Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

JUNE 2000 

OEI-02-99-00340 

The Effect of Financial Screening and Distinct 

Part Rules on Access to Nursing Facilities 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's New York regional office prepared this report under the direction of John I. Molnar, 

Regional Inspector General, and Renee C. Dunn, Deputy Regional Inspector General. Principal 

OEI staff included:

REGION

Jodi Nudelman, Project Leader

Nancy Harrison

Natasha Besch

Lucille Cop

Judy Lin

Christi Macrina

HEADQUARTERS

Susan Burbach, Program Specialist

Linda Moscoe

To obtain copies of this report, please call the New York Regional Office at 212 264-2000. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY 

PURPOSE 

To assess the extent to which financial screening and distinct part rules limit access to 

nursing facilities for Medicare and Medicaid beneficiaries. 

BACKGROUND 

The Health Care Financing Administration (HCFA) requested that the Office of Inspector 

General (OIG) conduct a study about nursing home certification and admissions practices 

that may limit access to care for Medicaid and Medicare beneficiaries. These practices are 

distinct part certification and financial screening. 

In recent years, HCFA and the Office of Civil Rights (OCR) have been alerted by nursing 

home advocacy groups and beneficiaries that nursing homes may be using financial 

screening and distinct part rules to limit access for Medicare and Medicaid applicants. 

Facilities can request financial information from beneficiaries as part of their admissions 

process and can designate a distinct part by certifying a specific number of their beds for 

Medicare and/or Medicaid. There is some concern, however, that facilities are using these 

practices to deny access to Medicare and Medicaid beneficiaries. 

To address these concerns, we interviewed State Long Term Care Ombudsmen, State 

Medicaid officials, a sample of hospital discharge planners, and a sample of nursing home 

administrators. We also contacted several oversight agencies about complaints they have 

received related to these issues. Additionally, we analyzed data from the National 

Ombudsman Reporting System (NORS) and the Online Survey Certification and 

Reporting System (OSCAR) to assess complaints and the nursing home bed supply. 

FINDINGS 

Distinct Part Certification 

Overall, distinct part rules do not appear to limit access for Medicaid or Medicare 

beneficiaries. Twenty-nine States allow nursing homes to certify a portion of their beds 

for Medicaid. The remaining 22 States have a “one bed, all beds” policy that requires 

nursing homes that participate in Medicaid to certify all of their beds for Medicaid. 

Irrespective of these rules, about 97 percent of all beds that are certified nationwide are 

for Medicaid. In addition, Medicaid officials report no significant problems with distinct 

part. Ombudsmen generally concur, although some express concerns. 

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Regarding Medicare, all but one State allow nursing homes to certify a portion of their 

beds for Medicare. However, access to Medicare beds does not appear to be a problem 

according to respondents and previous OIG studies. 

Financial Screening 

Nursing facilities commonly request financial information as part of the admissions 

process. Ombudsmen, Medicaid officials, and nursing home administrators report that 

facilities commonly ask for financial information, often about a person’s assets, income, 

and insurance. 

When financial screening occurs, it primarily affects access for Medicaid 

beneficiaries. While no Medicaid officials and only eight ombudsmen report that 

Medicaid beneficiaries are “very often” denied access to a nursing home because of 

financial screening, one-third of discharge planners say that nursing homes refuse patients 

“very often” for financial reasons. Many discharge planners note that Medicaid patients 

are most likely to be affected by these practices. 

Complaints 

Oversight agencies receive relatively few complaints about financial screening or 

distinct part practices. The Office of Civil Rights (OCR) and the OIG Hotline could 

document virtually no complaints about financial screening or distinct part practices. 

Ombudsmen from 24 States estimate receiving an average total of 339 complaints related 

to financial screening per year. Over two-thirds of these complaints come from 7 States. 

Regarding distinct part practices, ombudsmen in 20 States estimate receiving an average 

total of 334 complaints per year. Similarly, three-quarters of these complaints are from 6 

States. The total number of complaints represents less than one percent of all complaints 

reported by ombudsmen in a year. 

CONCLUSION 

Distinct part rules do not appear to limit access for Medicaid or Medicare beneficiaries. 

Financial screening may cause access problems for some Medicaid beneficiaries, but these 

problems do not appear to be widespread. At this time, any potential effects of distinct 

part rules and financial screening are being tempered by a bed supply that generally 

exceeds demand and by State initiatives that promote access. The dynamics of the nursing 

home bed supply, however, could change in the future. 

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The Department can respond to these findings with a number of options. 

< It can do nothing new at this time and continue to monitor access and changes in 

nursing home occupancy rates, as well as the factors that affect nursing home bed 

supply and demand; 

< It can strengthen its oversight efforts by alerting survey and certification and 

ombudsman staff to potential abuses and by using public service announcements to 

alert consumers to common financial screening practices; 

< It can issue new regulations or legislation that eliminates Medicare distinct part 

and/or prohibits financial screening; or 

< It can study the effects on access of the practices adopted by 23 States to promote 

access to nursing facilities. 

AGENCY COMMENTS 

We received comments on the draft report from the Health Care Financing Administration 

(HCFA), the Administration on Aging, and the Assistant Secretary for Planning and 

Evaluation (ASPE). The HCFA agreed with our recommendation to strengthen oversight 

and listed a number of steps they were taking to implement that recommendation. 

Additionally, at ASPE’s request we have forwarded a memorandum to HCFA containing a 

State-specific discussion of access. The ASPE also asked for a discussion of the variance 

in responses listed in Table 2. We believe the variance is due to perspective. While the 

State officials take a policy or oversight view of the problem, the discharge planners' view 

is that of a caseworker focusing on the process of placing beneficiaries. We elaborate on 

this on page 16 of the report with our follow-up interviews with discharge planners. 

Technical comments have also been included in the report. The full text of the agencies' 

comments are contained in Appendix B. 

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TABLE OF CONTENTS 

PAGE

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

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

FINDINGS 

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

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

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

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

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

APPENDICES 

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

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

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INTRODUCTION 

PURPOSE 

To assess the extent to which financial screening and distinct part rules limit access to 

nursing facilities for Medicare and Medicaid beneficiaries. 

BACKGROUND 

The Health Care Financing Administration (HCFA) requested that the Office of Inspector 

General (OIG) conduct a study about nursing home certification and admissions practices 

that may limit access to care for Medicaid and Medicare beneficiaries. These practices are 

distinct part certification and financial screening. 

In recent years, HCFA and the Office of Civil Rights (OCR) have been alerted by nursing 

home advocacy groups and beneficiaries that nursing homes may be using financial 

screening and distinct part rules to limit access for Medicare and Medicaid applicants. 

These groups have also been concerned that such limitations may have a disparate impact 

on minorities because they are less likely to have financial resources. 

Medicare Program 

Title XVIII of the Social Security Act, entitled "Health Insurance for the Aged and 

Disabled," is commonly known as Medicare. Medicare provides insurance to people who 

are 65 years and older; people who are disabled; and people with permanent kidney 

failure. 

Medicare consists of two primary parts: Hospital Insurance (HI), also known as Part A, 

and Supplementary Medical Insurance (SMI), also known as Part B. Medicare Part A 

provides coverage of inpatient hospital care, skilled nursing facility care, home health 

services, and hospice care. Medicare Part B pays for the cost of physician services, 

outpatient hospital services, medical equipment and supplies, and other health services and 

supplies with a coinsurance. 

Skilled nursing facility (SNF) care is covered by Part A only if the care is generally within 

30 days of a hospitalization of 3 or more days, and is certified as medically necessary. The 

number of SNF days provided under Medicare is limited to 100 days per benefit period, 

with a co-payment required for days 21 through 100. Medicare Part A does not cover 

nursing facility care at all if the patient does not require skilled nursing or skilled 

rehabilitation services. 

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Medicaid Program 

Medicaid was established under Title XIX of the Social Security Act and is the principle 

payer of nursing home care. The program is administered by the States, but is funded 

jointly by the States and the Federal Government. A State must present a State Medicaid 

plan to HCFA for approval in order to obtain Federal funding. 

Medicaid is designed to provide assistance for medical care to low-income people. 

Medicaid pays for nursing facility care for recipients who meet a State-determined poverty 

level, provided the nursing facility is certified for the program. The amount paid is 

determined by each State and covers room, board, and nursing care. Although it is 

voluntary, the majority of facilities participate in the Medicaid program. 

Distinct Part Certification 

Facilities use distinct part certification to define the extent of their participation in the 

Medicaid or Medicare program. To do this, they can certify a specific number of their 

beds for either or both of these programs. Distinct part rules for Medicare and Medicaid 

differ somewhat and are described below. 

Medicare 

Under Medicare, a facility can certify a part or all of its facility for Medicare. The part has 

to be a physically identifiable unit of an institution such as a separate wing or a floor of the 

facility. 

The practice of distinct part has been used primarily for cost reporting purposes. Until 

recently, SNFs were reimbursed based on a retrospective, reasonable cost basis. Under 

this system, some nursing homes perceived a financial incentive to limit their program 

participation by establishing a distinct part. Specifically, facilities could track their costs 

for their distinct part and their non-distinct part separately. Their Medicare distinct part 

costs, which were likely to be higher than their non-distinct part costs because of the care 

required for skilled services, was a factor in determining a facility’s reimbursement. 

The Balanced Budget Act of 1997 (BBA97) changed SNF reimbursement to a prospective 

payment system (PPS). Under this system, SNFs are paid through “per diem, prospective, 

case-mix adjusted” payments. Each resident is categorized into one of 44 “resource 

utilization groups” and payment is based on the level of care that each resident requires. 

The system is currently being phased in over a 3 year transition period. Under this new 

system, distinct part is no longer a factor in determining the reimbursement rates for SNFs. 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
Prior to this year, SNFs were allowed to change the size of their distinct part as needed. 

As of January 1999, a SNF can change the size of its distinct part only once during its cost 

reporting year. 

Medicaid 

Distinct part rules for Medicaid vary by State. Some States require facilities that choose 

to participate in the Medicaid program to certify all of their beds for Medicaid. Other 

States mirror the Federal rule for Medicare in that individual facilities can determine the 

size of their distinct part. 

The use of Medicaid distinct part has been challenged. In April 1990, the District Court 

for the Middle District of Tennessee ruled, in Linton v. Tennessee Commissioner of 

Health and Environment, that Tennessee’s practice of allowing a nursing facility to certify 

some, but not all, of its beds for Medicaid participation violated both the Medicaid statute 

and Title VI of the Civil Rights Act of 1964. In July 1990, the court approved a plan that 

requires certification of all available licensed nursing home beds in facilities that participate 

in Medicaid. The plan also requires participating nursing facilities to admit residents on a 

first-come, first-serve basis and prohibits involuntary transfer or discharge based upon 

source of payment. 

Financial Screening 

Facilities may request financial information from applicants as part of their admissions 

process. As part of the Omnibus Reconciliation Act of 1987 (OBRA ‘87), Congress 

passed the comprehensive Nursing Home Reform Act (PL 100-203) which provides some 

protections to Medicaid beneficiaries with respect to nursing home admission practices. 

The statutes and regulations, however, do not explicitly address whether nursing facilities 

may financially screen applicants and base admissions on their ability to pay. The law does 

not prohibit facilities from rejecting potential admissions, except to the extent that the 

practice violates the Civil Rights Act or Rehabilitation Act requirements, which prohibits 

discrimination against individuals with disabilities. 

The discussion about financial screening has centered around several requirements. These 

include provisions of the Social Security Act titled Equal Access to Quality Care --

(1819(c)(4) and 1919 (c)(4)(A)) . They state that “a facility must establish and maintain 

identical policies and practices regarding transfer, discharge, and the provision of services 

under the State plan for all individuals regardless of source of payment” (42 CFR 483.12 

(b)(c)(1)). Additional requirements state: 

(d) Admissions policy (1)The facility must- (i) Not require residents or potential 

residents to waive their rights to Medicare or Medicaid; and (ii) the facility must 

not require oral or written assurance that residents or potential residents are not 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
eligible for, or will not apply for, Medicare or Medicaid benefits...(3) In the case of 

a person eligible for Medicaid, a nursing facility must not charge, solicit, accept, or 

receive, in addition to any amount otherwise required to be paid under the State 

plan, any gift, money, donation, or other consideration as a precondition of 

admission, expedited admission or continued stay in the facility. 

General Concerns 

In recent years, some beneficiaries and advocacy groups have complained that facilities are 

using distinct part and financial screening to limit the number of Medicaid and Medicare 

beneficiaries they admit. 

Specifically, facilities allegedly use distinct part to inform applicants that they do not 

have a Medicaid or Medicare bed available and that the person can only be admitted if he 

or she pays privately. (Facilities prefer private pay residents largely because they can 

charge these patients higher rates than the amount they are reimbursed for patients under 

Medicare or Medicaid.) Reportedly, facilities may also use distinct part to limit access to 

residents who initially pay privately for care and later become eligible for Medicaid. In 

this situation, facilities may tell these beneficiaries that there is no Medicaid bed available 

and that they must move. 

Similarly, facilities allegedly use financial screening to deny access to Medicaid patients or 

persons who will be eligible for Medicaid in the near future. Reportedly, some facilities 

require applicants to submit information about their finances so that they can determine 

whether or not and for how long the person will be able to pay privately before they 

become eligible for Medicaid. 

Nursing Home Industry Concerns 

The American Health Care Association and the American Association of Homes and 

Services for the Aging, the primary associations for nursing homes, have strongly objected 

to any limitations on financial screening and on their ability to have distinct parts. Their 

arguments hinge on the need for financial solvency and their desire to avoid additional 

regulation. 

Additionally, nursing homes have raised concerns about the new PPS reimbursement 

system for Medicare beneficiaries. They believe that the system is causing considerable 

stress on the industry. They claim that the prospective payment system is reducing 

payments to SNFs and may cause some SNFs to go out of business. 

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Nursing Home Surveyors 

Nursing Home surveyors carry out the State survey and certification process for 

determining nursing home compliance with Federal standards. The HCFA contracts with 

States to perform routine facility surveys for Medicare and dually-certified nursing homes. 

The State is also responsible for surveying its Medicaid certified nursing homes. 

Surveyors perform unannounced visits to all facilities no later than every 15 months of the 

previous survey. During their visits, they review compliance with residents’ rights and 

audit residents’ assessments and plans of care for a sample of residents to determine 

accuracy and adequacy. When a facility fails to meet a specific requirement, they cite the 

facility for noncompliance. 

Long Term Care Ombudsman Program 

The State Long Term Care Ombudsman Program is a federally mandated program 

established in 1978 in the Older Americans Act. The program began in response to 

concerns about poor quality of care in nursing homes. The program operates in all 50 

States, the District of Columbia, Puerto Rico, and in hundreds of local communities. The 

program has multiple functions, many of which are closely tied to ensuring residents’ 

rights and quality care. These functions include: 

< Identifying, investigating, and resolving complaints made on behalf of long 

term care residents; 

< protecting the legal rights of residents; 

< advocating for systemic change; 

< providing information and consultation to residents and their families, and; 

< publicizing issues of importance to residents. 

In 1996, all programs began to collect and report data under the National Ombudsman 

Reporting System (NORS). This system includes information about complaints made on 

behalf of residents about residents’ rights, resident care, quality of life, administration, and 

other complaints not against the facility. 

METHODOLOGY 

This inspection is based on information gathered from several different sources. As 

described below, we conducted interviews with a broad range of stakeholders who have 

experience with beneficiary access to nursing homes. We also analyzed data from the 

Online Survey Certification and Reporting System (OSCAR) and data about complaints 

from several different sources. 

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Interviews 

First, we interviewed the State Long Term Care Ombudsman from each State (except 

Alaska who was not available at the time) and the District of Columbia to identify any 

complaints they have received about financial screening and distinct part practices. We 

also asked about the extent to which access to nursing home care is a problem in their 

State. 

Second, we contacted State Medicaid officials in each State and the District of Columbia 

to obtain information about their distinct part requirements and policies that promote 

nursing home access. We also discussed the extent to which financial screening and 

distinct part may limit access for Medicaid beneficiaries in their State. 

Third, we conducted interviews with 180 randomly selected hospital discharge planners in 

eight States. We asked them about their experiences with placing Medicare and Medicaid 

patients in nursing homes and about any reasons why access to nursing home care may be 

a problem in their area. Results from these interviews are also reported in a related study 

entitled, Early Effects of the Prospective Payment System on Access to Skilled Nursing 

Facilities OEI-02-99-00400. 

Fourth, we interviewed 64 nursing home administrators in eight States. We asked them 

about access to nursing homes and about how they make decisions concerning which 

types of patients to admit. Results from these interviews are reported in another study 

entitled, Early Effects of the Prospective Payment System on Access to Skilled Nursing 

Facilities: Nursing Home Administrators’ Perspectives OEI-02-99-00401. 

OSCAR Data 

The Online Survey Certification and Reporting System (OSCAR) is the system HCFA 

uses in its survey of Medicare and Medicaid providers to monitor State agency and 

provider performance. We analyzed OSCAR data from the most recent survey and the 

Provider of Services (POS) File to determine the number of nursing home beds and 

nursing home occupancy rates in each State. We also analyzed data about two 

deficiencies concerning admissions and equal quality of care that nursing home surveyors 

may cite in their annual review of each nursing facility. These two deficiencies, identified 

as deficiency tags 207 and 208, reflect the requirements in the Nursing Home Reform Act 

discussed earlier. 

Complaint Data 

We identified the key agencies that beneficiaries and others may contact about problems 

related to access to nursing home care. We asked these agencies about any complaints 

related to financial screening and distinct part rules. In addition, we analyzed the 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
National Ombudsman Reporting System (NORS) for FY 1997. (Note that FY 1998 data 

were not available.) We also asked each ombudsman about any complaints specifically 

related to financial screening and distinct part that they received in the past three years. 

These data were annualized to estimate the average number of complaints received in a 

year. 

Sample Selection 

We selected a two-stage stratified cluster sample of hospital discharge planners and 

nursing home administrators in eight States. The first stage of sampling was a stratified 

sample of eight States as shown below. 

Strata 1 The four States with the most SNF beds (CA, NY, IL, TX) 

Strata 2 Two of the four States currently using a Medicaid demonstration 

prospective payment system (MS, ME) 

Strata 3 Two States randomly selected from the remaining 40 contiguous States 

(VA, CT) 

At the second stage, we selected a simple random sample of eight nursing homes that had 

greater than 60 beds within each of these States. We also selected a simple random 

sample of 25 hospitals within each of these States. We achieved a 100 percent response 

rate for nursing home administrators and a 90 percent response rate for discharge 

planners. Data for both samples were weighted and projected to the universe. Note that 

the estimates based on these samples are associated with large confidence intervals and 

should be interpreted with caution. Appendix A provides the confidence intervals for the 

key questions. 

This inspection was conducted in accordance with the Quality Standards for 

Inspections issued by the President’s Council on Integrity and Efficiency. 

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F I N D I N G S 

DISTINCT PART CERTIFICATION 

Most States allow distinct part certification in nursing homes 

According to Medicaid officials, 29 States allow nursing homes to certify a portion of 

their beds for Medicaid. Three of these States actually specify what percentage of a 

nursing home’s beds that must be certified for Medicaid. The remaining 22 States do not 

allow Medicaid distinct part certification. These States have a “one bed, all beds” policy 

that requires nursing homes that participate in Medicaid to certify all of their beds for 

Medicaid. 

Regarding Medicare, all but one State allow nursing homes to certify a portion of their 

beds for Medicare. In the remaining State, all beds must be certified for both Medicare 

and Medicaid. 

Overall, distinct part rules do not appear to limit access for Medicaid or Medicare 

beneficiaries 

Irrespective of the rules about Medicaid distinct part, only about 875 facilities or 5 percent 

of 17,317 facilities nationwide appear to have a Medicaid distinct part. Further, as shown 

in Figure 1, about 97 percent of all beds that are certified nationwide are for Medicaid. At 

the same time, about 68 percent of nursing home residents are Medicaid beneficiaries. It 

is important to note, however, that even if a bed is certified for Medicaid, the facility does 

not have to fill it with a Medicaid beneficiary. 

Regarding Medicare, according to 1998 OSCAR data, 8971 facilities or about half of all 

facilities nationwide have a Medicare distinct part and about 42 percent of all certified 

beds are for Medicare. Note that only about 9 percent of nursing home residents are 

Medicare beneficiaries. 

As shown, many beds (38 percent) are actually certified for both Medicare and Medicaid. 

The number of these beds has also increased from 1996 to 1998 by 7 percent. Medicaid 

officials from 39 States confirm that it is “very common” for nursing homes in their State 

to certify their beds for both programs and several note that facilities are increasingly 

certifying their beds in this manner. 

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Source: Provider of Services File, 1998

In addition, no Medicaid officials report that distinct part limits Medicaid beneficiaries’

access to nursing homes in their State to a large extent. 

due to their State’s “one-bed all-beds” policy, distinct part does not affect access. 

note that occupancy rates are low and therefore nursing homes do not refuse applicants in

order to keep their beds filled. 

for Medicaid are less likely to report that overall access is a problem for Medicaid

beneficiaries than those in States that do not allow distinct part. 

Ombudsmen generally concur with Medicaid officials but some express concerns. 

Ombudsmen in seven States believe that distinct part limits access for Medicaid

beneficiaries to a large extent. 

to some extent. 

not have a Medicaid certified bed available when that may not have been the case. 

(See Table 1.) Some explain that

Others

Also, Medicaid officials in States that allow distinct part

Another 18 ombudsmen say that distinct part limits access

A few mention instances where a family was told that a nursing home did
Table 1

Effect of Distinct Part on Access

To what extent does distinct part limit Medicaid beneficiaries’ access to nursing 

homes? 

Large Somewhat Not at all Don’t know 

Medicaid Officials 0 5 43 3 

Ombudsmen 7 18 20 5 

Source: OEI Surveys, 1999 

Ombudsmen are less likely to report that distinct part practices are a problem for Medicare 

beneficiaries. Specifically, only two ombudsmen report that distinct part limits access for 

Medicare beneficiaries to a large extent. Another 21 ombudsmen say that it limits access 

to some extent. Some ombudsmen report that nursing homes want Medicare beneficiaries 

and others note that they do not hear complaints about Medicare beneficiaries being 

denied access because a Medicare bed is not available. 

Finally, when asked their opinions, most Medicaid officials (35) believe that requiring 

nursing facilities to certify all of their beds for both Medicare and Medicaid would not 

have an effect on access for Medicaid beneficiaries in their State. Similarly, the majority 

of nursing home administrators report that it would not affect the number of Medicare or 

Medicaid patients that they would admit. In contrast, ombudsmen generally believe that 

this requirement would increase access for Medicare and for Medicaid beneficiaries. 

FINANCIAL SCREENING 

Nursing facilities commonly request financial information as part of the 

admissions process 

State ombudsmen and Medicaid officials report that nursing homes routinely ask for 

financial information as part of the admissions process. Specifically, 41 ombudsmen and 

40 Medicaid officials note that nursing homes do this “very often” or “somewhat often.” 

Most nursing home administrators (75 percent) confirm that they ask for financial 

information when a person applies to their facility, most often about a person’s assets, 

income, and/or insurance. Some note their facility requires an advance deposit for 

applicants who plan to pay privately. 

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When financial screening occurs, it primarily affects access for Medicaid 

beneficiaries 

No Medicaid officials and only eight ombudsmen report that Medicaid beneficiaries are 

denied access to a nursing home “very often” because of financial screening. (See Table 

2.) Eleven ombudsmen, however, report Medicaid beneficiaries are denied access 

“somewhat often” because of financial screening. They commonly explain that nursing 

facilities want to maximize their reimbursement and clearly prefer private pay and 

Medicare applicants. Regarding Medicare beneficiaries, only one ombudsman believes 

that these beneficiaries are denied access “very often” because of financial screening. 

Table 2

Effect of Financial Screening on Access

How often are Medicaid beneficiaries denied access to a nursing home because of 

financial screening? 

Respondent Very Often Somewhat Not Often Never Don’t 

Often Know 

Medicaid Officials* 0 2 30 12 7 

Ombudsmen* 8 11 19 10 2 

How often do nursing homes refuse patients because of financial reasons? 

Discharge 33% 37% 23% 7% 0%

Planners 

Source: OEI Surveys, 1999 

* Responses from Medicaid Officials and Ombudsmen are in terms of their counts, not percentages. 

Ombudsmen in 15 States further note that it is at least somewhat common for nursing 

homes in their State to require a person to pay privately for a specified period of time in 

order to be admitted. According to their experience, a person may be required to pay for 

a month or more which is inconsistent with the current law. 

In contrast, discharge planners believe that financial screening is a common problem. 

One-third say that nursing homes refuse patients “very often” because of financial reasons. 

Another 37 percent say that this happens “somewhat often.” Some note that patients with 

complex medical conditions, patients without any insurance, and Medicaid patients are 

most likely to be denied access because of financial screening. 

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To understand these issues further, we contacted the discharge planners (15) who say that 

nursing homes refuse patients “very often” because of financial reasons and that it is “very 

difficult” to place Medicaid patients in nursing homes. Seven respondents report that they 

can place all of their patients in a nursing home. Another 3 say they cannot place up to 10 

percent, whereas 4 cannot place between 25 and 88 percent of their Medicaid patients. 

Most note that these patients remain in the hospital for long periods of time. In some 

cases, they may eventually be placed in a nursing home or in other types of care. They 

also report that the patient’s medical condition or low reimbursement under Medicaid is 

the primary reason they have difficulty placing these patients. 

Nursing home administrators generally believe that financial screening is not a large 

problem. The majority of nursing home administrators (85 percent) assert that they do not 

look at payment source to decide the proportion of Medicare, Medicaid, and private pay 

patients to admit. Rather, many say they take whoever applies or make decisions based on 

bed availability or whether they can meet a patient’s needs. Others explain that they try to 

admit as many private pay patients as possible. 

When asked their opinions about financial screening rules, most ombudsmen and many 

Medicaid officials believe there should be at least some limitations on financial screening. 

A typical comment is that financial screening should not be used to “shop” for residents. 

Some ombudsmen note that it is important for nursing homes to be able to screen 

residents so they can remain financially solvent and be able to provide quality care to all. 

In contrast, about two-thirds of nursing home administrators believe there should not be 

any limits placed on financial screening. They commonly say they need to ask for financial 

information so they can know how their facility will be paid. Some specifically point out 

that they are operating a business and need this information to protect themselves 

financially. Others say that they use the information to help plan a resident’s stay or to 

assist them in applying for Medicaid when they become eligible. 

COMPLAINTS 

Oversight agencies receive relatively few complaints about financial screening or 

distinct part practices 

Beneficiaries and others may contact certain agencies including the Office of Civil Rights 

(OCR), the OIG Hotline, and/or the Ombudsman Program about problems related to 

access to nursing home care. Additionally, nursing home surveyors may cite facilities for 

admissions practices that do not assure equal access to care and for certain financial 

screening practices. The available data are presented below. 

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The Office of Civil Rights. Staff at OCR did not find any complaints in which financial 

screening or distinct part was an issue in FY 98 or FY 99. They note that three 

complaints remain open from the early 1990's which allege that certain Michigan area 

nursing homes use distinct part rules and financial screening to limit access for Medicaid 

beneficiaries and minorities. 

The Office of Inspector General Hotline. Staff identified only one complaint related to 

payment source that was received by the OIG Hotline between May 1995 and September 

1999. This complaint alleges that a nursing home asked Medicaid residents to leave so 

that it could admit private pay residents. 

. 

Nursing home surveyors. Nursing home surveyors rarely cite nursing homes for 

problems related to equal access to care or financial screening. According to OSCAR 

data for the most recent survey, surveyors gave a total of 59 citations related to these 

issues. These citations represent less than one percent of all citations given in that time 

period. 

Ombudsmen. According to 1997 NORS data, ombudsmen report a total of 1,262 

complaints in categories that may include issues related to distinct part and financial 

screening practices. Together, these complaints represent less than one percent of all 

complaints reported by ombudsmen in that year. 

When asked to look at their data more specifically, 17 ombudsmen report they have not 

received any complaints about financial screening and 18 ombudsmen report that they 

have not received any complaints about distinct part practices. Ombudsmen from 24 

States estimate receiving an average total of 339 complaints related to financial screening 

per year. The majority (71 percent) of these complaints come from 7 States. Regarding 

distinct part practices, ombudsmen in 20 States estimate receiving an average total of 334 

complaints per year. Similarly, about 76 percent of these complaints are from 6 States. 

Note that not all ombudsmen were able to obtain these data. 

Ombudsmen explain that these complaints are primarily about nursing homes denying 

access to Medicaid beneficiaries or those who would become Medicaid eligible in the near 

future. Some involve facilities requesting extensive financial information from patients or 

their family members, or asking residents to pay a certain amount prior to admission. 

Several ombudsmen also mention complaints about beds not being available, possibly 

because of distinct part practices. 

In addition, 23 State ombudsmen estimate an average total of 734 complaints per year 

about issues related to access to care. These complaints primarily involve residents being 

transferred from one bed to another when they become eligible for Medicaid. Others are 

about residents being discharged either to a hospital or for a psychological evaluation so 

that the nursing home could fill the bed with a Medicare or private pay resident. 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
At the same time, many ombudsmen believe that problems caused by financial screening 

and distinct part are larger than what is actually reported. Some note that people may not 

complain or be aware that they are being denied access because of financial screening or 

distinct part rules. They also mention that many people may not know to notify the 

Ombudsmen program if they have this type of problem. 

OVERALL ACCESS 

The effects of distinct part rules and financial screening must be viewed within the broader 

context of overall access to nursing home care. Overall access is primarily affected by the 

supply of and demand for nursing home beds which can be measured in terms of 

occupancy rates. 

Occupancy rates are low and most respondents report that overall access to 

nursing home care is not a major problem 

According to OSCAR data, occupancy rates are generally low. Specifically, the average 

occupancy rate for all certified nursing facilities nationwide is 82 percent. State 

occupancy rates range from 68 percent in Arkansas to 95 percent in New York. Many 

ombudsmen and Medicaid officials confirm that nursing homes are experiencing low 

occupancy rates. Some explain that this is due to more people obtaining care in 

alternative settings such as assisted living facilities or at home. Several also note that 

some nursing homes are eager to accept anyone, or prefer some guarantor of payment to 

having a vacant bed. 

Further, respondents report that overall access to nursing homes is not a major problem 

for Medicaid beneficiaries. Specifically, no Medicaid officials say that access to nursing 

home care for Medicaid beneficiaries is a large problem. (See Table 3.) Nursing home 

administrators generally agree. Only 6 percent report that access to nursing home care for 

Medicaid patients is a large problem in their area. Medicaid officials and nursing home 

administrators commonly explain that enough beds are available to meet demand. Others 

note that access is somewhat of a problem for persons with complex care needs or with 

certain medical conditions or in some areas of their State. 

In contrast, ombudsmen from 11 States report that access for Medicaid beneficiaries is a 

large problem in their State. They point out that facilities prefer private pay or Medicare 

patients. Similarly, about one-third of discharge planners report that it is “very difficult” 

to place Medicaid patients in nursing homes, mainly because Medicaid reimbursement is 

low. 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
Table 3

Overall Access for Medicaid Beneficiaries

To what extent is access to nursing home care a problem for Medicaid 

beneficiaries? 

A large Somewhat of a Not at all a Don’t know 

problem problem problem 

Medicaid Officials* 0 19 30 2 

Ombudsmen* 11 24 15 0 

How difficult it is to place Medicaid patients in nursing homes? 

Very difficult Somewhat difficult Not at all difficult 

Discharge Planners 35% 42% 23% 

Source: OEI Surveys, 1999 

* Responses from Medicaid Officials and Ombudsmen are in terms of their counts, not percentages. 

Regarding Medicare, fewer respondents report that access to nursing home care is a 

problem. Only five ombudsmen report that access for Medicare beneficiaries is a large 

problem in their State. (See Table 4.) Many observe that occupancy rates are low or that 

there are enough beds. Some note, however, that the nursing home prospective payment 

system has created some difficulties or that access problems exist for patients with 

complex medical needs or in some areas in their State. 

Discharge planners and nursing home administrators generally concur. Only one percent 

of discharge planners report that it is “very difficult” to place short-term Medicare 

patients. They point out that nursing homes generally want Medicare patients because 

they have short stays or because their reimbursement for these patients is higher than it is 

under Medicaid. Similarly, about 6 percent of nursing home administrators report that 

access to nursing home care for Medicare patients is a large problem in their area. 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
Table 4

Overall access for Medicare Beneficiaries

To what extent is access to nursing home care a problem for Medicare 

beneficiaries? 

A large Somewhat Not at all 

problem of a problem a problem Don’t Know 

Ombudsmen* 5 26 18 1 

How difficult it is to place short-term Medicare patients in nursing homes? 

Somewhat Not at all 

Very difficult difficult difficult Don’t Know 

Discharge 1% 32% 66% 1% 

Planners 

Source: OEI Surveys, 1999 

* Responses from Ombudsmen are in terms of their counts, not percentages. 

We also found that many States (23) have specific policies to promote nursing home 

access. According to Medicaid officials, 13 States have occupancy incentives in which the 

State reimburses nursing homes at a higher Medicaid rate when their occupancy reaches a 

certain level, such as 95 percent. Five States mandate that all nursing homes use a single 

waiting list, or a first-come, first-served policy to assure access for Medicaid recipients. 

Two States have a rate equalization policy that prohibits a facility from charging privatepay patients a higher rate than it is paid under Medicaid. 

Some States have other policies such as bed-hold policies that specify certain conditions in 

which a nursing home cannot deny readmission to a beneficiary who leaves a facility for a 

short amount of time. A few States also have a resident bill of rights that prohibits 

discrimination based on payment source. The majority of Medicaid officials in States that 

have policies believe that the policies are “somewhat” or “very” effective at assuring 

access. 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
CONCLUSION 

Distinct part rules do not appear to limit access for Medicaid or Medicare beneficiaries. 

Financial screening may cause access problems for some Medicaid beneficiaries, but these 

problems do not appear to be widespread. At this time, any potential effects of distinct 

part rules and financial screening are being tempered by a bed supply that generally 

exceeds demand and by State initiatives that promote access. The dynamics of the nursing 

home bed supply, however, could change in the future. 

The Department can respond to these findings with a number of options. 

< It can do nothing new at this time and continue to monitor access and changes in 

nursing home occupancy rates, as well as the factors that affect nursing home bed 

supply and demand; 

< It can strengthen its oversight efforts by alerting survey and certification and 

ombudsman staff to potential abuses and by using public service announcements to 

alert consumers to the current law and common financial screening practices; 

< It can issue new regulations or legislation that eliminates Medicare distinct part 

and/or prohibits financial screening; or 

< It can study the effects on access of the practices adopted by 23 States to promote 

access to nursing facilities. 

AGENCY COMMENTS 

We received comments on the draft report from the Health Care Financing Administration 

(HCFA), the Administration on Aging, and the Assistant Secretary for Planning and 

Evaluation (ASPE). The HCFA agreed with our recommendation to strengthen oversight 

and listed a number of steps they were taking to implement that recommendation. 

Additionally, at ASPE’s request we have forwarded a memorandum to HCFA containing a 

State-specific discussion of access. The ASPE also asked for a discussion of the variance 

in responses listed in Table 2. We believe the variance is due to perspective. While the 

State officials take a policy or oversight view of the problem, the discharge planners' view 

is that of a caseworker focusing on the process of placing beneficiaries. We elaborate on 

this on page 16 of the report with our follow-up interviews with discharge planners. 

Technical comments have also been included in the report. The full text of the agencies' 

comments are contained in Appendix B. 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
APPENDIX A 

Confidence Intervals for Discharge Planners 

and Nursing Home Administrators 

We calculated confidence intervals for key findings for discharge planners and nursing home 

administrators. The point estimate and 95% confidence interval are given for each of the 

following: 

DISCHARGE PLANNERS ESTIMATE 

POINT 

INTERVAL 

CONFIDENCE 

In your opinion, how often do nursing homes 

refuse patients because of financial reasons? 

Very often 

Somewhat often 

Not often 

Never 

33% 

37% 

23% 

7% 

+ 3.7 

+ 16.0 

+ 18.8 

+ 2.2 

Currently, how difficult is it to place Medicaid 

patients? Would you say: 

Very difficult 

Somewhat difficult 

Not at all difficult 

35% 

42% 

23% 

+ 15.8 

+ 8.4 

+ 8.5 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
DISCHARGE PLANNERS (continued) ESTIMATE 

POINT 

INTERVAL 

CONFIDENCE 

Currently, how difficult is it to place short-term 

Medicare patients into nursing homes? Would you 

say: 

Very difficult 

Somewhat difficult 

Not at all difficult 

1% 

32% 

66% 

+ 1.3 

+ 6.6 

+ 4.3 

NURSING HOME ADMINISTRATORS ESTIMATE 

POINT 

INTERVAL 

CONFIDENCE 

In your opinion, to what extent is access to nursing 

home care a problem for Medicaid patients in your 

area? Would you say it is: 

A large problem 

Somewhat of a problem 

Not at all a problem 

6% 

33% 

62% 

+ 8.7 

+ 16.9 

+ 25.2 

In your opinion, to what extent is access to nursing 

home care a problem for Medicare patients in your 

area? Would you say it is: 

A large problem 

Somewhat of a problem 

Not at all a problem 

6% 

26% 

68% 

+ 8.8 

+ 34.5 

+ 26.1 

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The Effect of Financial Screening and Distinct Part Rules on Access to Nursing Facilities OEI-02-99-00340 
APPENDIX B 

Comments

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