Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
T A
RENDS IN THE  SSIGNMENT OF 
R U
ESOURCE  TILIZATION 
G
ROUPS 
Inspector General 
November 2003 
OEI-01-03-00180  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 OIG's 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 ex amine 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 
mismanagemen t and to promote economy and efficiency throughout the department. 
Office of Evaluation and Inspections 
The OIG's Office of Evaluation and Inspections (OEI) conducts short-term 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. 
Office of Investigations 
The OIG's 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. The OI also oversees 
state Medicaid fraud control units, which investigate and prosecute fraud and patient 
abuse in the Medicaid program. 
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. The OCIG imposes program exclusions and 
civil monetary penalties on health care providers and litigates those actions within the 
department. The OCIG also represents OIG in the global settlement of cases arising 
under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops model compliance plans, renders advisory opinions on OIG sanctions to the 
health care community, and issues fraud alerts and other industry guidance.    A B S T R A C T

Based on our analysis of data from January 1999 to December 2002, 
minimal shifts occurred in the assignment of resource utilization groups 
corresponding to legislative payment changes to skilled nursing 
facilities. The rehabilitation category, the largest of the seven resource 
utilization group categories, remained stable. However, assignment to 
the rehabilitation subcategories shifted parallel to the reimbursement 
changes of the Balanced Budget Refinement Act and the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000. 
In addition, small changes occurred in other categories, including 
extensive care, special care, and clinically complex. As of October 1, 
2002, all temporary payment adjustments ended, and any payment 
incentives that may have existed concluded at that time. 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  i    E X E C U T I V E   S U M M A R Y

OBJECTIVE 
To identify changes in the proportion of Medicare beneficiaries assigned 
to each resource utilization group in skilled nursing facilities between 
January 1999 and December 2002, given legislative changes in 
reimbursement levels. 
BACKGROUND 
The Balanced Budget Act of 1997 changed Medicare reimbursement for 
skilled nursing facilities from a cost based to a prospective payment 
system (PPS). Under PPS, skilled nursing facilities are required to 
assign residents to 1 of 44 resource utilization groups (RUGs), which are 
calculated based on a clinical assessment tool. 
In the fall of 1999, Congress enacted the Balanced Budget Refinement 
Act (BBRA), which included a 4 percent across-the-board increase in 
payments to skilled nursing facilities for fiscal years 2001 and 2002 and 
a temporary 20 percent increase to 15 RUGs for resident conditions 
considered medically complex. These included three individual RUGs in 
the special rehabilitation category (RMB, RHC, and RMC) as well as all 
the RUGs in three of the seven RUG categories (clinically complex, 
special care, and extensive care categories). The changes went into 
effect on October 1, 2000. In the fall of 2000, Congress further adjusted 
the payment rates under the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act (BIPA), which became effective on 
April 1, 2001. 
Congress mandated in Section 314 of BIPA that the Office of Inspector 
General (OIG) review, no later than October 1, 2001, the Medicare 
payment structure for services to assess whether payment incentives exist 
for the delivery of inadequate care. In response, OIG released Trends in 
the Assignment of Resource Utilization Groups by Skilled Nursing 
Facilities (OEI-02-01-00280) in July 2001, which analyzed the changes in 
RUG assignments from January 1999 to March 31, 2001. This current 
inspection analyzes data post-BIPA through December 2002. 
This inspection is based on an analysis of the Centers for Medicare & 
Medicaid Servicess National Claims History File. We analyzed the 
admission RUG code for all residents by quarter from January 1999 to 
December 2002. 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  ii  E X E C U T I V E   S U M M A R Y  
FINDINGS 
Minimal shifts occurred in the assignment of resource utilization 
groups since the prospective payment system (PPS) 
implementation. 
While the overall rehabilitation category has remained largely unchanged, 
the assignment to rehabilitation subcategories did shift. Nursing homes 
can classify residents into one of seven categories: rehabilitation, 
extensive care, special care, clinically complex, cognitively impaired, 
behavior problems, and reduced physical functions. Since the 
implementation of PPS in 1999, the mix of residents classified into the 
rehabilitation RUG category, the largest of all seven categories, 
remained about the same. In the fourth quarter of 2002, 77 percent of 
all Medicare residents were assigned to 1 of the 14 rehabilitation RUGs, 
which was a 0.6 percent increase since the first quarter of 1999. In 
addition, during that time period, the percentage of nursing home 
residents assigned to the rehabilitation category fluctuated by only 
about 1 percent. 
While the proportion of Medicare residents assigned to all 14 of the 
rehabilitation RUGs remained constant, the subcategories within the 
rehabilitation RUG category shifted at the same time as the 
reimbursement changes from BBRA and BIPA. The rehabilitation 
RUGs are broken down into five subcategories based on the number of 
minutes of physical or occupational therapy required: ultra high, very 
high, high, medium, and low. The proportion of Medicare residents in 
the rehabilitation category assigned to the high subgroup steadily 
increased 8 percent from January 1999 to December 2002. The 
proportion of residents assigned to the medium subcategory increased 
until the shift in payment under BIPA in 2001. At the same time, the 
proportion of residents assigned to the combined ultra high, very high, 
and low subgroups decreased. After BIPA changes spread out the specific 
increases from 3 RUGs to all 14 rehabilitation RUGs, the declining trend 
reversed, and the medium, ultra high, very high, and low subcategories 
began to increase. 
Small changes seen in the other categories, including extensive care, 
special care, and clinically complex.  The proportion of Medicare 
residents assigned to the remaining three RUG categories affected by 
BBRA and BIPA (extensive care, special care, and clinically complex) 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  iii  E X E C U T I V E   S U M M A R Y  
experienced minimal shifts since PPS was introduced.  The extensive 
care category increased from about 13 percent in the first quarter of 
1999 to about 15 percent. Special care and clinically complex each 
decreased by about 1 percent. The shift in trends for these 3 categories 
appears to be unrelated to either BBRA or BIPA payment increases 
because all 3 categories steadily increased or decreased from the first 
quarter of 1999. In addition, the law did not create payment incentives 
to code residents in one RUG or RUG category over another, because all 
were increased uniformly. 
Underlying resident demographics do not explain the minimal resource 
utilization group assignment shifts.  We analyzed gender, race, age, and 
reason for Medicare eligibility from January 1999 to December 2002. 
We found no substantial shifts in the demographics of Medicare 
residents in nursing homes assigned to RUGs in that time period. 
SUMMARY 
The analysis showed that shifts did occur in the proportion of Medicare 
nursing home residents assigned to RUG categories and subcategories 
corresponding to payment changes. However, the changes were small in 
magnitude and focused only in the rehabilitation RUGs. In addition, all 
payment changes ended on October 1, 2002, and any payment 
incentives that may have existed concluded at that time. This report 
fulfills the legislative mandate that the OIG assess whether payment 
incentives existed for the delivery of inadequate care in skilled nursing 
facilities. 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  iv    T A B L E   O F   C O N T E N T S

A B S T R A C T  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .   i

E X E C U T I V E   S U M M A R Y  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .   ii

I N T R O D U C T I O N   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .  1

F I N D I N G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .  1

Minimal shifts in assignment of RUGs ............................................. 5

S U M M A R Y  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .   10

A P P E N D I C E S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .   11

A: List of RUGs ................................................................................ 11

B: Proportion of residents in RUG categories.................................. 12

C: Proportion of residents in rehab subcategories........................... 13

B: Proportion of residents in each RUG .......................................... 14

A C K N O W L E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .   18
   I N T R O D U C T I O N

OBJECTIVE 
To identify changes in the proportion of Medicare beneficiaries assigned 
to each resource utilization group in skilled nursing facilities between 
January 1999 and December 2002, given legislative changes in 
reimbursement levels. 
BACKGROUND 
Medicare Payments to Skilled Nursing Facilities 
Medicare Part A helps pay for skilled nursing facility (SNF) care when a 
beneficiary meets certain conditions. These conditions include a 
requirement of daily skilled nursing or rehabilitative services, a prior 3-
day consecutive stay in a hospital, admission to a SNF within a short 
period of time after leaving the hospital, treatment for the same condition 
that was treated in the hospital, and a medical professional certifying the 
need for daily skilled nursing or rehabilitative care. Medicare limits the 
number of covered SNF days to 100 days per benefit period, with a co
payment required for days 21 through 100. After the Medicare 100-day 
SNF Part A benefit runs out, the Medicare Part B benefit continues to 
pay for physician services and other Part B covered services. 
In order to control escalating nursing home costs, the Balanced Budget 
Act (BBA) of 1997 changed SNF reimbursement from a cost-based to a 
prospective payment system (PPS). Beginning with the first cost-
reporting period after July 1, 1998, Medicare began paying SNFs 
through a prospective, case-mix adjusted per-diem payment that covers 
routine, ancillary, and capital-related costs, including most items and 
services for which payment was previously made under Medicare Part 
B. The per-diem payment is based on fiscal year (FY) 1995 Part A and 
B costs, adjusted using three elements: the SNF market basket index, 
which reflects changes over time in the prices of an appropriate mix of 
goods and services included in the covered SNF services; the case-mix 
from resident assessments; and geographic wage variations. 
To determine the case-mix, SNFs classify residents into 1 of 44 resource 
utilization groups (RUGs). To do this, SNFs must complete the 
Minimum Data Set (MDS) assessment, a standardized set of clinical 
and functioning status measures. An interdisciplinary team from the 
nursing home completes the MDS for each resident by the 5th, 14th, 
30th, 60th, and 90th days of his/her stay. 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  1  I N T R O D U C T I O N  
RUGs are divided into seven major categories: special rehabilitation, 
extensive services, special care, clinically complex, impaired cognition, 
behavior problems, and reduced physical function. Each RUG is 
associated with a payment rate that is based on a number of factors, 
such as the need for therapy and the level of functioning measured in 
terms of the activities of daily living (ADL). Medicare does not typically 
reimburse SNFs for residents in the last three categories because the 
resident usually does not require skilled care (see Appendix A). 
Nursing homes assign residents requiring physical or occupational 
therapy to a RUG in the special rehabilitation category. Each resident 
is classified in a subcategory depending on the number of therapy 
minutes required in the last 7 days, as indicated on the MDS. There are 
5 special rehabilitation subcategories: ultra-high (over 720 minutes), 
very high (500 to 719 minutes), high (325 to 499 minutes), medium (150 
to 324 minutes), and low (45 to 149 minutes). The nursing home then 
assigns each resident to a specific RUG within these subcategories 
depending on the level of self-performance and support needed with four 
ADLs: eating, bed mobility, toileting, and transfers. The score on the 
MDS for these four ADLs places the resident into a specific RUG. 
Legislative Changes 
In the fall of 1999, Congress enacted the Balanced Budget Refinement 
Act (BBRA) in response to providers concerns that reductions in 
payment under BBA were too severe. BBRA included a 4 percent 
across-the-board increase in payments to SNFs for FYs 2001 and 2002 
and a temporary 20 percent increase to 15 RUGs for patient conditions 
considered medically complex. These included all the RUGs in the 
clinically complex, special care, and extensive care categories as well as 
three RUGs in the medium and high subcategories of the special 
rehabilitation category (RMB, RHC, and RMC). In addition, several 
costly non-therapy ancillary services, including certain ambulance 
services, prostheses, and chemotherapy drugs, were excluded from PPS 
and paid for separately. BBRA changes went into effect on October 1, 
2000. 
In 2000, Congress further adjusted the payment rates under the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act (BIPA). These changes went into effect on April 1, 2001. BIPA 
increased the inflation update to the full market basket in FY 2001 and 
raised the nursing component of the RUGs by 16.6 percent in an effort 
to improve PPS nursing staff ratios. Additionally, BBRAs 20 percent 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  2  I N T R O D U C T I O N  
increase to the 3 rehabilitation RUGs was spread across all 14 special 
rehabilitation RUGs as a 6.7 percent increase. The other RUGs affected 
in the BBRA maintainted the 20 percent increase. 
As of October 1, 2002, all payment adjustments ended. (See Figure 1) 
Figure 1: Legislative Timeline 
January 1999  Oct 1, 2000  April 1, 2001  Oct. 1, 2002 
PPS  BBRA  BIPA  BIPA 
implemented  implemented  implemented  temporary 
for SNFs  adjustments 
ended 
Previous OIG Inspections 
Congress mandated in Section 314 of BIPA that the Office of Inspector 
General (OIG) review, no later than October 1, 2001, the Medicare 
payment structure for services classified within the rehabilitation RUGs 
to assess whether payment incentives exist for the delivery of 
inadequate care. In response, OIG released Trends in the Assignment 
of Resource Utilization Groups by Skilled Nursing Facilities (OEI-02-01-
00280) in July 2001, which analyzed the changes in RUG assignments 
from January 1999 to March 31, 2001.  The report found no major 
changes in RUG assignment since the implementation of PPS. 
However, since the implementation of PPS in January 1999, small 
shifts occurred in the proportion of residents assigned to the RUGs 
within the rehabilitation category. Our analysis in that report was 
limited because BIPA changes were not implemented until April 2001. 
METHODOLOGY 
Using the Centers for Medicare & Medicaid Servicess (CMSs) National 
Claims History File, we examined claims processed through March 2003 
for all Medicare beneficiaries who were admitted to a SNF between 
January 1, 1999, and December 2002. We reviewed the RUG code 
generated from the MDS assessment conducted at admission (types 01, 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  3  I N T R O D U C T I O N  
11, 19, 31,and 41) that is on the provider claim.1 We analyzed the 
proportion of Medicare beneficiaries in each of the 44 RUG codes and in 
each of the 7 RUG categories by quarter beginning in 1999. 
Second, we examined select characteristics of Medicare beneficiaries in 
our analysis. We analyzed the CMS enrollment data, including 
beneficiaries age, race, gender, and reason for eligibility to assess 
whether changes in these characteristics are associated with trends in 
the RUGs. 
Data Limitations 
The data used in this analysis may change based on additional and 

adjusted claims submitted over the next several quarters. Data 

reported in the original report have been updated, and therefore, do not 

match the numbers in this report. In seven of the nine quarters of 

original data, the total number of assessments differed by 3 percent or 

less. In addition, we included admission assessment types 19, 31, and 

41 in this analysis to capture all admission assessments where we only 

analyzed admission assessment types 01 and 11 in the previous report. 

However, assessment codes 01 and 11 represent 97 percent of all 

admission codes. Since the first report, we have learned of these three 

special situation or adjustment codes that are able to replace the 5-day 

assessment.

Standards 

We conducted this inspection in accordance with the Quality Standards 

for Inspections issued by the Presidents Council on Integrity and 

Efficiency.

1 01: 5-day Medicare required assessment/not an admission assessment 
11: 5-day Medicare required assessment and admission assessment 
19: 5-day assessment: special payment situation 
31: Significant change assessment/replaces 5-day assessment 
41: Significant correction of prior assessment: replaces 5-day assessment 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  4    F I N D I N G S

Minimal shifts occurred in the assignment of 
resource utilization groups since the 
prospective payment system (PPS) 
While the overall rehabiliatation category has remained largely unchanged, 

the assignment to rehabilitation subcategories did shift.

Rehabilitation Category.  Since the implementation of PPS in 1999, the 

mix of residents classified into the rehabilitation RUG category 

remained about the same. Nursing homes can classify residents into 

one of seven categories: rehabilitation, extensive care, special care, 

clinically complex, cognitively impaired, behavior problems and reduced 

physical functions. The last three categories are grouped under 

custodial care, and Medicare generally does not cover these services 

because the resident usually does not require skilled care. Medicare 

reimburses on a hierarchical system with the rehabilitation category 

being the highest (see Appendix A). 

Table 1: Proportion of Medicare Residents in each RUG Category 
Oct-Dec 2002  Percentage 
Oct-Dec 2000  Apr-Jun 2001  (Changes  Point Change 
RUG Category  Jan-Mar 1999  (BBRA)  (BIPA)  ended)  1999-2002 
Rehabilitation  76.3%  76.5%  76.7%  76.9%  0.6% 
Extensive Care  12.8  13.4  13.5  14.5  1.7 
Special Care  5.6  5.0  4.9  4.2  -1.4 
Clinically Complex  3.8  3.3  3.1  2.6  -1.2 
Custodial Care  1.4  1.7  1.7  1.8  0.4 
Note: Percentages do not add to 100 due to rounding	 Source: Office of Evaluation and Inspections (OEI) analysis of 
National Claims History File, July 2003 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  5  F I N D I N G S  
In the fourth quarter of 2002, 77 percent of all Medicare residents were 
assigned to 1 of the 14 rehabilitation RUGs, which was a 0.6 percent 
increase since the first quarter of 1999 (see Table 1). In addition, 
during that time period, the percentage of nursing home residents 
assigned to the rehabilitation category fluctuated by only about 1 
percent (see Appendix B). 
Rehabilitation Subcategories.  While the proportion of Medicare 
residents assigned to all 14 of the rehabilitation RUGs remained 
constant, the subcategories within the rehabilitation RUG category 
shifted at the same time as the reimbursement changes from BBRA and 
BIPA. The rehabilitation RUGs are broken down into five subcategories 
based on the number of minutes of therapy required: ultra high, very 
high, high, medium, and low. The proportion of Medicare residents in 
the rehabilitation category assigned to the high subgroup steadily 
increased from 48 percent in the first quarter of 1999 to about 56 
percent of all rehabilitation RUGs in the second quarter of 2001. At 
that point the high category remained stable until December 2002. The 
proportion of residents assigned to the medium subcategory increased 
until the shift in payment under BIPA in 2001. 
At the same time, the proportion of residents assigned to the combined 
ultra high, very high, and low subgroups decreased (see Chart 1 on the 
following page). All the individual RUGs in these three subcategories were 
uniformly adjusted with BBRA and BIPA and follow very similar trends to 
one another. After BIPA changes spread out the specific increases from 3 
RUGs to all 14 rehabilitation RUGs, the declining trend reversed, and the 
medium, ultra high, very high, and low subcategories began to increase 
(see Appendix C). 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  6  F I N D I N G S  
CHART #1 
Proportion of Medicare Residents in Rehabilitation Subgroups 
0.6 
0.5 
High 
0.4 
Medium 
0.3 
0.2 
Ultra High, 
Very High, 
0.1 
Low 
0 
               
9 9 0 0 1 1 2 2
9 9 0 0 0 0 0 0
 '  '  '  '  '  '  '  '
1 3 1 3 1 3 1 3
Q Q Q Q Q Q Q Q
Note: BBRA effectiv e 4th quarter 2000 (October 1, 2000) through 2nd quarter 2001 (March 31, 
2001). BIPA effective 3rd quarter 2001 (April 1, 2001) through 3rd quarter 2002 (September 30, 
2002). All temporary adjustments ended as of October 1, 2002. 
Source: OEI analysis of National Claims History File, July 2003 
Individual rehabilitation resource utilization groups.  The trend for the 
three RUGs (RMB, RMC, and RHC) whose payment structure was 
changed by BBRA and BIPA showed shifts that coincide with those 
reimbursement changes. Twenty percent of all Medicare residents were 
assigned to RHC (high subcategory) in the fourth quarter of 2002, 
making it the largest of all 44 RUGs. The proportion of residents coded 
in RHC increased steadily from 15 percent in the first quarter 1999 to 
20 percent in the fourth quarter in 2002. The two RUGs in the medium 
subcategory, RMB and RMC, followed similar patterns to each other by 
increasing to hit a peak as BBRA changes went into effect, and then 
decreasing when BIPA rescinded those increases (see Table 2). (See 
Appendix D for a complete listing of RUGs by quarter.) 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  7  Table 2: Trend in the Proportion of Medicare Residents in 3 RUGs 
S 
Oct-Dec 2002 
m  Jan-Mar  Oct-Dec  Apr-Jun 2001  (Changes 
Rehabilitation RUGs  1999  2000 (BBRA)  (BIPA)  ended) 
a 
RHC  15.0%  18.9%  18.8%  19.9% 
RMB  8.2  9.4  8.7  7.3 
RMC  5.0  5.5  5.3  5.0 
Source: OEI analysis of National Claims History File, July 2003 
Small changes seen in the other catgories including extensive care, special 
care, and clinically complex. 
The proportion of Medicare residents assigned to the remaining three 
RUG categories affected by BBRA and BIPA (extensive care, special 
care, and clinically complex) experienced minimal shifts since PPS was 
introduced. The shift in trends for these three categories appears to be 
unrelated to either BBRA or BIPA payment increases because all three 
categories steadily increased or decreased from the first quarter of 1999. 
In addition, neither law created payment incentives to code residents in 
one RUG or RUG category over another, because all were increased 
uniformly. However, the extensive care has always been the most 
highly reimbursed of the three non-rehabilitative RUG categories, and 
this may explain some of the gradual increase seen in that category 
since 1999. The extensive care category had the largest shift in the 
proportion of residents assigned to those RUGs and increased from 
about 13 percent in the first quarter of 1999 to about 15 percent. 
Special care and clinically complex each decreased by about 1 percent 
(see Chart 2). 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  8  F I N D I N G S  
CHART #2: 
Trend in the Proportion of Medicare 
Residents in RUG Categories 
16.0% 
14.0% 
12.0% 
10.0%  Extensive Care 
8.0% 
Special Care 
6.0% 
Clinically 
4.0%  Complex 
Custodial Care 
2.0% 
0.0% 
1 '99  3 '99  1 '00  3 '00  1 '01  3 '01  1 '02  3 '02  1 '03 
Q Q Q Q Q Q Q Q Q
Note: BBRA effective 4th quarter 2000 (October 1, 2000) through 2nd quarter 2001 (March 31, 
2001). BIPA effective 3rd quarter 2001 (April 1, 2001) through 3rd quarter 2002 (September 30, 
2002). All temporary adjustments ended as of October 1, 2002. 
Source: OEI analysis of National Claims History File, July 2003 
Underlying resident demographics do not explain the minimal resource 
utilization group (RUG) assignment. 
We analyzed gender, race, age, and reason for Medicare eligibility from 
January 1999 to December 2002, and found no substantial shifts in the 
demographics of Medicare residents in nursing homes assigned to RUGs 
in that time period. For example, the mean age of Medicare residents 
remained about 80 years with a range of 0.4 years over 16 quarters of 
data. 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  9    S U M M A R Y

The analysis showed that shifts did occur in the proportion of Medicare 
nursing home residents assigned to RUG categories and subcategories 
corresponding to payment changes. However, the changes were small in 
magnitude and focused only in the rehabilitation RUGs. In addition, all 
payment changes ended on October 1, 2002, and any payment 
incentives that may have existed concluded at that time. This report 
fulfills the legislative mandate that the OIG assess whether payment 
incentives existed for the delivery of inadequate care in skilled nursing 
facilities. 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  10    A P P E N D I X   ~   A

OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  11
   A P P E N D I X   ~   B

The Proportion of Medicare Beneficiaries in Each RUG Category 
RUG Category 
Q1 99  Q2 99  Q3 99  Q4 99  Q1 00  Q2 00  Q3 00  Q4 00 
Rehab  76.3%  76.7%  76.8%  76.0%  75.9%  76.0%  76.2%  76.5% 
Extensive  12.8  12.8  12.8  13.5  13.7  13.3  13.3  13.4 
Care 
Special Care  5.6  5.4  5.4  5.4  5.3  5.3  5.3  5.0 
Clinically  3.8  3.5  3.4  3.4  3.5  3.5  3.4  3.3 
Complex 
Cognitively  0.3  0.3  0.3  0.4  0.4  0.4  0.4  0.4 
Impaired 
Behavior  0.0  0.0  0.0  0.1  0.1  0.1  0.1  0.0 
Problems 
Reduced  1.1  1.1  1.1  1.2  1.1  1.3  1.3  1.3 
Physical 
Function 
Total Number  427,351  418,258  411,465  427,873  485,122  438,619  428,079  428,467 
of 
Beneficiaries 
RUG Category 
Q1 01  Q2 01  Q3 01  Q4 01  Q1 02  Q2 02  Q3 02  Q4 02 
Rehab  76.8%  76.7%  76.8%  76.7%  76.8%  76.9%  76.8%  76.9% 
Extensive  13.5  13.5  13.6  13.9  14.2  14.1  14.2  14.5 
Care 
Special Care  4.9  4.9  4.7  4.6  4.4  4.4  4.4  4.2 
Clinically  3.1  3.1  2.9  2.9  2.8  2.8  2.7  2.6 
Complex 
Cognitively  0.4  0.4  0.5  0.4  0.4  0.5  0.5  0.5 
Impaired 
Behavior  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
Problems 
Reduced  1.2  1.2  1.2  1.3  1.1  1.2  1.2  1.2 
Physical 
Function 
Total Number  481,851  459,049  438,031  453,335  507,011  475,821  468,006  522,803 
of 
Beneficiaries 
Source: OEI analysis of National Claims History File, July 2003 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  12
   A P P E N D I X   ~   C

Proportion of Medicare Beneficiaries in Each Rehabilitation Subcategory 
REHAB 
SUBCATEGORIES  Q1 99  Q2 99  Q3 99  Q4 99  Q1 00  Q2 00  Q3 00  Q4 00 
Ultra High  8.6%  7.4%  6.6%  5.6%  5.2%  5.1%  4.9%  4.3% 
Very High  20.9  20.3  20.1  19.0  18.6  17.7  17.4  16.1 
High  48.1  50.0  51.0  52.7  53.1  53.7  54.0  55.2 
Medium  21.7  21.7  21.9  22.2  22.6  23.2  23.3  24.0 
Low  0.7  0.6  0.5  0.5  0.4  0.4  0.4  0.4 
Total Number  326,021  321,009  315,852  325,367  368,135  333,495  326,010  327,592 
of Rehab 
Beneficiaries 
REHAB 
SUBCATEGORIES  Q1 01  Q2 01  Q3 01  Q4 01  Q1 02  Q2 02  Q3 02  Q4 02 
Ultra High  4.6%  4.6%  4.9%  4.8%  5.2%  5.3%  5.6%  5.4% 
Very High  16.4  16.9  17.2  17.2  18.2  18.5  19.1  18.8 
High  55.2  55.7  55.7  56.0  55.4  55.6  55.2  55.9 
Medium  23.4  22.5  21.9  21.7  21.0  20.4  19.8  19.6 
Low  0.3  0.3  0.3  0.3  0.2  0.3  0.2  0.2 
Total Number  369,957  352,128  336,483  347,693  389,190  366,065  359,615  402,183 
of Rehab 
Beneficiaries 
Source: OEI analysis of National Claims History File, July 2003 
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   A P P E N D I X   ~   D

The Proportion of Medicare Beneficiaries in Each RUG at Admission by Quarter 
Calendar Year 
1999  Calendar Year 2000 
RUG  Q1 '99  Q2 '99  Q3 '99  Q4 '99  Q1 '00  Q2 '00  Q3 '00  Q4 '00 
RUA  1.2%  1.0%  0.9%  0.7%  0.7%  0.6%  0.6%  0.5% 
RUB  4.3  3.8  3.3  2.9  2.6  2.5  2.5  2.2 
RUC  1.1  0.9  0.8  0.7  0.7  0.7  0.6  0.5 
RVA  3.9  3.7  3.6  3.2  3.3  3.2  3.1  2.8 
RVB  10.0  10.0  9.9  9.4  9.1  8.7  8.7  8.1 
RVC  2.0  2.0  1.9  1.8  1.7  1.6  1.5  1.4 
RHA  6.0  6.1  6.1  6.0  6.2  6.1  6.0  6.0 
RHB  15.7  16.5  16.8  17.2  17.2  17.2  17.3  17.3 
RHC  15.0  15.8  16.3  16.9  16.9  17.5  17.8  18.9 
RMA  3.4  3.3  3.4  3.3  3.4  3.5  3.4  3.4 
RMB  8.2  8.3  8.3  8.4  8.5  8.9  9.1  9.4 
RMC  5.0  5.0  5.2  5.2  5.3  5.3  5.3  5.5 
RLA  0.3  0.3  0.2  0.2  0.2  0.2  0.2  0.2 
RLB  0.2  0.2  0.1  0.2  0.1  0.1  0.1  0.1 
SE1  0.4  0.4  0.4  0.5  0.4  0.5  0.5  0.5 
SE2  6.8  6.8  6.9  7.2  7.3  7.1  7.1  7.2 
SE3  5.6  5.6  5.5  5.9  6.0  5.7  5.8  5.7 
SSA  3.6  3.6  3.6  3.6  3.5  3.7  3.6  3.4 
SSB  1.2  1.1  1.1  1.1  1.1  1.0  1.0  1.0 
SSC  0.8  0.7  0.7  0.7  0.7  0.6  0.7  0.6 
Total 
Beneficiaries  427,351  418,258  411,465  427,873  485,122  438,619  428,079  428,467 
Source: OEI analysis of National Claims History File, July 2003 
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 A P P E N D I X ~ D  
Calendar Year 2001  Calendar Year 2002 
RUG  Q1 '01  Q2 '01  Q3 '01  Q4 '01  Q1 '02  Q2 '02  Q3 '02  Q4 '02 
RUA  0.6%  0.6%  0.6%  0.6%  0.7%  0.7%  0.7%  0.6% 
RUB  2.4  2.4  2.5  2.4%  2.6  2.7  2.9  2.8 
RUC  0.6  0.6  0.7  0.7%  0.7  0.7  0.8  0.7 
RVA  2.9  2.9  2.9  2.8  3.0  3.0  3.1  2.8 
RVB  8.2  8.5  8.6  8.7  9.2  9.4  9.7  9.7 
RVC  1.4  1.6  1.7  1.7  1.8  1.8  1.9  2.0 
RHA  6.1  6.1  6.0  5.9  6.0  5.9  5.9  5.7 
RHB  17.5  17.8  17.9  17.8  17.5  17.6  17.2  17.4 
RHC  18.8  18.8  18.9  19.3  19.1  19.2  19.3  19.9 
RMA  3.3  3.3  3.3  3.1  3.1  3.0  2.9  2.8 
RMB  9.2  8.7  8.4  8.3  8.0  7.8  7.4  7.3 
RMC  5.5  5.3  5.1  5.2  5.0  4.9  4.8  5.0 
RLA  0.2  0.2  0.1  0.1  0.1  0.1  0.1  0.1 
RLB  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
SE1  0.5  0.5  0.5  0.5  0.4  0.4  0.5  0.5 
SE2  7.2  7.3  7.4  7.4  7.6  7.5  7.5  7.6 
SE3  5.8  5.7  5.8  6.0  6.2  6.1  6.2  6.4 
SSA  3.4  3.5  3.4  3.2  3.2  3.2  3.2  3.1 
SSB  0.9  0.9  0.8  0.8  0.8  0.7  0.7  0.7 
SSC  0.6  0.6  0.5  0.5  0.5  0.5  0.5  0.5 
Total 
Beneficiaries  481,851  459,049  438,031  453,335  507,011  475,821  468,006  522,803 
Source: OEI analysis of National Claims History File, July 2003 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  15
 A P P E N D I X ~ D  
Calendar Year 1999  Calendar Year 2000 
RUG  Q1 '99  Q2 '99  Q3 '99  Q4 '99  Q1 '00  Q2 '00  Q3 '00  Q4 '00 
CA1  1.7%  1.5%  1.5%  1.5%  1.5%  1.5%  1.4%  1.4% 
CB1  1.1  1.0  1.0  1.0  1.0  1.1  1.0  1.0 
CC1  0.4  0.3  0.3  0.3  0.3  0.3  0.3  0.3 
CA2  0.3  0.3  0.3  0.3  0.3  0.3  0.3  0.3 
CB2  0.2  0.2  0.2  0.2  0.2  0.2  0.2  0.2 
CC2  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
IA1  0.1  0.1  0.1  0.1  0.2  0.2  0.2  0.2 
IB1  0.2  0.2  0.2  0.2  0.2  0.2  0.2  0.2 
IA2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
IB2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BA1  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BB1  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BA2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BB2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PA1  0.4  0.3  0.4  0.4  0.3  0.4  0.4  0.4 
PB1  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
PC1  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
PD1  0.3  0.3  0.4  0.4  0.4  0.4  0.4  0.4 
PE1  0.1  0.1  0.2  0.2  0.2  0.2  0.2  0.2 
PA2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PB2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PC2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PD2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PE2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
Other  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
Total 
Beneficiaries  427,351  418,258  411,465 427,873  485,122  438,619  428,079  428,467 
Source: OEI analysis of National Claims History File, July 2003 
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 A P P E N D I X ~ D  
Calendar Year 2001  Calendar Year 2002 
RUG  Q1 '01  Q2 '01  Q3 '01  Q4 '01  Q1 '02  Q2 '02  Q3 '02  Q4 '02 
CA1  1.3%  1.3%  1.2%  1.2%  1.2%  1.2%  1.1%  1.1% 
CB1  0.9  0.9  0.9  0.9  0.9  0.8  0.8  0.8 
CC1  0.3  0.3  0.3  0.3  0.3  0.3  0.3  0.3 
CA2  0.2  0.3  0.3  0.3  0.2  0.2  0.3  0.2 
CB2  0.2  0.2  0.2  0.2  0.2  0.2  0.2  0.2 
CC2  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
IA1  0.2  0.2  0.2  0.2  0.2  0.2  0.2  0.2 
IB1  0.2  0.2  0.2  0.2  0.2  0.3  0.3  0.2 
IA2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
IB2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BA1  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BB1  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BA2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
BB2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PA1  0.4  0.4  0.4  0.4  0.4  0.4  0.4  0.3 
PB1  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
PC1  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
PD1  0.4  0.4  0.4  0.4  0.4  0.4  0.4  0.4 
PE1  0.2  0.2  0.2  0.2  0.2  0.2  0.2  0.2 
PA2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PB2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PC2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PD2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
PE2  0.0  0.0  0.0  0.0  0.0  0.0  0.0  0.0 
Other  0.1  0.1  0.1  0.1  0.1  0.1  0.1  0.1 
Total 
Beneficiaries  481,851  459,049  438,031  453,335  507,011  475,821  468,006  522,803 
Source: OEI analysis of National Claims History File, July 2003 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  17
 A AP PC EK NN DOI WX L~ ED D G M E N T S  
This report was prepared under the direction of Mark R. Yessian, Ph.D., 
Regional Inspector General for Evaluation and Inspections in the 
Boston Regional Office, and Joyce M. Greenleaf, M.B.A., Deputy 
Regional Inspector General. Other principal Office of Evaluation and 
Inspections staff who contributed include: 
Danielle Fletcher, Project Leader 
Sandy Khoury, Program Specialist 
OEI-01-03-00180  TRENDS IN THE ASSIGNMENT OF RUGS  18