Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

Inspector General 

November 2003 

OEI-01-03-00180 

TRENDS IN THE ASSIGNMENT OF 

RESOURCE UTILIZATION 

GROUPS 
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. 
� ABSTRACT

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 T RENDS IN THE ASSIGNMENT OF RUGS i 
� EXECUTIVE SUMMARY

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 Services’s 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 T RENDS IN THE ASSIGNMENT OF RUGS ii 
EXECUTIVE SUMMARY 

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 T RENDS IN THE ASSIGNMENT OF RUGS iii 
EXECUTIVE SUMMARY 

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 T RENDS IN THE ASSIGNMENT OF RUGS iv 
� TABLE OF CO NTENTS

ABSTRACT ................................ ....................... i

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

INTRODUCTION ................................ ................. 1

FINDINGS ................................ ........................ 1

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

SUMMARY ................................ ...................... 1 0

APPENDICES ................................ .................. 1 1

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

ACKNOWLEDGMENTS ................................ ......... 1 8
� INTRODUCTION

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 copayment 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 costreporting 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 T RENDS IN THE ASSIGNMENT OF RUGS 1 
INTRODUCTION 

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, BBRA’s 20 percent 

OEI - 01 - 03 - 00180 T RENDS IN THE ASSIGNMENT OF RUGS 2 
INTRODUCTION 

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 

PPS 

implemented 

for SNFs 

Oct 1, 2000 

BBRA 

implemented 

April 1, 2001 

BIPA 

implemented 

Oct. 1, 2002 

BIPA 

temporary 

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 Services’s (CMS’s) 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 T RENDS IN THE ASSIGNMENT OF RUGS 3 
INTRODUCTION 

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 President’s 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 T RENDS IN THE ASSIGNMENT OF RUGS 4 
� FINDINGS

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 

RUG Category Jan-Mar 1999 

76.3% 

12.8 

5.6 

3.8 

1.4 

Oct-Dec 2000 

(BBRA) 

76.5% 

13.4 

5.0 

3.3 

1.7 

Apr-Jun 2001 

(BIPA) 

76.7% 

13.5 

4.9 

3.1 

1.7 

Oct-Dec 2002 

(Changes 

ended) 

Percentage 

Point Change 

1999-2002 

Rehabilitation 

Extensive Care 

Special Care 

Clinically Complex 

Custodial Care 

76.9% 

14.5 

4.2 

2.6 

1.8 

0.6% 

1.7 

-1.4 

-1.2 

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 T RENDS IN THE ASSIGNMENT OF RUGS 5 
FINDINGS 

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 T RENDS IN THE ASSIGNMENT OF RUGS 6 
FINDINGS 

CHART #1 

Proportion of Medicare Residents in Rehabilitation Subgroups 

0 

0.1 

0.2 

0.3 

0.4 

0.5 

0.6 

Q1 '99 Q3 '99 Q1 '00 Q3 '00 Q1 '01 Q3 '01 Q1 '02 Q3 '02 

High 

Medium 

Ultra High, 

Very High, 

Low 

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 T RENDS IN THE ASSIGNMENT OF RUGS 7 
Table 2: Trend in the Proportion of Medicare Residents in 3 RUGs 

S 

m 

a Rehabilitation RUGs 

RHC 

RMB 

RMC 

Jan-Mar 

1999 

15.0% 

8.2 

5.0 

Oct-Dec 

2000 (BBRA) 

18.9% 

9.4 

5.5 

Apr-Jun 2001 

(BIPA) 

18.8% 

8.7 

5.3 

Oct-Dec 2002 

(Changes 

ended) 

19.9% 

7.3 

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 T RENDS IN THE ASSIGNMENT OF RUGS 8 
FINDINGS 

CHART #2: 

Trend in the Proportion of Medicare 

Residents in RUG Categories 

0.0% 

2.0% 

4.0% 

6.0% 

8.0% 

10.0% 

12.0% 

14.0% 

16.0% 

Q1 '99 Q3 '99 Q1 '00 Q3 '00 Q1 '01 Q3 '01 Q1 '02 Q3 '02 Q1 '03 

Extensive Care 

Special Care 

Clinically 

Complex 

Custodial Care 

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 T RENDS IN THE ASSIGNMENT OF RUGS 9 
� 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 T RENDS IN THE ASSIGNMENT OF RUGS 10 
� APPENDIX ~ A

OEI - 01 - 03 - 00180 T RENDS IN THE ASSIGNMENT OF RUGS 11
� APPENDIX ~ 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 

Extensive 

Care 

Special Care 

Clinically 

Complex 

Cognitively 

Impaired 

Behavior 

Problems 

Reduced 

Physical 

Function 

Total Number 

of 

Beneficiaries 

76.3% 

12.8 

5.6 

3.8 

0.3 

0.0 

1.1 

427,351 

76.7% 

12.8 

5.4 

3.5 

0.3 

0.0 

1.1 

418,258 

76.8% 

12.8 

5.4 

3.4 

0.3 

0.0 

1.1 

411,465 

76.0% 

13.5 

5.4 

3.4 

0.4 

0.1 

1.2 

427,873 

75.9% 

13.7 

5.3 

3.5 

0.4 

0.1 

1.1 

485,122 

76.0% 

13.3 

5.3 

3.5 

0.4 

0.1 

1.3 

438,619 

76.2% 

13.3 

5.3 

3.4 

0.4 

0.1 

1.3 

428,079 

76.5% 

13.4 

5.0 

3.3 

0.4 

0.0 

1.3 

428,467 

RUG Category 

Q1 ‘01 Q2 ‘01 Q3 ‘01 Q4 ‘01 Q1 ‘02 Q2 ‘02 Q3 ‘02 Q4 ‘02 

Rehab 

Extensive 

Care 

Special Care 

Clinically 

Complex 

Cognitively 

Impaired 

Behavior 

Problems 

Reduced 

Physical 

Function 

Total Number 

of 

Beneficiaries 

76.8% 

13.5 

4.9 

3.1 

0.4 

0.1 

1.2 

481,851 

76.7% 

13.5 

4.9 

3.1 

0.4 

0.1 

1.2 

459,049 

76.8% 

13.6 

4.7 

2.9 

0.5 

0.1 

1.2 

438,031 

76.7% 

13.9 

4.6 

2.9 

0.4 

0.1 

1.3 

453,335 

76.8% 

14.2 

4.4 

2.8 

0.4 

0.1 

1.1 

507,011 

76.9% 

14.1 

4.4 

2.8 

0.5 

0.1 

1.2 

475,821 

76.8% 

14.2 

4.4 

2.7 

0.5 

0.1 

1.2 

468,006 

76.9% 

14.5 

4.2 

2.6 

0.5 

0.1 

1.2 

522,803 

Source: OEI analysis of National Claims History File, July 2003 

OEI - 01 - 03 - 00180 T RENDS IN THE ASSIGNMENT OF RUGS 12
� APPENDIX ~ 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 

of Rehab 

Beneficiaries 

326,021 321,009 315,852 325,367 368,135 333,495 326,010 327,592 

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 

of Rehab 

Beneficiaries 

369,957 352,128 336,483 347,693 389,190 366,065 359,615 402,183 

Source: OEI analysis of National Claims History File, July 2003 

OEI - 01 - 03 - 00180 T RENDS IN THE ASSIGNMENT OF RUGS 13
� APPENDIX ~ 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 

OEI - 01 - 03 - 00180 T RENDS IN THE ASSIGNMENT OF RUGS 14
APPENDIX~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 T RENDS IN THE ASSIGNMENT OF RUGS 15
APPENDIX~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 

OEI - 01 - 03 - 00180 T RENDS IN THE ASSIGNMENT OF RUGS 16
APPENDIX~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 T RENDS IN THE ASSIGNMENT OF RUGS 17
�APPENDIX~D ACKNOWLEDGMENTS 

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 T RENDS IN THE ASSIGNMENT OF RUGS 18