Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

A R N F
EVIEW OF  URSING  ACILITY

R U G
ESOURCE  TILIZATION  ROUPS

Daniel R. Levinson

Inspector General 

February 2006

OEI-02-02-00830
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts management and program 
evaluations (called inspections) that focus on issues of concern to the department, the 
Congress, and the public.  The findings and recommendations contained in the 
inspections reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of departmental programs.  OEI also oversees 
State Medicaid Fraud Control Units, which investigate and prosecute fraud and patient 
abuse in the Medicaid program. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS. 
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To determine the extent to which Resource Utilization Groups (RUGs) 
on claims submitted by nursing facilities are different from those 
generated based on evidence in the medical record.  
BACKGROUND 
This inspection is a followup to a 2001 Office of Inspector General report 
entitled Nursing Home Resident Assessment, Resource Utilization 
Groups (OEI-02-99-00041).  That report found both upcoding and 
downcoding differences between the RUGs submitted by the skilled 
nursing facilities and those generated based on a review of the medical 
record.  It further noted that these problems needed continued attention 
and that we planned to revisit them after the prospective payment 
system had been implemented. 
Medicare pays for Part A skilled nursing facility stays based on a 
prospective payment system that categorizes each resident into a 
payment group depending upon his or her care and resource needs. 
These groups are called RUGs.  Skilled nursing facilities determine a 
RUG based on 108 items on an assessment of the resident known as the 
Minimum Data Set (MDS).  The Centers for Medicare & Medicaid 
Services (CMS) requires skilled nursing facilities to complete the MDS 
for each resident covered by Medicare Part A by approximately the 5th, 
14th, and 30th day of the residents stay, and every 30 days thereafter, as 
appropriate. CMS considers the MDS to be part of the medical record 
and expects information contained in the rest of the medical record to 
support the MDS.   
The results of this inspection are based on an independent review of the 
MDS and other documentation in the medical record for a random 
sample of 272 claims submitted by skilled nursing facilities and from 
interviews with staff who are responsible for completing the MDS at the 
skilled nursing facilities.   
The reviewers determined whether the responses submitted by skilled 
nursing facilities on the 108 MDS items used to generate the RUG were 
consistent with documentation in the rest of the medical record.  If a 
particular response to an MDS item was not consistent with the rest of 
the medical record, the reviewer recoded that item and used the recoded 
item to calculate a new RUG.   
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  i  E X E C U T I V E   S U M M A R Y  
For each resident, reviewers made a determination based on the 
documentation available. If they did not find any documentation in the 
medical record or the medical record contained information that was not 
clear enough to make a judgment, they did not make an independent 
determination.  
This inspection does not determine the extent to which claims 
submitted by skilled nursing facilities are medically necessary or 
adequately supported by medical documentation.  It is limited in scope 
to whether the MDS is consistent with the rest of the medical record. 
FINDINGS 
Twenty-six percent of RUGs on claims were different from the ones 
generated based on evidence in the medical record. Based on a 
comparison of the MDS and the rest of the medical record, we found 
that 26 percent of RUGs on claims submitted by skilled nursing 
facilities (71 of the 272 claims in our sample) were different from the 
ones generated based on evidence in the rest of the medical record.  
More specifically, 22 percent of claims, or 59 of the 272 claims in our 
sample, had a RUG with a higher associated payment rate than the one 
generated based on evidence in the medical record.  These differences 
represented potential overpayments.  The remaining 4 percent of 
claims, or 12 of the 272 claims in our sample, had a RUG with a lower 
associated payment rate than the one generated based on evidence in 
the medical record, representing potential underpayments.  
To determine the potential effects of these differences on total Medicare 
payments, we calculated the net difference between the payment 
amounts for the RUGs on the claims submitted by nursing facilities and 
the payment amounts for RUGs generated from evidence in the medical 
record.  The net difference represented $542 million in potential 
Medicare overpayments for fiscal year 2002, when projected to all 
claims with RUGs generated from a 5-day, 14-day, or 30-day MDS 
assessment. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  ii  E X E C U T I V E   S U M M A R Y

Minimum Data Set items that require look-back periods, multiple 
assessors, or calculations contributed to differences in RUGs.  
RUGs are generated from 108 items on the MDS resident assessment. 
In the 71 claims in our sample that had a RUG different from the one 
generated based on evidence in the medical record, 11 MDS items 
accounted for 54 percent of all such instances.  These 11 items had one 
or more of the following characteristics:  a look-back period (i.e., 
observation over time), multiple assessors (i.e., assessment by two or 
more staff), or calculations. 
RECOMMENDATION 
We recommend that CMS take steps to ensure that skilled nursing 
facilities complete the MDS accurately and assign each resident to the 
correct RUG.  These steps could include (1) continuing the type of 
analysis conducted by the Data Assessment and Verification (DAVE) 
project and (2) more carefully examining the 11 MDS items that we 
found were most often inconsistent with the rest of the medical record. 
In addition, we have forwarded to CMS for appropriate action 
information on the 71 claims in our sample that had a RUG with a 
payment rate different from the one generated based on evidence in the 
medical record. 
AGENCY COMMENTS 
CMS concurred with our recommendation.  CMS sees this report as 
showing a significant improvement in the assignment of RUG categories 
at the facility level compared to our 2001 report.  CMS commented that 
it would continue current efforts to improve the accuracy of the MDS 
and has taken, or agreed to take, the following actions: 
o 	 CMS recently awarded a contract to expand upon the DAVE 
project, called DAVE2.  The purpose of this new project is to 
assess the accuracy and reliability of national CMS data through 
focused onsite reviews of the MDS assessment.  
o 	 CMS will take the findings of this report into consideration in 
developing a Web-based training program for the Resident 
Assessment Instrument Manual. 
o 	 CMS will maintain ongoing communications with stakeholders, 
such as State and regional staff, consultants, and trade 
associations, regarding the MDS. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  iii  E X E C U T I V E   S U M M A R Y  
o 	 CMS will have fiscal intermediaries and Program Safeguard 
Contractors continue to assess MDS information through the 
routine medical review process. 
o 	 CMS will incorporate the findings of this report into educational 
efforts to improve the accuracy of the MDS. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We agree with the actions CMS plans to take to improve the accuracy of 
the MDS.  However, it is important to note that, because of 
methodological differences, the results of this report cannot be 
compared to the results of the previous OIG report.  
The methodologies of the two reports differed in two main ways.  First, 
for the previous report, reviewers completed an MDS based on the 
residents medical record without referring to the original MDS and 
then compared the results of the two assessments.  In its comments to 
the previous report, CMS noted that the MDS is a part of the medical 
record.  Therefore, for the current report, the reviewers included the 
MDS in their review of the medical record.  They compared the original 
MDS to the rest of the medical record to determine whether they were 
consistent.  Second, for the previous report, we only reviewed the 14-day 
MDS, while for the current report we reviewed the 5-day, 14-day, and 
30-day MDS assessments.  Because of these differences, the current 
report cannot necessarily be used as evidence to show that MDS 
accuracy has improved over time. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  iv    TT AA BB LL EE    OO FF    CC OO NN TT EE NN TT SS   

EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i

I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

Differences found in 26 percentof RUGs. . . . . . . . . . . . . . . . . . . . .  7

Certain MDS itemscontribute to differences in RUGs. . . . . . . . . .  8

R E C O MMEN D A T ION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

Agency Comments and Office of Inspector General Response . . . .  12

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

A:  Minimum Data Set . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

B: RUG-III Classification System. . . . . . . . . . . . . . . . . . . . . . . . .  21

C:  Sampled RUGs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22

D:  Differences in RUGs Between Claim and Reviewer  . . . . . . . .  23

E:  Confidence Intervalsfor Key Findings. . . . . . . . . . . . . . . . . . .  25

F:  AgencyComments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
 I N T R O D U C T I O N
  I N T R O D U C T I O N  

OBJECTIVE 
To determine the extent to which Resource Utilization Groups (RUGs) 
on claims submitted by nursing facilities are different from those 
generated based on evidence in the medical record.  
BACKGROUND 
This inspection is a followup to a 2001 Office of Inspector General report 
entitled Nursing Home Resident Assessment, Resource Utilization 
Groups (OEI-02-99-00041).  That report found both upcoding and 
downcoding differences between RUGs submitted by the skilled nursing 
facilities and those generated based on a review of the medical record. 
Specifically, it found that 46 percent of residents in an overall sample of 
640 received an upcoded RUG, whereas 30 percent of residents received 
a downcoded RUG.  It further noted that these problems needed 
continued attention and that we planned to revisit them after the 
prospective payment system had been implemented.   
This inspection determines the extent to which RUGs on claims 
submitted by skilled nursing facilities are different from the ones that 
would be generated based on evidence in the medical record.  The 
results of this review are determined from an independent review of the 
resident assessment known as the Minimum Data Set (MDS) and looks 
at whether the responses on the MDS are consistent with other 
documentation in the medical record. 
Resource Utilization Groups 
Medicare pays skilled nursing facilities a daily rate to cover services 
provided to Medicare residents during each day of a covered skilled 
nursing facility stay. Medicare pays skilled nursing facilities based on a 
prospective payment system that categorizes each resident into a 
different group depending upon his or her care and resource needs. 
These groups are called RUGs, and each represents a different Medicare 
payment rate.  CMS requires that each covered resident be correctly 
assigned to one of the RUGs designated as representing the required 
level of care.1 
Skilled nursing facilities determine each residents RUG based on the 
MDS. The Social Security Act, as amended by the Omnibus Budget 
1 42 CFR  424.20(a)(ii). 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  1  I N T R O D U C T I O N

Reconciliation Act of 1987, requires Medicare skilled nursing facilities 
to complete the MDS for each resident.2  CMS further requires that the 
MDS be completed by the 5th, 14th, and 30th day of the residents stay, 
and every 30 days thereafter, as appropriate for each resident covered 
by Medicare Part A.3  CMS also requires that the MDS be conducted or 
coordinated by a registered nurse in the skilled nursing facility.  See 
Appendix A for a copy of the MDS. 
There are 553 items on the MDS.  Data from 108 of the items are used 
to determine the RUG and, therefore, the payment rate for each 
resident covered in a Medicare Part A stay.  There are seven major RUG 
categories:  Rehabilitation, Extensive Services, Special Care, Clinically 
Complex, Impaired Cognition, Behavior Problems, and Reduced 
Physical Function.  These categories are further divided into 44 
subcategories, each of which has a different Medicare payment rate. 
See Appendix B for a list of the RUGs.   
CMS considers the MDS to be part of the medical record and does not 
require duplicative documentation.4  CMS expects that information 
contained in the rest of the medical record supports, rather than 
conflicts, with the MDS.  Specifically, CMSs Resident Assessment 
Instrument Manual states that CMS expects that documentation 
maintained by a skilled nursing facility in a residents medical record 
will chronicle, support, and be consistent with the findings of each 
MDS assessment.5  The manual further states that the MDS can be 
verified by a review of the entire record to verify that the medical 
record supports and is consistent with the responses on the MDS.6 
CMS oversight 
CMS conducts or has conducted five main oversight activities to monitor 
the accuracy of the MDS: 
o 	 CMS contracts with fiscal intermediaries to process Medicare 
Part A skilled nursing facility claims. Fiscal intermediaries 
2 42 USC  1395i-3(b)(3)(A).   

3 63 Federal Register 26265, May 12 ,1998. 

4 Centers for Medicare & Medicaid Services, Resident Assessment Instrument Version 2.0 

Manual, FY 2002, Chapter 1.14, Clarifications Regarding Documentation Requirements,  
p. 1-23.   
5 Ibid. 
6 Ibid. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  2  I N T R O D U C T I O N  
identify outlier payments for extensive onsite and offsite medical 
record reviews as part of their review of these claims. 
o 	 CMS uses its Comprehensive Error Rate Testing (CERT) 
Program to produce national error rates and error rates by 
contractor, provider type, and benefit category-specific paid 
claims.  The projects independent medical reviewers periodically 
conduct medical reviews on random samples of Medicare claims. 
o 	 CMS contracts with State agencies to conduct standard surveys 
of nursing homes as part of the survey and certification process. 
The State agencies look at MDS accuracy as part of the survey. 
o 	 CMS regional offices monitor States nursing home survey and 
certification processes by conducting comparative and 
observational surveys, both of which assess MDS accuracy. 
o 	 From 2001 to 2005, CMS contracted with Computer Science 
Corporation for the Data Assessment and Verification project. 
One of the primary goals of this project was to improve the 
accuracy of MDS data through the establishment of State, 
territory, and national MDS accuracy thresholds.  The project 
conducted both onsite and offsite medical record reviews to 
determine these thresholds.7  It has not released any findings. 
7 	 To do this analysis, the project selected a sample of skilled nursing facility stays which 
contained multiple RUGs.  The project compared the RUGs based on a medical record 
review to the RUGs generated from the State MDS database (which are the data 
submitted to the National Repository), the RUGs billed on the claim, and the RUGs 
submitted by the skilled nursing facilities.   
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  3  I N T R O D U C T I O N

METHODOLOGY 
Scope 
This inspection determines the extent to which RUGs submitted on 
skilled nursing facility claims are different from the ones that would be 
generated based on evidence in the medical record.  The results of this 
review are determined from an independent review of the MDS and 
documentation in the rest of the medical record for a random sample of 
272 claims submitted by skilled nursing facilities and from interviews 
with staff responsible for completing the MDS at the skilled nursing 
facilities. 
This inspection does not determine the extent to which claims 
submitted by skilled nursing facilities are medically necessary or 
adequately supported by medical documentation.  It also does not 
compute total improper payments for nursing facilities.  Rather, it 
focuses on whether the MDS is consistent with the rest of the medical 
record. 
Sample 
We selected a simple random sample of 300 skilled nursing facility 
claim line items from the National Claims History File.  The population 
from which we selected our sample included all claim line items that 
contained a RUG calculated from a 5-day, 14-day, or 30-day MDS 
assessment that had been submitted between October 1, 2001, and    
September 30, 2002.  We excluded 60-day and 90-day assessments, 
readmission/return assessments, and other Medicare- or State-required 
assessments from the population to simplify the medical record review. 8 
For ease of presentation, we refer to claim line items as claims 
throughout this report.  Please see Appendix C for the number of claims 
in each RUG for our sample. 
For each of the 300 claims, we requested the residents medical record 
from the skilled nursing facility for the date of admission through the 
first 35 days of residence.  We received medical records for 272 of the 
300 claims.9  For the remaining 28 claims, we contacted each of the 
facilities at least three times to obtain the medical records, but we 
8 The 5-day, 14-day, and 30-day assessments represent about 87 percent of all Medicare 
prospective payment system MDS assessments.   
9 These claims were submitted by 267 skilled nursing facilities. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  4  I N T R O D U C T I O N  
were unsuccessful. For these claims, we were unable to make key 
comparisons between respondents and nonrespondents because we did 
not have the medical records. 
Medical Record Reviews 
We contracted with an independent consulting firm to conduct a medical 
record review. The medical record reviewers, two registered nurses,10 
followed guidelines defined in the Revised Long Term Care Resident 
Assessment Instrument Users Manual for the Minimum Data Set 
Version 2.0.  They limited their review to the time period that coincided 
with the assessment, i.e., the assessment reference date for the 5-day, 
14-day, or 30-day assessment.  The reviewers also considered 
information from other time periods if it enhanced their understanding 
of the case.  
The reviewers focused their review on the 108 items on the MDS that 
determine payment rates for Medicare Part A skilled nursing facility 
stays. The reviewers determined whether the responses submitted by 
skilled nursing facilities for these 108 MDS items were consistent with 
evidence in the rest of the medical record.  For example, if item J1h, 
fever, was not indicated on the MDS, but the medical record indicated 
that the resident had a fever in the last 7 days, reviewers considered 
item J1h to be inconsistent with evidence in the rest of the medical 
record.11 
The reviewers made a determination based on the documentation 
available.  They did not draw any conclusion about an MDS item if 
there was no documentation in the rest of the medical record or if, for 
some other reason, they could not determine the appropriate response to 
that item.  This does not mean that the MDS item was accurate, only 
that it was not possible to compare it to any related documentation in 
the medical record.  
The medical record reviewers generated a new RUG for each RUG in 
our sample based on their review of the MDS and documentation in the 
rest of the medical record.  The reviewers used CMSs Statistical 
Analytical Software program script to generate a RUG.  If a particular 
10 One reviewer has a Ph.D. and the other is Masters-prepared. 
11 As explained earlier, this methodology is consistent with CMSs Resident Assessment 
Instrument Manual, which states that the MDS can be verified by a review of the medical 
record that verifies that the record supports and is consistent with the responses on the 
MDS. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  5  III NNN TTT RRR OOO DDD UUU CCC TTT III OOO NNN
MDS item was inconsistent with the rest of the medical record, the 
reviewer recoded that item based on the evidence in the rest of the 
medical record. Reviewers used the recoded item to recalculate the 
RUG. In 155 of the 272 claims, the reviewers did not find any 
documentation in the rest of the medical record or the medical record 
did not contain enough information to make a judgment for at least one 
item on the MDS. For these items, the reviewers did not make an 
independent determination. This method resulted in a conservative 
estimate of RUG differences. 
Finally, we determined the potential effects of the RUG differences on 
total Medicare payments. We calculated the net difference between the 
payment amounts for the RUGs on the claims submitted by nursing 
facilities and the payment amounts for the RUGs generated from 
evidence in the medical record. For each RUG, we multiplied the urban 
payment rate12 by the number of days on the claim and calculated the 
difference. We then calculated the total net difference and projected it 
to all claims with a RUG based on a 5-day, 14-day, and 30-day MDS 
assessment in fiscal year 2002. 
Interviews 
MDS coordinators are responsible for overseeing and processing MDS 
assessments for their nursing homes. We conducted a mail survey of 
the 300 MDS coordinators in the skilled nursing facilities with a 
resident in our sample of claims and received a response from 245. We 
asked them about their experiences with the MDS and about any 
problems they may have with the MDS. 
Limitations 
The size of our sample was not large enough to determine whether there 
were certain RUGs that were more likely than others to differ from 
those generated based on evidence in the medical record. 
Standards 
Our review was conducted in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
12 There is an urban and a rural payment rate for each RUG. The urban payment rate is 
lower than the rural rate for the rehabilitation RUGs, which comprise 80 percent of the 
RUGs in our sample. We used the urban rate to provide a more conservative estimate. 
OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  6    F I N D I N G S

Twenty-six percent of Resource Utilization  Based on a comparison of the 
Groups on claims were different from the ones  MDS and the rest of the medical 
record, we found that 26 percent 
generated based on evidence in the medical 
of RUGs on claims submitted by 
record 
skilled nursing facilities (71 of 
272 claims in our sample) differed from the ones generated based on 
evidence in the rest of the medical record.  The medical record 
reviewers identified differences by reviewing the responses to the 108 
MDS items used to generate the RUG and documentation in the rest 
of the medical record. 
The differences between the RUGs on the claims and the ones generated 
based on evidence in the medical record resulted in both potential 
underpayments and overpayments.  As shown in Chart 1, 22 percent of 
claims, or 59 of the 272 claims in our sample, had a RUG with a higher 
associated payment rate than the one generated based on evidence in 
the medical record.  These differences represented potential 
overpayments. The remaining 4 percent of claims, or 12 of the 272 
claims in our sample, had a RUG with a lower associated payment rate 
than the one generated based on evidence in the medical record, 
representing potential underpayments.  Appendix D includes a list of 
the differences between the RUGs on the skilled nursing facility claims 
and the ones generated based on evidence in the medical record for our 
sample. Appendix E includes the confidence intervals for the key 
estimates. 
CHART 1 
A Comparison of Claim RUGs to Medical Record RUGs 
Claim RUG same as medical record RUG 
22% 
4% 
Claim RUG lower than medical record RUG 
74% 
Claim RUG higher than medical record RUG 
Source:  OIG medical record review, 2003. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  7  FF II NN DD II NN GG SS  
These differences represented a net $542 million in potential Medicare 
overpayments for fiscal year 2002 
To determine the potential effects of these differences on total Medicare 
payments, we calculated the net difference between the payment 
amounts for the RUGs on the claims submitted by nursing facilities and 
the payments for the RUGs generated from evidence in the medical 
record. We found the net difference to be about $36,000 for our sample. 
We then projected this estimate to all claims with a RUG based on a 
5-day, 14-day, and 30-day MDS assessment in fiscal year 2002. This 
estimate amounted to a net $542 million in potential Medicare 
overpayments for fiscal year 2002.13 
Minimum Data Set items that require look-back  RUGs are generated from 
periods, multiple assessors, or calculations  108 items on the MDS. In the 71 
claims in our sample that had a 
contributed to differences in Resource 
RUG different from the one 
Utilization Groups 
generated based on evidence in 
the medical record, 11 MDS items were most frequently inconsistent 
with documentation in the rest of the medical record. These 11 MDS 
items accounted for 54 percent of the 291 total instances in which a 
response on the MDS was inconsistent with the rest of the medical 
record for the 71 claims. 
These 11 MDS items have one or more of the following characteristics: 
a look-back period (i.e., observation over time), multiple assessors (i.e., 
two or more staff assess a resident to determine these items), or 
calculations. These measures are described below and are shown in 
Table 1 on page 10. 
Look-back 
All 11 items require that the nurse completing the MDS evaluate the 
resident by looking back over a period of time. For example, item 
P1bba is the total number of days the resident has received 
occupational therapy out of the last 7 days. 
The look-back periods for these 11 MDS items range from 7 to 30 days 
and can be difficult to code. For example, one MDS coordinator noted 
that the varying number of days in the look-back is a particularly 
confusing component of the MDS process. Also, several of these 
13 In fiscal year 2002, Medicare payments to skilled nursing facilities totaled $14.2 billion. 
OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  8  F	 I N D I N G
 S  
look-back periods require information about the period prior to 
admission, such as when the resident was in the hospital, which can be 
difficult to obtain.   
Determination by multiple assessors 
Seven of the eleven items require a determination of the residents 
performance by multiple assessors (i.e., two or more staff assess a 
resident to determine these items). More than 25 percent of MDS 
coordinators we interviewed suggested that one of the following 
factors may contribute to differences between the MDS and the rest of 
the medical record for these types of items: 
o 	 Different staff may have added varying observations of a 
residents abilities to the medical record. 
o 	 A residents condition can change daily or throughout the day, 
making it difficult to code these items. 
o 	 Guidelines for these measures are not always clear, causing some 
confusion about the appropriate coding. 
Calculations 
Four of the eleven items require the nurse completing the MDS to 
calculate the total number of treatments, therapies, or physicians 
visits received by a resident during a specified time period. For 
example, item P1bcb requires the assessor to calculate the total 
number of therapy minutes the resident received during the prior 
7 days. 
We found that the most common issue for these items was that the 
number of minutes or days of therapy recorded on the MDS did not 
match the number recorded in the rest of the medical record.  These 
inconsistencies may be due in part to miscalculations.  For example, 
one MDS coordinator pointed out that it is particularly difficult to 
calculate the number of doctors visits when there are multiple visits 
on 1 day. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  9  F I N D I N G S  

Table 1: The 11 MDS Items Most Frequently Inconsistent With the Rest of the Medical Record  
  in Claims With RUG Differences 
Number of Claims 
With Conflicts 
MDS Item Description  Characteristics of Item  (n = 71) 
Calculation, look-back  25 
P1bbb - Occupational Therapy, Minutes 
Calculation, look-back  24 
P1bcb - Physical Therapy, Minutes 
Calculation, look-back  19 
P1bba - Occupational Therapy, Days 
Calculation, look-back  15 
P1bca - Physical Therapy, Days 
G1aA - Bed Mobility Self-Performance, How Resident Moves  Multiple assessors, 
13 
From Lying Position, Turns Side to Side, and Positions Body  look-back 
Multiple assessors, 
12 
G1aB - Bed Mobility Support   look-back 
Multiple assessors, 
11 
G1bB - Residents Transfer Support   look-back 
Multiple assessors, 
11 
G1iA - Residents Self-Performance With Toileting   look-back 
Multiple assessors, 
10 
G1bA - Residents Self-Performance for Transfer  look-back 
Multiple assessors, 
9 
G1ib - Residents Support for Toilet   look-back 
Multiple assessors, 
9 
G1Ha - Residents Self-Performance With Eating  look-back 
Total occurrences   158 
Source: OIG medical record review, 2003. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  10  R E C O M M E N D A T I O N
  R E C O M M E N D A T I O N  

Based on a comparison of the MDS and the rest of the medical record, 
we found that approximately one-quarter of RUGs on claims submitted 
by skilled nursing facilities differed from the ones generated based on 
evidence in the medical record.  These differences represented a net 
$542 million in potential Medicare overpayments for fiscal year 2002.   
We recommend that CMS take steps to ensure that skilled nursing 
facilities complete the MDS accurately and assign each resident to the 
correct RUG.  These steps could include (1) continuing the type of 
analysis conducted by the Data Assessment and Verification (DAVE) 
project and (2) more carefully examining the 11 MDS items that we 
found were most often inconsistent with the rest of the medical record. 
In addition, we have forwarded to CMS for appropriate action 
information on the 71 claims in our sample that had a RUG with a 
payment rate different from the one generated based on evidence in the 
medical record. 
AGENCY COMMENTS 
CMS concurred with our recommendation.  CMS sees this report as 
showing a significant improvement in the assignment of RUG categories 
at the facility level compared to our 2001 report.  CMS commented that 
it would continue current efforts to improve the accuracy of the MDS 
and has taken, or has agreed to take, the following actions: 
o 	 CMS recently awarded a contract to expand upon the DAVE 
project, called DAVE2.  The purpose of this new project is to 
assess the accuracy and reliability of national CMS data through 
focused onsite reviews of the MDS assessment.  
o 	 CMS will take the findings of this report into consideration in 
developing a Web-based training program for the Resident 
Assessment Instrument Manual. 
o 	 CMS will maintain ongoing communications with stakeholders, 
such as State and regional staff, consultants, and trade 
associations, regarding the MDS. 
o 	 CMS will have fiscal intermediaries and Program Safeguard 
Contractors continue to assess MDS information through the 
routine medical review process. 
  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  11  R	 E C O M M E N D A T I O N  
o 	 CMS will incorporate the findings of this report into educational 
efforts to improve the accuracy of the MDS. 
The full text of CMSs comments is included in Appendix F. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We agree with the actions CMS plans to take to improve the accuracy of 
the MDS.  However, it is important to note that, because of 
methodological differences, the results of this report cannot be 
compared to the results of the previous OIG report.  
The methodologies of the two reports differed in two main ways.  First, 
for the previous report, reviewers completed an MDS based on the 
residents medical record without referring to the original MDS and 
then compared the results of the two assessments.  In its comments to 
the previous report, CMS noted that the MDS is a part of the medical 
record.  Therefore, for the current report, the reviewers included the 
MDS in their review of the medical record.  They compared the original 
MDS to the rest of the medical record to determine whether they were 
consistent.  Second, for the previous report, we only reviewed the 14-day 
MDS, while for the current report we reviewed the 5-day, 14-day, and 
30-day MDS assessments.  Because of these differences, the current 
report cannot necessarily be used as evidence to show that MDS 
accuracy has improved over time. 
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 A P P E N D I X   A  

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  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  21    A P P E N D I X   C  
Sampled RUGs 
Number in  Percentage of 
Number in  Percentage of  Reviewed  Reviewed 
RUG Group  Sample  Sample  Sample  Sample 
RUC - Rehabilitation Ultra High C  5  1.8%  5  1.8% 
RUB - Rehabilitation Ultra High B  10  3.3%  8  2.9% 
RUA - Rehabilitation Ultra High A  4  1.4%  4  1.4% 
RVC - Rehabilitation Very High C  9  3.0%  8  2.9% 
RVB - Rehabilitation Very High B  32  11.0%  30  11.0% 
RVA - Rehabilitation Very High A  14  4.6%  13  4.7% 
RHC - Rehabilitation High C  53  17.6%  46  16.9% 
RHB - Rehabilitation High B  48  16.0%  46  16.9% 
RHA - Rehabilitation High A   19  6.3%  17  6.2% 
RMC - Rehabilitation Medium C  14  4.6%  13  4.7% 
RMB - Rehabilitation Medium B  22  7.3%  20  7.3% 
RMA - Rehabilitation Medium A  11  3.6%  10  3.6% 
RLA - Rehabilitation Low A  1  0.3%  1  0.3%
       Total Rehabilitation  242  80.6%  221  81.2% 
SE3 - Extensive Services 3  13  0.4%  9  3.3% 
SE2 - Extensive Services 2  12  4.0%  11  4.0% 
SE1 - Extensive Services 1  1  0.3%  1  0.3% 
       Total Extensive Services  26  8.6%  21  7.7% 
SSC - Special Care C  3  1.0%  3  1.1% 
SSB - Special Care B  6  2.0%  6  2.2% 
SSA - Special Care A  10  3.3%  10  3.6% 
       Total Special Care  19  6.3%  19  6.9% 
CC2 - Clinically Complex C2  2  0.6%  2  0.7% 
CC1 - Clinically Complex C1  1  0.3%  1  0.3% 
CB2 - Clinically Complex B2  1  0.3%  1  0.3% 
CB1 - Clinically Complex B1  1  0.3%  2  0.7% 
CA1 - Clinically Complex A1  4  1.3%  4  1.4% 
       Total Clinically Complex  10  3.3%  10  3.3% 
IB1 Impaired Cognition 1  1  0.3%  0  0.0% 
       Total Impaired Cognition  1  0.3%  0  0.0%
       Total Behavior Problems  0  0.0%  0  0.0% 
PD1 Reduced Physical Functioning 1  2  0.6%  1  0.3% 
       Total Physical Functioning 
        Reduced  2  0.6%  1  0.3%
       Totals All RUG Categories  300  272  100% 
Source:  OIG medical record review, 2003. 
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Differences in RUGs Between Claim and Reviewer  
Daily Payment  Daily Payment 
Claim  Rate for Claim  Reviewer  Rate for Reviewer 
RUG  RUG  RUG  RUG  Difference 
RUC  $441.18  RUB  $391.65  $49.53 
RUC  $441.18  RUB  $391.65  $49.53 
RUC  $441.18  RVC  $341.68  $99.50 
RUC  $441.18  RHC  $317.76  $123.42 
RUB  $392.78  RVB  $330.22  $62.56 
RUB  $392.78  RVB  $330.22  $62.56 
RUB  $392.78  RVB  $330.22  $62.56 
RUB  $392.78  RHB  $291.02  $101.76 
RVC  $342.67  RHC  $318.68  $23.99 
RVC  $342.67  RHC  $318.68  $23.99 
RVC  $342.67  RVB  $330.22  $12.45 
RVB  $330.22  RVA  $298.41  $31.81 
RVB  $330.22  RHC  $318.68  $11.54 
RVB  $330.22  RHB  $291.02  $39.20 
RVB  $330.22  RHB  $291.02  $39.20 
RVB  $330.22  RHB  $291.02  $39.20 
RVB  $330.22  RHB  $291.02  $39.20 
RVB  $330.22  RMB  $279.99  $50.23 
RVB  $330.22  RMB  $279.99  $50.23 
RVB  $330.22  CB1  $188.42  $141.80 
RVA  $298.41  RVB  $330.22  ($31.81) 
RVA  $298.41  RHB  $291.02  $7.39 
RVA  $298.41  RHA  $264.74  $33.67 
RVA  $298.41  RHA  $264.74  $33.67 
RHC  $318.68  RHB  $291.02  $27.66 
RHC  $318.68  RHB  $291.02  $27.66 
RHC  $318.68  RHB  $291.02  $27.66 
RHC  $318.68  RHB  $291.02  $27.66 
RHC  $318.68  RMC  $315.94  $2.74 
RHC  $318.68  RMB  $279.99  $38.69 
RHC  $318.68  RMB  $279.99  $38.69 
RHC  $318.68  SSA  $211.93  $106.75 
RHB  $291.02  RVB  $330.22  ($39.20) 
RHB  $291.02  RHA  $264.74  $26.28 
RHB  $291.02  RHA  $264.74  $26.28 
RHB  $291.02  RMB  $279.99  $11.03 
 Source:  OIG medical record review, 2003. 

  Daily payment rates are based on FY 2002 urban rates.  

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Differences in RUGs Between Claim and Reviewer (continued) 
Daily Payment  Daily Payment 
Claim  Rate for Claim  Reviewer  Rate for Reviewer 
RUG  RUG  RUG  RUG  Difference 
RHB  $291.02  RMB  $279.99  $11.03 
RHB  $291.02  RMB  $279.99  $11.03 
RHB  $291.02  RMB  $279.99  $11.03 
RHB  $291.02  RMA  $262.01  $29.01 
RHB  $291.02  SE2  $264.48  $26.54 
RHB  $291.02  SE2  $264.48  $26.54 
RHB  $291.02  SE2  $264.48  $26.54 
RHA  $264.74  RUA  $369.27  ($104.53) 
RHA  $264.74  RMA  $262.01  $2.73 
RHA  $264.74  RMA  $262.01  $2.73 
RHA  $264.74  RMA  $262.01  $2.73 
RHA  $264.74  SSA  $211.93  $52.81 
RMC  $315.94  RMB  $279.99  $35.95 
RMC  $315.94  SSC  $228.53  $87.41 
RMC  $315.94  CB1  $188.42  $127.52 
RMB  $279.99  RHC  $318.68  ($38.69) 
RMB  $279.99  SE2  $264.48  $15.51 
RMB  $279.99  PB1  $141.14  $138.85 
RMA  $262.01  RHA  $264.74  ($2.73) 
SE3  $307.35  RHB  $291.02  $16.33 
SE3  $307.35  RMB  $279.99  $27.36 
SE3  $307.35  CC1  $209.17  $98.18 
SE3  $307.35  PA1  $135.87  $171.48 
SE2  $264.48  RUB  $392.78  ($128.30) 
SE2  $264.48  SSA  $211.93  $52.55 
SE2  $264.48  CA2  $187.55  $76.93 
SE2  $264.48  IA1  $145.55  $118.93 
SE1  $234.06  SE3  $307.35  ($73.29) 
SSC  $228.53  RMC  $315.94  ($87.41) 
SSB  $217.46  CB1  $188.42  $29.04 
SSA  $211.93  SE1  $234.06  ($22.13) 
CC1  $209.17  SSC  $228.53  ($19.36) 
CB1  $188.42  CC1  $209.17  ($20.75) 
CA1  $175.98  PA1  $135.87  $40.11 
PD1  $169.06  SSA  $211.93  ($42.87) 
Source:  OIG medical record review, 2003. 

  Daily payment rates are based on FY 2002 urban rates.

  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  24    A P P E N D I X   E  
Confidence Intervals for Key Findings 
Key Findings  Point Estimate  Confidence Interval 
26 percent of RUGs on claims submitted by skilled nursing 
facilities were different from the ones generated based on  26.1%  20.9% - 31.3% 
evidence in the medical record  (n=272) 
These differences in RUGs represent a net $542 million in 
potential Medicare overpayments for fiscal year 2002  $542,173,340 
$258,705,071 - $825,641,610 
(n=272) 
Source:  OIG medical record review, 2003. 
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 A P P E N D I X   F  

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 A P P E N D I X   F  

  OEI-02-02-00830  A REVIEW OF NURSING FACILITY RESOURCE UTILIZATION GROUPS  28 
 This report was prepared under the direction of Jodi Nudelman 
Regional Inspector General for Evaluation and Inspections in the New 
York regional offce. Other principal Offce of Evaluation and 
Inspections staff who contributed include: 
Miriam Anderson  Team Leader 
Judy Kells Program Analyst

Patricia Banta 
Program Analyst 
Tricia Davis  Director, Medicare and Medicaid Branch 
Program Specialist 
Sandy Khoury, 

Technical Assistance 
Barbara Tedesco Mathematical Statistician 
Scott Horning,  Program Analyst

OEI. 02-02. 00830  A REVIEW OF NURSING FACILITY ResouRcE UTILIZATION GROUPS