care may be 
a problem in their area.  Results from these interviews are also reported in a related study 
entitled, Early Effects of the Prospective Payment System on Access to Skilled Nursing 
Facilities OEI-02-99-00400. 
Fourth, we interviewed 64 nursing home administrators in eight States.  We asked them 
about access to nursing homes and about how they make decisions concerning which 
types of patients to admit.  Results from these interviews are reported in another study 
entitled, Early Effects of the Prospective Payment System on Access to Skilled Nursing 
Facilities:  Nursing Home Administrators Perspectives OEI-02-99-00401. 
OSCAR Data 
The Online Survey Certification and Reporting System (OSCAR) is the system HCFA 
uses in its survey of Medicare and Medicaid providers to monitor State agency and 
provider performance.  We analyzed OSCAR data from the most recent survey and the 
Provider of Services (POS) File to determine the number of nursing home beds and 
nursing home occupancy rates in each State.  We also analyzed data about two 
deficiencies concerning admissions and equal quality of care that nursing home surveyors 
may cite in their annual review of each nursing facility.  These two deficiencies, identified 
as deficiency tags 207 and 208, reflect the requirements in the Nursing Home Reform Act 
discussed earlier. 
Complaint Data 
We identified the key agencies that beneficiaries and others may contact about problems 
related to access to nursing home care.  We asked these agencies about any complaints 
related to financial screening and distinct part rules.  In addition, we analyzed the 
10 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  National Ombudsman Reporting System (NORS) for FY 1997.  (Note that FY 1998 data 
were not available.)  We also asked each ombudsman about any complaints specifically 
related to financial screening and distinct part that they received in the past three years. 
These data were annualized to estimate the average number of complaints received in a 
year. 
Sample Selection 
We selected a two-stage stratified cluster sample of hospital discharge planners and 
nursing home administrators in eight States.  The first stage of sampling was a stratified 
sample of eight States as shown below. 
Strata 1  The four States with the most SNF beds (CA, NY, IL, TX) 
Strata 2  Two of the four States currently using a Medicaid demonstration 
prospective payment system (MS, ME) 
Strata 3  Two States randomly selected from the remaining 40 contiguous States 
(VA, CT) 
At the second stage, we selected a simple random sample of eight nursing homes that had 
greater than 60 beds within each of these States.  We also selected a simple random 
sample of 25 hospitals within each of these States.  We achieved a 100 percent response 
rate for nursing home administrators and a 90 percent response rate for discharge 
planners.  Data for both samples were weighted and projected to the universe.  Note that 
the estimates based on these samples are associated with large confidence intervals and 
should be interpreted with caution.  Appendix A provides the confidence intervals for the 
key questions. 
This inspection was conducted in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and Efficiency. 
11 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  F  I  N  D  I  N  G  S 
DISTINCT PART CERTIFICATION 
Most States allow distinct part certification in nursing homes 
According to Medicaid officials, 29 States allow nursing homes to certify a portion of 
their beds for Medicaid.  Three of these States actually specify what percentage of a 
nursing homes beds that must be certified for Medicaid.  The remaining 22 States do not 
allow Medicaid distinct part certification.  These States have a one bed, all beds policy 
that requires nursing homes that participate in Medicaid to certify all of their beds for 
Medicaid. 
Regarding Medicare, all but one State allow nursing homes to certify a portion of their 
beds for Medicare.  In the remaining State, all beds must be certified for both Medicare 
and Medicaid. 
Overall, distinct part rules do not appear to limit access for Medicaid or Medicare 
beneficiaries 
Irrespective of the rules about Medicaid distinct part, only about 875 facilities or 5 percent 
of 17,317 facilities nationwide appear to have a Medicaid distinct part.  Further, as shown 
in Figure 1, about 97 percent of all beds that are certified nationwide are for Medicaid.  At 
the same time, about 68 percent of nursing home residents are Medicaid beneficiaries.  It 
is important to note, however, that even if a bed is certified for Medicaid, the facility does 
not have to fill it with a Medicaid beneficiary. 
Regarding Medicare, according to 1998 OSCAR data, 8971 facilities or about half of all 
facilities nationwide have a Medicare distinct part and about 42 percent of all certified 
beds are for Medicare.  Note that only about 9 percent of nursing home residents are 
Medicare beneficiaries. 
As shown, many beds (38 percent) are actually certified for both Medicare and Medicaid. 
The number of these beds has also increased from 1996 to 1998 by 7 percent.  Medicaid 
officials from 39 States confirm that it is very common for nursing homes in their State 
to certify their beds for both programs and several note that facilities are increasingly 
certifying their beds in this manner. 
12 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Source: Provider of Services File, 1998
In addition, no Medicaid officials report that distinct part limits Medicaid beneficiaries
access to nursing homes in their State to a large extent.  (See Table 1.)  Some explain that
due to their States one-bed all-beds policy, distinct part does not affect access.  Others
note that occupancy rates are low and therefore nursing homes do not refuse applicants in
order to keep their beds filled.  Also, Medicaid officials in States that allow distinct part
for Medicaid are less likely to report that overall access is a problem for Medicaid
beneficiaries than those in States that do not allow distinct part. 
Ombudsmen generally concur with Medicaid officials but some express concerns. 
Ombudsmen in seven States believe that distinct part limits access for Medicaid
beneficiaries to a large extent.  Another 18 ombudsmen say that distinct part limits access
to some extent.  A few mention instances where a family was told that a nursing home did
not have a Medicaid certified bed available when that may not have been the case. 
13
   
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities      OEI-02-99-00340 Table 1

Effect of Distinct Part on Access

To what extent does distinct part limit Medicaid beneficiaries access to nursing 
homes? 
Large  Somewhat  Not at all  Dont know 
Medicaid Officials  0  5  43  3 
Ombudsmen  7  18  20  5 
Source: OEI Surveys, 1999 
Ombudsmen are less likely to report that distinct part practices are a problem for Medicare 
beneficiaries.  Specifically, only two ombudsmen report that distinct part limits access for 
Medicare beneficiaries to a large extent.  Another 21 ombudsmen say that it limits access 
to some extent.  Some ombudsmen report that nursing homes want Medicare beneficiaries 
and others note that they do not hear complaints about Medicare beneficiaries being 
denied access because a Medicare bed is not available. 
Finally, when asked their opinions, most Medicaid officials (35) believe that requiring 
nursing facilities to certify all of their beds for both Medicare and Medicaid would not 
have an effect on access for Medicaid beneficiaries in their State.  Similarly, the majority 
of nursing home administrators report that it would not affect the number of Medicare or 
Medicaid patients that they would admit.  In contrast, ombudsmen generally believe that 
this requirement would increase access for Medicare and for Medicaid beneficiaries. 
FINANCIAL SCREENING 
Nursing facilities commonly request financial information as part of the 
admissions process 
State ombudsmen and Medicaid officials report that nursing homes routinely ask for 
financial information as part of the admissions process.  Specifically, 41 ombudsmen and 
40 Medicaid officials note that nursing homes do this very often or somewhat often. 
Most nursing home administrators (75 percent) confirm that they ask for financial 
information when a person applies to their facility, most often about a persons assets, 
income, and/or insurance.  Some note their facility requires an advance deposit for 
applicants who plan to pay privately. 
14 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  When financial screening occurs, it primarily affects access for Medicaid 
beneficiaries 
No Medicaid officials and only eight ombudsmen report that Medicaid beneficiaries are 
denied access to a nursing home very often because of financial screening.  (See Table 
2.)  Eleven ombudsmen, however, report Medicaid beneficiaries are denied access 
somewhat often because of financial screening.  They commonly explain that nursing 
facilities want to maximize their reimbursement and clearly prefer private pay and 
Medicare applicants.  Regarding Medicare beneficiaries, only one ombudsman believes 
that these beneficiaries are denied access very often because of financial screening. 
Table 2

Effect of Financial Screening on Access

How often are Medicaid beneficiaries denied access to a nursing home because of 
financial  screening? 
Respondent  Very Often  Somewhat  Not Often  Never  Dont 
Often  Know 
Medicaid Officials*  0  2  30  12  7 
Ombudsmen*  8  11  19  10  2 
How often do nursing homes refuse patients because of financial reasons? 
Discharge  33%  37%  23%  7%  0%

Planners 
Source: OEI Surveys, 1999 
* Responses from Medicaid Officials and Ombudsmen are in terms of their counts, not percentages. 
Ombudsmen in 15 States further note that it is at least somewhat common for nursing 
homes in their State to require a person to pay privately for a specified period of time in 
order to be admitted.  According to their experience, a person may be required to pay for 
a month or more which is inconsistent with the current law. 
In contrast, discharge planners believe that financial screening is a common problem. 
One-third say that nursing homes refuse patients very often because of financial reasons. 
Another 37 percent say that this happens somewhat often.  Some note that patients with 
complex medical conditions, patients without any insurance, and Medicaid patients are 
most likely to be denied access because of financial screening. 
15 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  To understand these issues further, we contacted the discharge planners (15) who say that 
nursing homes refuse patients very often because of financial reasons and that it is very 
difficult to place Medicaid patients in nursing homes.  Seven respondents report that they 
can place all of their patients in a nursing home.  Another 3 say they cannot place up to 10 
percent, whereas 4 cannot place between 25 and 88 percent of their Medicaid patients. 
Most note that these patients remain in the hospital for long periods of time.  In some 
cases, they may eventually be placed in a nursing home or in other types of care.  They 
also report that the patients medical condition or low reimbursement under Medicaid is 
the primary reason they have difficulty placing these patients. 
Nursing home administrators generally believe that financial screening is not a large 
problem.  The majority of nursing home administrators (85 percent) assert that they do not 
look at payment source to decide the proportion of Medicare, Medicaid, and private pay 
patients to admit.  Rather, many say they take whoever applies or make decisions based on 
bed availability or whether they can meet a patients needs.  Others explain that they try to 
admit as many private pay patients as possible. 
When asked their opinions about financial screening rules, most ombudsmen and many 
Medicaid officials believe there should be at least some limitations on financial screening. 
A typical comment is that financial screening should not be used to shop for residents. 
Some ombudsmen note that it is important for nursing homes to be able to screen 
residents so they can remain financially solvent and be able to provide quality care to all. 
In contrast, about two-thirds of nursing home administrators believe there should not be 
any limits placed on financial screening.  They commonly say they need to ask for financial 
information so they can know how their facility will be paid.  Some specifically point out 
that they are operating a business and need this information to protect themselves 
financially.  Others say that they use the information to help plan a residents stay or to 
assist them in applying for Medicaid when they become eligible. 
COMPLAINTS 
Oversight agencies receive relatively few complaints about financial screening or 
distinct part practices 
Beneficiaries and others may contact certain agencies including the Office of Civil Rights 
(OCR), the OIG Hotline, and/or the Ombudsman Program about problems related to 
access to nursing home care.  Additionally, nursing home surveyors may cite facilities for 
admissions practices that do not assure equal access to care and for certain financial 
screening practices.  The available data are presented below. 
16 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  The Office of Civil Rights.  Staff at OCR did not find any complaints in which financial 
screening or distinct part was an issue in FY 98 or FY 99.  They note that three 
complaints remain open from the early 1990's which allege that certain Michigan area 
nursing homes use distinct part rules and financial screening to limit access for Medicaid 
beneficiaries and minorities. 
The Office of Inspector General Hotline.  Staff identified only one complaint related to 
payment source that was received by the OIG Hotline between May 1995 and September 
1999.  This complaint alleges that a nursing home asked Medicaid residents to leave so 
that it could admit private pay residents. 
. 
Nursing home surveyors.  Nursing home surveyors rarely cite nursing homes for 
problems related to equal access to care or financial screening.  According to OSCAR 
data for the most recent survey, surveyors gave a total of 59 citations related to these 
issues.  These citations represent less than one percent of all citations given in that time 
period. 
Ombudsmen.  According to 1997 NORS data, ombudsmen report a total of 1,262 
complaints in categories that may include issues related to distinct part and financial 
screening practices.  Together, these complaints represent less than one percent of all 
complaints reported by ombudsmen in that year. 
When asked to look at their data more specifically, 17 ombudsmen report they have not 
received any complaints about financial screening and 18 ombudsmen report that they 
have not received any complaints about distinct part practices.  Ombudsmen from 24 
States estimate receiving an average total of 339 complaints related to financial screening 
per year.  The majority (71 percent) of these complaints come from 7 States.  Regarding 
distinct part practices, ombudsmen in 20 States estimate receiving an average total of 334 
complaints per year.  Similarly, about 76 percent of these complaints are from 6 States. 
Note that not all ombudsmen were able to obtain these data. 
Ombudsmen explain that these complaints are primarily about nursing homes denying 
access to Medicaid beneficiaries or those who would become Medicaid eligible in the near 
future.  Some involve facilities requesting extensive financial information from patients or 
their family members, or asking residents to pay a certain amount prior to admission. 
Several ombudsmen also mention complaints about beds not being available, possibly 
because of distinct part practices. 
In addition, 23 State ombudsmen estimate an average total of 734 complaints per year 
about issues related to access to care.  These complaints primarily involve residents being 
transferred from one bed to another when they become eligible for Medicaid.  Others are 
about residents being discharged either to a hospital or for a psychological evaluation so 
that the nursing home could fill the bed with a Medicare or private pay resident. 
17 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  At the same time, many ombudsmen believe that problems caused by financial screening 
and distinct part are larger than what is actually reported.  Some note that people may not 
complain or be aware that they are being denied access because of financial screening or 
distinct part rules.  They also mention that many people may not know to notify the 
Ombudsmen program if they have this type of problem. 
OVERALL ACCESS 
The effects of distinct part rules and financial screening must be viewed within the broader 
context of overall access to nursing home care.  Overall access is primarily affected by the 
supply of and demand for nursing home beds which can be measured in terms of 
occupancy rates. 
Occupancy rates are low and most respondents report that overall access to 
nursing home care is not a major problem 
According to OSCAR data, occupancy rates are generally low.  Specifically, the average 
occupancy rate for all certified nursing facilities nationwide is 82 percent.  State 
occupancy rates range from 68 percent in Arkansas to 95 percent in New York.  Many 
ombudsmen and Medicaid officials confirm that nursing homes are experiencing low 
occupancy rates.  Some explain that this is due to more people obtaining care in 
alternative settings such as assisted living facilities or at home.  Several also note that 
some nursing homes are eager to accept anyone, or prefer some guarantor of payment to 
having a vacant bed. 
Further, respondents report that overall access to nursing homes is not a major problem 
for Medicaid beneficiaries.  Specifically, no Medicaid officials say that access to nursing 
home care for Medicaid beneficiaries is a large problem.  (See Table 3.)  Nursing home 
administrators generally agree.  Only 6 percent report that access to nursing home care for 
Medicaid patients is a large problem in their area.  Medicaid officials and nursing home 
administrators commonly explain that enough beds are available to meet demand.  Others 
note that access is somewhat of a problem for persons with complex care needs or with 
certain medical conditions or in some areas of their State. 
In contrast, ombudsmen from 11 States report that access for Medicaid beneficiaries is a 
large problem in their State.  They point out that facilities prefer private pay or Medicare 
patients.  Similarly, about one-third of discharge planners report that it is very difficult 
to place Medicaid patients in nursing homes, mainly because Medicaid reimbursement is 
low. 
18 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Table 3

Overall Access for Medicaid Beneficiaries

To what extent is access to nursing home care a problem for Medicaid 
beneficiaries? 
A large  Somewhat of a  Not at all a  Dont know 
problem  problem  problem 
Medicaid Officials*  0  19  30  2 
Ombudsmen*  11  24  15  0 
How difficult it is to place Medicaid patients in nursing homes? 
Very difficult  Somewhat difficult  Not at all difficult 
Discharge Planners  35%  42%  23% 
Source: OEI Surveys, 1999 
* Responses from Medicaid Officials and Ombudsmen are in terms of their counts, not percentages. 
Regarding Medicare, fewer respondents report that access to nursing home care is a 
problem.  Only five ombudsmen report that access for Medicare beneficiaries is a large 
problem in their State.  (See Table 4.)  Many observe that occupancy rates are low or that 
there are enough beds.  Some note, however, that the nursing home prospective payment 
system has created some difficulties or that access problems exist for patients with 
complex medical needs or in some areas in their State. 
Discharge planners and nursing home administrators generally concur.  Only one percent 
of discharge planners report that it is very difficult to place short-term Medicare 
patients.  They point out that nursing homes generally want Medicare patients because 
they have short stays or because their reimbursement for these patients is higher than it is 
under Medicaid.  Similarly, about 6 percent of nursing home administrators report that 
access to nursing home care for Medicare patients is a large problem in their area. 
19 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  Table 4

Overall access for Medicare Beneficiaries

To what extent is access to nursing home care a problem for Medicare 
beneficiaries? 
A large  Somewhat  Not at all 
problem  of a problem  a problem  Dont Know 
Ombudsmen*  5  26  18  1 
How difficult it is to place short-term Medicare patients in nursing homes? 
Somewhat  Not at all 
Very difficult  difficult  difficult  Dont Know 
Discharge  1%  32%  66%  1% 
Planners 
Source: OEI Surveys, 1999 
* Responses from Ombudsmen are in terms of their counts, not percentages. 
We also found that many States (23) have specific policies to promote nursing home 
access.  According to Medicaid officials, 13 States have occupancy incentives in which the 
State reimburses nursing homes at a higher Medicaid rate when their occupancy reaches a 
certain level, such as 95 percent.  Five States mandate that all nursing homes use a single 
waiting list, or a first-come, first-served policy to assure access for Medicaid recipients. 
Two States have a rate equalization policy that prohibits a facility from charging private-
pay patients a higher rate than it is paid under Medicaid. 
Some States have other policies such as bed-hold policies that specify certain conditions in 
which a nursing home cannot deny readmission to a beneficiary who leaves a facility for a 
short amount of time.  A few States also have a resident bill of rights that prohibits 
discrimination based on payment source.  The majority of Medicaid officials in States that 
have policies believe that the policies are somewhat or very effective at assuring 
access. 
20 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  C O N C L U S I O N  
Distinct part rules do not appear to limit access for Medicaid or Medicare beneficiaries. 
Financial screening may cause access problems for some Medicaid beneficiaries, but these 
problems do not appear to be widespread.  At this time, any potential effects of distinct 
part rules and financial screening are being tempered by a bed supply that generally 
exceeds demand and by State initiatives that promote access.  The dynamics of the nursing 
home bed supply, however, could change in the future. 
The Department can respond to these findings with a number of options. 
<	 It can do nothing new at this time and continue to monitor access and changes in 
nursing home occupancy rates, as well as the factors that affect nursing home bed 
supply and demand; 
<	 It can strengthen its oversight efforts by alerting survey and certification and 
ombudsman staff to potential abuses and by using public service announcements to 
alert consumers to the current law and common financial screening practices; 
<	 It can issue new regulations or legislation that eliminates Medicare distinct part 
and/or prohibits financial screening; or 
<	 It can study the effects on access of the practices adopted by 23 States to promote 
access to nursing facilities. 
AGENCY COMMENTS 
We received comments on the draft report from the Health Care Financing Administration 
(HCFA), the Administration on Aging, and the Assistant Secretary for Planning and 
Evaluation (ASPE).  The HCFA agreed with our recommendation to strengthen oversight 
and listed a number of steps they were taking to implement that recommendation. 
Additionally, at ASPEs request we have forwarded a memorandum to HCFA containing a 
State-specific discussion of access.  The ASPE also asked for a discussion of the variance 
in responses listed in Table 2.  We believe the variance is due to perspective.  While the 
State officials take a policy or oversight view of the problem, the discharge planners' view 
is that of a caseworker focusing on the process of placing beneficiaries.  We elaborate on 
this on page 16 of the report with our follow-up interviews with discharge planners. 
Technical comments have also been included in the report.  The full text of the agencies' 
comments are contained in Appendix B. 
21 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  APPENDIX A 
Confidence Intervals for Discharge Planners 

and Nursing Home Administrators 

We calculated confidence intervals for key findings for discharge planners and nursing home 
administrators.  The point estimate and 95% confidence interval are given for each of the 
following: 
POINT  CONFIDENCE 
DISCHARGE PLANNERS  ESTIMATE  INTERVAL 
In your opinion, how often do nursing homes 
refuse patients because of financial reasons? 
Very often  33%  + 3.7 
Somewhat often  37%  + 16.0 
Not often  23%  + 18.8 
Never  7%  + 2.2 
Currently, how difficult is it to place Medicaid 
patients? Would you say: 
Very difficult  35%  + 15.8 
Somewhat difficult  42%  + 8.4 
Not at all difficult  23%  + 8.5 
22 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  POINT  CONFIDENCE 
DISCHARGE PLANNERS  (continued)  ESTIMATE  INTERVAL 
Currently, how difficult is it to place short-term 
Medicare patients into nursing homes? Would you 
say: 
Very difficult  1%  + 1.3 
Somewhat difficult  32%  + 6.6 
Not at all difficult  66%  + 4.3 
POINT  CONFIDENCE 
NURSING HOME ADMINISTRATORS  ESTIMATE  INTERVAL 
In your opinion, to what extent is access to nursing 
home care a problem for Medicaid patients in your 
area? Would you say it is: 
A large problem  6%  + 8.7 
Somewhat of a problem  33%  + 16.9 
Not at all a problem  62%  + 25.2 
In your opinion, to what extent is access to nursing 
home care a problem for Medicare patients in your 
area? Would you say it is: 
A large problem  6%  + 8.8 
Somewhat of a problem  26%  + 34.5 
Not at all a problem  68%  + 26.1 
23 
The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities  OEI-02-99-00340  APPENDIX B 
Comments

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