Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
S   N F
KILLED  URSING  ACILITY 
 
B C I
I  LLING FOR  HANGES  N 
 
T :  I
H  ERAPY    MPROVEMENTS 
 
A N  
RE  EEDED 
Suzanne Murrin 
Deputy Inspector General for 
Evaluation and Inspections 
 
June 2015 
OEI-02-13-00611   
   
EXECUTIVE SUMMARY:  SKILLED NURSING FACILITY BILLING FOR 
CHANGES IN THERAPY:  IMPROVEMENTS ARE NEEDED  
OEI-02-13-00611 
 
WHY WE DID THIS STUDY 
 
In fiscal years 2011 and 2012, the Centers for Medicare & Medicaid Services (CMS) 
implemented new policies to address concerns that billing by skilled nursing facilities 
(SNFs) did not adequately reflect changes in the amount of therapy that a beneficiary 
receives during a SNF stay. Specifically, CMS introduced new types of assessments that 
capture changes in a beneficiarys therapy more quickly.  This report provides 
information about SNF billing for changes in therapy under these new policies. 
 
HOW WE DID THIS STUDY  
 
We used SNF claims to analyze billing for changes in therapy from fiscal years 2010 
through 2013.  We also determined whether, under the new policies, SNFs used 
assessments differently when decreasing therapy than when increasing it. Lastly, we 
determined the extent to which SNFs used the new assessments incorrectly. 
 
WHAT WE FOUND 
 
CMS introduced three types of therapy assessments to more quickly capture when 
beneficiaries start therapy, end therapy, and decrease or increase therapy.  However, we 
found that SNF billing for changes in therapy increased only slightly.  In addition, SNFs 
used assessments very differently when decreasing therapy than when increasing it,  
costing Medicare $143 million over 2 years.  Further, SNFs frequently used the new 
start-of-therapy assessment incorrectly.  For example, SNFs often used a start-of-therapy 
assessment but billed for no therapy during the stay. 
 
WHAT WE RECOMMEND  
 
CMSs new policies are complex and create challenges for effective oversight.  To better 
ensure that beneficiaries are receiving the amount of therapy they need, and that 
Medicare is paying appropriately, CMS should accelerate its efforts to implement a new 
method for paying for therapy.  A new payment method may eliminate the need for the 
new assessments by basing payments on beneficiary characteristics rather than on the 
amount of therapy provided.  In the meantime, CMS should mitigate the problems with 
the new therapy assessments by (1) reducing the financial incentive for SNFs to use 
assessments differently when decreasing and increasing therapy and (2) strengthening the 
oversight of SNF billing for changes in therapy.  CMS concurred with both of our 
recommendations.  
   
     
   
TABLE OF CONTENTS 
 
Objective......................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................3 

Findings........................................................................................................6 

Under CMSs new policies, SNFs slightly increased their billing 
for changes in therapy......................................................................6 

SNFs used assessments very differently when decreasing therapy 

than when increasing it, costing Medicare $143 million over  

2 years ..............................................................................................7 

SNFs frequently used the start-of-therapy assessments  

incorrectly ........................................................................................9 

Conclusion and Recommendations ............................................................10 

Agency Comments and OIG Response..........................................11 
 
Appendix....................................................................................................12 

Agency Comments.........................................................................12 

Acknowledgments......................................................................................14 

 
     
   
OBJECTIVE 
To describe billing by skilled nursing facilities (SNFs) for changes in 
therapy under new Medicare policies. 
BACKGROUND 
SNFs provide skilled nursing care, therapy, and other services to Medicare 
beneficiaries who meet certain conditions.  In 2012, Medicare spent 
$27.6 billion for nearly 2 million Medicare beneficiaries to receive these 
services.1    
In fiscal years (FYs) 2011 and 2012, the Centers for Medicare & Medicaid 
Services (CMS) implemented new policies to address concerns that SNF 
billing did not adequately reflect changes in therapy that occurred during a 
beneficiarys stay.  In particular, CMS introduced three types of 
assessments to capture when beneficiaries start therapy, end therapy, and 
decrease or increase therapy. CMS made these changes to help ensure that 
SNFs are paid appropriately both when they increase therapy and when 
they decrease therapy.      
This technical report is a companion to another report that examines the 
extent to which SNF billing and beneficiary characteristics changed from  
FYs 2011 to 2013.2    
The SNF Payment System 
During a beneficiarys Part A stay, the SNF periodically assesses the 
beneficiary to classify him or her into a resource utilization group (RUG).  
The particular RUG determines how much Medicare pays each day for the 
beneficiarys care.3    
CMS divides the 66 RUGs into nontherapy RUGs and therapy RUGs. 
Therapy RUGs are for beneficiaries who need physical therapy, speech 
therapy, or occupational therapytypically, to recover from an event such 
as a hip fracture or a stroke. 
____________________________________________________________ 
1 The Centers for Medicare & Medicaid Services (CMS), The Medicare and Medicaid  
Statistical Supplement, 2013 Edition, Tables 6.1 and 6.4.  Accessed at 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/MedicareMedicaidStatSupp/2013.html on March  19, 2014. 

2  Office of  Inspector General (OIG),  The Medicare Payment System for Skilled Nursing 
 
Facilities Needs To Be Reevaluated, OEI-02-13-00610, forthcoming. 
 
3 CMS, Long-Term Care Facility Resident Assessment Instrument Users Manual, 
ver. 3.0  (RAI), May 2013,  1.3.  
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  1 
   
   
The therapy RUGs are divided into five levels of therapy:  ultra high, 
very high, high, medium, and low.   A  SNF categorizes a beneficiary into 
one of these levels primarily based on the amount of therapy that the 
beneficiary receives during a 7-day assessment period.4  For example, if a 
beneficiary received 45 minutes of therapy during the assessment period, 
he or she is typically categorized into a low-therapy RUG, whereas if a 
beneficiary received 720 minutes, he or she is typically categorized into an  
ultra-high-therapy RUG. SNFs are typically paid more for higher levels of  
therapy.      
SNFs must conduct scheduled assessments by the 5th, 14th, 30th, 60th and 
90th day of a beneficiarys stay.5   They have some flexibility in 
determining when to conduct each of  these assessmentsfor example, in 
FY 2012, the beneficiarys second scheduled assessment period could 
begin anytime between Days 7 and 12 of the stay.6  However, SNFs 
typically do not have flexibility in determining when to bill for the RUG.  
For example, the first scheduled assessment typically determines the RUG 
for Days 1 through 14 and the second scheduled assessment determines 
the RUG for Days 15 through 30. 
New Policies Regarding SNF Billing for Changes in Therapy 
In FYs 2011 and 2012, CMS also introduced three types of beneficiary 
assessments that capture changes in a beneficiarys therapy more timely 
than scheduled assessments.  The new assessments are designed to better 
align SNF billingand Medicare paymentswith changes in therapy 
during a beneficiarys stay.  
Start-of-Therapy Assessments.  In FY 2011, CMS introduced the 
start-of-therapy assessment.7 Prior to FY 2011, SNFs were allowed to bill 
for a therapy RUGstarting on the first day of the stayon the basis of 
therapy that had been scheduled but not yet provided.  Since FY 2011, this 
has not been allowed. Instead, if the beneficiary begins receiving therapy  
after the first scheduled assessment, SNFs may use a start-of-therapy 
assessment to begin billing for a therapy RUG, rather than waiting for the 
next scheduled assessment.  
End-of-Therapy Assessments.  In FY 2011, CMS also created a stricter 
policy for billing when a beneficiarys therapy is discontinued.8  
 ____________________________________________________________ 
4 CMS, RAI,   6.6.   

5 42 CFR   413.343(b) and CMS, RAI,  2.8.
  
6 Throughout this report, we refer to the assessment periods that SNFs use to  determine a 

beneficiarys therapy level.  These assessment periods are 7 days long.   
7 74 Fed. Reg. 40288, 4034640349  (Aug. 11, 2009), 74 Fed. Reg. 22208, 2224422246 
 
(May 12, 2009), and CMS, RAI,  2.8. 
 
8 74 Fed. Reg.Reg.  4034740348 (Aug. 11, 2009) and CMS, RAI,  2.8. 
 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  2 
   
   
Previously, SNFs could wait 8 to 10 days after therapy was discontinued 
to conduct an end-of-therapy assessment.  Since FY 2011, however, SNFs 
have been required to conduct this assessment within 3 days of the end of 
therapy and to begin billing for the nontherapy RUG on the first day after 
therapy has been discontinued.  
Change-of-Therapy Assessments. Since FY 2012, when a beneficiary is 
receiving therapy, the SNF has been required to review the beneficiarys 
therapy level every 7 days throughout the stay.9  If the therapy level 
changes, the SNF must conduct a change-of-therapy assessment to begin 
billing for the new RUG.  This billing goes into effect on the first day of 
the 7-day assessment period. 
When a change-of-therapy assessment overlaps with a scheduled 
assessment, SNFs conduct what is called a combined change-of-therapy 
assessment.10  For example, a SNF conducts such an assessment when the 
change-of-therapy assessment period begins any day between Day 7 and 
Day 12, because the scheduled assessment period could also begin on 
these days. 
In addition, a SNF can sometimes choose between a scheduled assessment 
and a combined change-of-therapy assessment by carefully timing the 
beneficiarys assessments.11  Using a scheduled assessment delays when a 
SNF can begin billing for the therapy change.  In contrast, using a 
combined change-of-therapy assessment allows the SNF to bill more 
timely for the therapy change.  Because the choice between the two types  
of assessments determines when the SNF begins billing for the new 
therapy RUG, it affects how much Medicare pays the SNF for the 
beneficiarys stay. CMS currently does not specify which assessment 
SNFs should use in these circumstances.  
METHODOLOGY 
We based this study on an analysis of paid Part A SNF claims from the 
National Claims History file with dates of service in FYs 2010 through 
2013. 
Analysis of SNF billing for changes in therapy. We analyzed all billing 
for changes in therapy, regardless of the type of assessment used.  We 
 ____________________________________________________________ 
9 74 Fed. Reg. 48486, 48518, and 48526  (Aug. 8, 2011). 
10 CMS, RAI,  2.10.  When the assessment periods do not overlap,  SNFs conduct a 

stand-alone change-of-therapy assessment. 

11 CMS, RAI,  2.8 and 2.10. 
 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  3 
   
   
conducted this analysis by looking at the RUGs on SNF claims for 
beneficiaries stays. 
For each FY, we grouped the claims by stays, using SNF and beneficiary 
identifiers and SNF admission dates.12 Each stay was associated with one 
or more line items in a claim,  and each line item indicated the RUG.13  We  
calculated the percentage of stays during which:   
   the SNF billed for no therapy; 
   the SNF billed for the same level of therapy; or  
   the SNF billed for changes in therapy.  
Next, for each FY, we determined the percentage of stays in which the 
SNF billed for the following types of therapy changes: 
   a change in the level of therapy, 
   a therapy RUG followed by a nontherapy RUG, or  
   a nontherapy RUG followed by a therapy RUG.14    
Analysis of SNFs use of assessments for decreases and increases in 
therapy.  Beginning in FY 2012, SNFs could change therapy levels using 
either scheduled assessments or change-of-therapy assessments.  We  
determined whether SNFs use of these assessments differed when they 
decreased the therapy level compared to when they increased it.  In this 
analysis, we included scheduled assessments and combined 
change-of-therapy assessments because a SNF can sometimes choose one 
or the other by carefully timing the beneficiarys assessments; this 
decision determines when the SNF begins billing for the new therapy 
RUG.15    
We also determined how much SNFs use of scheduled assessmentsas 
opposed to combined change-of-therapy assessmentscost Medicare.  
Using a scheduled assessment delays when a SNF begins billing for the 
therapy change. In contrast, using a combined change-of-therapy 
____________________________________________________________ 
12 The number of stays per year ranged from 2.40 million in  FY 2013 to  2.46 million in  
FY 2011. 

13  We extracted the RUG from the first three characters of the Health Insurance 

Prospective Payment System  (HIPPS) code  on the claim line item.  The remaining two 

characters in the HIPPS code indicate the type of assessment that the SNF used to 

determine the beneficiarys RUG. 

14 SNFs may bill for more than  one type of therapy change during a stay. 
 
15  We excluded stand-alone change-of-therapy assessments from this analysis because 

SNFs have  no  flexibility as to whether or  when to conduct these assessments. After 

change-of-therapy assessments were introduced in  FY 2012, SNFs changed beneficiaries 

therapy levels  approximately 900,000 times a year and used scheduled assessments and 

combined change-of-therapy assessments for 57 percent of these changes. 
 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  4 
   
   
assessment results in more timely billing.  We calculated the cost to 
Medicare of using scheduled assessments as the difference between what 
Medicare actually paid when SNFs used scheduled assessments to change 
therapy levels and what Medicare would have paid if SNFs had used 
combined change-of-therapy assessments.  We did these analyses 
separately for FYs 2012 and 2013.  
Analysis of how often SNFs used the new therapy assessments incorrectly. 
We determined how often SNFs used each of the three types of therapy 
assessments incorrectly.  We considered a SNFs use of an assessment to 
be incorrect if the assessment type reported on the claim clearly 
contradicted the RUGs on the SNFs claim.     
Specifically, we considered the use of a start-of-therapy assessment to be 
incorrect if the SNF did not bill for a nontherapy RUG immediately 
followed by a therapy RUG. We considered the use of an end-of-therapy 
assessment to be incorrect if the SNF did not bill for a therapy RUG 
immediately followed by a nontherapy RUG.  Lastly, we considered the 
use of a change-of-therapy assessment to be incorrect if the SNF billed for 
the same level of therapy throughout the stay.  We did this analysis 
separately for each FY.     
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  5 
   
   
FINDINGS 
Under CMSs new policies, SNFs slightly increased 
their billing for changes in therapy   
In FYs 2011 and 2012, CMS implemented new policies requiring SNFs to 
bill for changes in therapy more quickly.  In particular, CMS introduced 
three types of therapy assessments to capture when beneficiaries start 
therapy, end therapy, and decrease or increase therapy.  However, SNF 
billing for changes in therapy increased only slightly under CMSs new 
policies, from 27 percent of SNF stays in FY 2010 to 31 percent in 
FY 2013.16  Table 1 shows this slight increase in billing for changes in 
therapy, as well as the percentage of stays in which SNFs billed for the 
same level of therapy or for no therapy at all during the beneficiarys stay. 
 
Table 1: Percentage of SNF Stays by  Type of Billing, by Fiscal Year  
Percentage of SNF Stays  
Type of Billing During SNF Stay  
FY 2010   FY 2011   FY 2012   FY 2013  
Billed for changes in therapy    27%   29%   31%   31%  
Billed for same level of therapy     64%   59%   58%   59%  
Billed for no therapy    9%   12%   11%   10%  
Totals*   100%  100%   100%  100%  
* Columns do not sum to totals due to  rounding. 

Source:  OIG analysis of SNF claims, 2015. 
 
When SNFs billed for changes in therapy, they most commonly billed for 
a change in the level of therapy. As shown in Table 2, in FY 2013, SNFs 
billed for a change in the level of therapy during approximately 
one-quarter of stays.  This represents a total increase of 2 percentage 
points from FY 2010; this increase occurred in FY 2012 when CMS 
introduced the change-of-therapy assessment. 
In contrast, SNFs billed for a therapy RUG followed by a nontherapy 
RUG far less often than they billed for a change in the level of therapy.   
Further, billing for this change increased by only 1 percentage point from  
FYs 2010 to FY 2013; this increase occurred in FY 2011, when CMS 
introduced the end-of-therapy assessment.   
SNFs were least likely to bill for a nontherapy RUG followed by a therapy 
RUG. However, billing for this change increased from 1 percent of stays 
in FY 2010 to 5 percent in FY 2013. Most of this increase occurred in 
FY 2011, when CMS introduced the start-of-therapy assessment.   
____________________________________________________________ 
16 This analysis was based  on the RUGs billed and included  billing  for all changes in  
therapy, regardless of the type of assessment used. 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  6 
   
   
Table 2: Percentage of SNF Stays by  Type of Billing for Change in Therapy,  
by Fiscal Year  
Percentage of SNF Stays  
Type of Billing for Change in Therapy  
FY 2010   FY 2011   FY 2012   FY 2013  
A change in the level of therapy  23%   23%   25%   25%  
A therapy RUG followed by a nontherapy RUG  6%   7%   8%   7%  
A nontherapy RUG followed by a therapy RUG  1%   4%   5%   5%  
Totals*   27%  29%  31%   31%  
* Columns do not sum to totals because SNFs may bill for more than one type of therapy change during a  stay. 
Source:  OIG analysis of SNF claims, 2015. 
SNFs used assessments very differently when 
decreasing therapy  than when increasing it, costing 
Medicare $143 million over 2 years 
As of FY 2012, SNFs can sometimes choose between conducting a 
scheduled assessment or a combined change-of-therapy assessment when 
a beneficiarys level of therapy changes.  This decision determines when 
the SNF begins billing for the new therapy RUG. Using a combined 
change-of-therapy assessment results in more timely billing, whereas 
using a scheduled assessment delays when SNFs begin billing for the 
therapy change. For example, as shown in Box 1, when a SNF chose a 
scheduled assessment when decreasing therapy, this choice delayed billing 
by 6 days and cost Medicare $315 more for the stay. 
Box 1:  Example of a Stay that Cost Medicare More Because a SNF 

Chose a Scheduled Assessment When Decreasing Therapy 
  
 	  The SNF began first assessment period on Day 2 and placed 
beneficiary into a very-high-therapy RUG. 
 	  The SNF began second assessment period on Day 8 and 
decreased therapy level to high. 
 	  The SNF chose a scheduled assessment by beginning the second 
assessment period 6 days (rather than 7 days) after the first, so 
billing for the lower paying RUG did not begin until Day 15.  
 	  If the SNF had chosen a combined change-of-therapy 
assessment by beginning the second assessment period 7 days 
after the first, billing would have started on Day 9. 
 	  Medicare paid $315 more for this stay because the SNF chose a 
scheduled assessment instead of a combined change-of-therapy 
assessment. 
 
Source:  OIG analysis of SNF claims, 2015. 
 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  7 
   
   
SNFs used scheduled assessments and combined change-of-therapy 
assessments very differently when decreasing and increasing therapy, 
which resulted in increased costs to Medicare.  In particular, SNFs were 
far more likely to use scheduled assessments when they decreased therapy 
than when they increased it. The choice of a scheduled assessment 
rather than a combined change-of-therapy assessmentwhen a SNF 
decreases therapy allows it to delay billing for the lower paying therapy 
RUG. This practice increased from FY 2012 to FY 2013.  See Table 3. 
Table 3: Type of Assessment Used When SNFs Decreased and 

Increased Therapy, by Fiscal Year  

Percentage of Therapy  Level 
Type of Assessment Used to Decrease and  Changes  
Increase Therapy  
FY 2012   FY 2013  
Decreased therapy using:  
Scheduled assessment  86%   89%  
Combined change-of-therapy assessment  14%   11%  
Totals  100%   100%  
Increased therapy using:  
Scheduled assessment   51%   32%  
Combined change-of-therapy assessment   49%   68%  
Totals  100%   100%  
Source:  OIG analysis of SNF claims, 2015. 
As a result of these billing practices, SNFs use of scheduled assessments 
to change therapy levels in FYs 2012 and 2013 cost Medicare 
$143 million more than if SNFs had used combined change-of-therapy 
assessments.  See Table 4. 
Table 4: Cost to Medicare Associated With Using Scheduled Assessments, 
Rather Than Combined Change-of-Therapy Assessments, to Change 
Therapy Levels  
Cost to Medicare 
  (millions) 
Type of Therapy Change Billed by SNFs   
FY 2012   FY 2013   Total  
Decrease in therapy  $90.1   $108.4   $198.5  
Increase in therapy*   -$35.2   -$20.5   -$55.8  
Totals  $55.9   $87.8   $142.8  
* Medicare saves money  when SNFs delay  billing for increasing therapy, but this is far less common than  
delayed billing for  decreasing  therapy.   
Source:  OIG analysis of SNF claims, 2015. 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  8 
   
   
SNFs frequently used the start-of-therapy assessments 
incorrectly   
In FY 2013, SNFs used the new therapy assessments in just over 
one-quarter of SNF stays.  As shown in Table 5, SNFs were most likely to 
use change-of-therapy assessments and least likely to use start-of-therapy 
assessments.  
Table 5: SNFs Use of the New  Therapy Assessments, By Type of 

Assessment 

Percentage of SNF Stays  
Type of Assessment Used During Stay  
FY 2011   FY 2012   FY 2013  
Start-of-therapy assessment   5%   4%   3%  
End-of-therapy assessment   6%   7%   6%  
Change-of-therapy assessment  N/A  17%   19%  
Totals*  11%   25%   26%  
* Columns do not sum to totals because a SNF may have used more than one type of therapy  
assessment during a stay. 

Source:  OIG analysis of SNF claims, 2015. 
 
However, SNFs were most likely to use the start-of-therapy assessments 
incorrectly.17 In FY 2011, for 61 percent of the stays in which SNFs used 
a start-of-therapy assessment, they did not bill for a nontherapy RUG 
immediately followed by a therapy RUG.  For example, SNFs sometimes 
billed for no therapy RUGs throughout the stay when they used a 
start-of-therapy assessment.  This incorrect use decreased in FY 2013, but 
remained high at 27 percent.  SNFs also used the end-of-therapy and 
change-of-therapy assessments incorrectly, but to a lesser extent.  See 
Table 6.  
Table 6: Incorrect Use of Therapy Assessments, by Assessment 

Type and Fiscal Year  

Percentage of Stays with Incorrect Use  
Type of Therapy  Assessment  
FY 2011   FY 2012   FY 2013  
Start-of-therapy assessment   61%   35%   27%  
End-of-therapy assessment   14%   10%   8%  
Change-of-therapy assessment  N/A  4%   4%  
Source:  OIG analysis of SNF claims, 2015. 
 
   
 ____________________________________________________________ 
17  We considered a  SNFs use of an assessment to  be incorrect when the assessment types  
reported  on the claim clearly contradicted the RUGs billed.  
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  9 
   
   
CONCLUSION AND RECOMMENDATIONS 
CMS introduced three types of therapy assessments to capture when 
beneficiaries start therapy, end therapy, and decrease or increase therapy.  
However, under these new policies, SNF billing for changes in therapy 
increased only slightly. In addition, SNFs used assessments very 
differently when decreasing therapy than when increasing it, costing 
Medicare $143 million in FYs 2012 and 2013.  Further, SNFs frequently 
used the start-of-therapy assessments incorrectly.  For example, SNFs 
often used a start-of-therapy assessment but billed for no therapy during 
the stay. 
CMSs new policies are complex and create challenges for effective 
oversight.  To better ensure that beneficiaries are receiving the amount of 
therapy they need, and that Medicare is paying appropriately, CMS should 
accelerate its efforts to implement a new method for paying for therapy.  A 
new payment method may eliminate the need for the new therapy 
assessments by basing payments on beneficiary characteristics rather than  
on the amount of therapy provided.   
In the meantime, CMS should mitigate the problems with the new 
policies. We recommend that CMS: 
Reduce the financial incentive for SNFs to use assessments 
differently when decreasing therapy than when increasing it  
CMS should modify its policies so that SNFs cannot use assessments 
differently when decreasing and increasing therapy in a manner that 
substantially increases Medicare payments.  For example, CMS could 
eliminate SNFs ability to choose a scheduled assessment over a combined 
change-of-therapy assessment when changing therapy levels.   
Strengthen the oversight of SNF billing for changes in therapy    
CMS should instruct its contractors to monitor SNF billing for changes in 
therapy.  Such analyses should identify SNFs that rarely bill for changes in 
therapy  or that frequently  use the new therapy assessments incorrectly.  The 
contractors should target these SNFs for education and for claims review to 
establish whether these SNFs are billing inappropriately.  CMS should also 
instruct its contractors to develop claims processing edits (automatic 
systems processes) to reject claims if therapy assessments are used 
incorrectly.   
   
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  10 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with our two recommendations.   
CMS concurred with our recommendation to reduce the financial 
incentive for SNFs to use assessments differently when decreasing therapy  
than when increasing it.  CMS stated that it is working to identify potential 
alternatives to the existing methodology used to pay for therapy services 
under the SNF payment system.  We appreciate that CMS is developing 
alternative methods of paying for therapy and CMS should accelerate 
these efforts.  In the meantime, however, CMS should develop a shorter 
term solution to this problem with the new policies.  For example, CMS 
could eliminate SNFs ability to choose a scheduled assessment over a 
combined change-of-therapy assessment when changing therapy levels. 
CMS concurred with our recommendation to strengthen the oversight of 
SNF billing for changes in therapy.   CMS stated that it will work to 
monitor SNF billing for changes in therapy and to target for education and 
claims review the SNFs that rarely bill for changes in therapy or that 
frequently use therapy assessments incorrectly.  
For the full text of CMSs comments, see Appendix A.  
  
   
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  11 
  APPENDIX 
Agency Comments 
.l',:f'j;ISYIC."J::.t.~ 
\.~.~~	
DEPAR1MENT OF HEALTH & HUMAN__s_E_R_v_r_c_E_s_______c_e_nt__s_ro_rM__d_ic___&_M_ed-lc_a_lct_s_erv_lc-es 
~~ 	
200 Independence Avenue SW 

Washington, DC 20201 

DATE: 
JUN -5 2015 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Andrew M. Slavitt 

Acting Administrator 

SUBJECT: 	 Office ofinspector General (OIG) Draft Report: "Skilled Nursing Facility Billing 
for Changes in Therapy: Improvements are Needed" (OEl-02-13-00611) 
The Centers for Medicare and Medicaid Services (CMS) appreciates the opportunity to review 
and comment on the Office of Inspector General's (OIG) draft report.  CMS is committed to 
making sure that the Skilled Nursing Facility (SNF) payment model provides appropriate 
payments for services provided. 
SNFs provide care to beneficiaries who need daily skilled care given by, or under the supervision 
of, skilled nursing or therapy staff. Medicare Part A beneficiaries may qualify for coverage of up 
to I00 days of SNF services in a benefit period if they have a medically necessary inpatient 
hospital stay of three consecutive days or more that occurred within a short time period 
(generally, 30 days) prior to entering the SNF. Currently, Medicare pays for services provided by 
SNFs under the Medicare Part A benefit on a per diem basis through the SNF Prospective 
Payment System (PPS). This payment methodology was designed to prospectively reimburse 
SNFs based on the relative amount ofresources needed to treat beneficiaries. 
The SNF PPS was expected to control the costs of administering the Medicare Prut A SNF 
benefit. However, the number ofMedicare Part A payment days for therapy services in general, 
and more specifically for ultra-high levels oftherapy, continues to rise. A potential cause ofthis 
issue is that the Medicrue Part A therapy payment under the SNF PPS is based primarily on the 
amount oftherapy provided to the beneficiary regardless ofpatient condition, which implicitly 
provides a financial payment incentive for facilities to provide as much therapy to a resident as 
that resident can tolerate, regardless ofthe impact ofproviding this level oftherapy on producing 
positive patient outcomes. 
In FY 2011, CMS modified regulations regarding SNFs' use of Start ofTherapy Assessments 
and End ofTherapy Assessments to more accurately report and receive reimbursement for the 
start and end oftherapy services to beneficiaries. Previously, SNFs could only start billing for 
therapy after conducting a scheduled assessment and were required to conduct ru1 end of therapy 
assessment eight to I0 clays after therapy was discontinued. Under the new policies, SNFs may 
use a Start of Therapy Assessment to begin billing for therapy at the outset ofa new therapy 
regimen and End ofTherapy Assessments must be conducted within three days from the last day 
therapy services were provided. In FY 2012, CMS began requiring SNFs to use Change of 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  12  
   
   
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  13 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Jodi Nudelman, Regional 
Inspector General for Evaluation and Inspections in the New  York regional 
office, and Nancy Harrison and Meridith Seife, Deputy Regional 
Inspectors General.  
Judy Bartlett served as the team leader for this study, and Rachel Bryan 
served as lead analyst. We  would also like to acknowledge the 
contributions of other Office of Evaluation and Inspections regional office 
staff, including Marissa Baron.  Central staff who provided support 
include Clarence Arnold, Heather Barton, Berivan Demir Neubert, 
Evan Godfrey, and Christine Moritz.  
 
 
SNF Billing for Changes in Therapy:  Improvements Are Needed (OEI-02-13-00611)  14 
   
   
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, 
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