Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

A REVIEW OF NURSING FACILITY


RESOURCE UTILIZATION GROUPS


Daniel R. Levinson


Inspector General 


February 2006


OEI-02-02-00830

Office of Inspector General 
 http://oig.hhs.gov 

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

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts management and program 

evaluations (called inspections) that focus on issues of concern to the department, the 

Congress, and the public. The findings and recommendations contained in the 

inspections reports generate rapid, accurate, and up-to-date information on the 

efficiency, vulnerability, and effectiveness of departmental programs. OEI also oversees 

State Medicaid Fraud Control Units, which investigate and prosecute fraud and patient 

abuse in the Medicaid program. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
Δ EXECUTIVE SUMMAR Y 

OBJECTIVE 

To determine the extent to which Resource Utilization Groups (RUGs) 

on claims submitted by nursing facilities are different from those 

generated based on evidence in the medical record. 

BACKGROUND 

This inspection is a followup to a 2001 Office of Inspector General report 

entitled “Nursing Home Resident Assessment, Resource Utilization 

Groups” (OEI-02-99-00041). That report found both upcoding and 

downcoding differences between the RUGs submitted by the skilled 

nursing facilities and those generated based on a review of the medical 

record. It further noted that these problems needed continued attention 

and that we planned to revisit them after the prospective payment 

system had been implemented. 

Medicare pays for Part A skilled nursing facility stays based on a 

prospective payment system that categorizes each resident into a 

payment group depending upon his or her care and resource needs. 

These groups are called RUGs. Skilled nursing facilities determine a 

RUG based on 108 items on an assessment of the resident known as the 

Minimum Data Set (MDS). The Centers for Medicare & Medicaid 

Services (CMS) requires skilled nursing facilities to complete the MDS 

for each resident covered by Medicare Part A by approximately the 5th, 

14th, and 30th day of the resident’s stay, and every 30 days thereafter, as 

appropriate. CMS considers the MDS to be part of the medical record 

and expects information contained in the rest of the medical record to 

support the MDS. 

The results of this inspection are based on an independent review of the 

MDS and other documentation in the medical record for a random 

sample of 272 claims submitted by skilled nursing facilities and from 

interviews with staff who are responsible for completing the MDS at the 

skilled nursing facilities. 

The reviewers determined whether the responses submitted by skilled 

nursing facilities on the 108 MDS items used to generate the RUG were 

consistent with documentation in the rest of the medical record. If a 

particular response to an MDS item was not consistent with the rest of 

the medical record, the reviewer recoded that item and used the recoded 

item to calculate a new RUG. 

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EXE CUTIVE S U MMAR Y 

For each resident, reviewers made a determination based on the 

documentation available. If they did not find any documentation in the 

medical record or the medical record contained information that was not 

clear enough to make a judgment, they did not make an independent 

determination. 

This inspection does not determine the extent to which claims 

submitted by skilled nursing facilities are medically necessary or 

adequately supported by medical documentation. It is limited in scope 

to whether the MDS is consistent with the rest of the medical record. 

FINDINGS 

Twenty-six percent of RUGs on claims were different from the ones 

generated based on evidence in the medical record. Based on a 

comparison of the MDS and the rest of the medical record, we found 

that 26 percent of RUGs on claims submitted by skilled nursing 

facilities (71 of the 272 claims in our sample) were different from the 

ones generated based on evidence in the rest of the medical record. 

More specifically, 22 percent of claims, or 59 of the 272 claims in our 

sample, had a RUG with a higher associated payment rate than the one 

generated based on evidence in the medical record. These differences 

represented potential overpayments. The remaining 4 percent of 

claims, or 12 of the 272 claims in our sample, had a RUG with a lower 

associated payment rate than the one generated based on evidence in 

the medical record, representing potential underpayments. 

To determine the potential effects of these differences on total Medicare 

payments, we calculated the net difference between the payment 

amounts for the RUGs on the claims submitted by nursing facilities and 

the payment amounts for RUGs generated from evidence in the medical 

record. The net difference represented $542 million in potential 

Medicare overpayments for fiscal year 2002, when projected to all 

claims with RUGs generated from a 5-day, 14-day, or 30-day MDS 

assessment. 

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EXE CUTIVE S U MMAR Y

Minimum Data Set items that require look-back periods, multiple 

assessors, or calculations contributed to differences in RUGs. 

RUGs are generated from 108 items on the MDS resident assessment. 

In the 71 claims in our sample that had a RUG different from the one 

generated based on evidence in the medical record, 11 MDS items 

accounted for 54 percent of all such instances. These 11 items had one 

or more of the following characteristics: a look-back period (i.e., 

observation over time), multiple assessors (i.e., assessment by two or 

more staff), or calculations. 

RECOMMENDATION 

We recommend that CMS take steps to ensure that skilled nursing 

facilities complete the MDS accurately and assign each resident to the 

correct RUG. These steps could include (1) continuing the type of 

analysis conducted by the Data Assessment and Verification (DAVE) 

project and (2) more carefully examining the 11 MDS items that we 

found were most often inconsistent with the rest of the medical record. 

In addition, we have forwarded to CMS for appropriate action 

information on the 71 claims in our sample that had a RUG with a 

payment rate different from the one generated based on evidence in the 

medical record. 

AGENCY COMMENTS 

CMS concurred with our recommendation. CMS sees this report as 

showing a significant improvement in the assignment of RUG categories 

at the facility level compared to our 2001 report. CMS commented that 

it would continue current efforts to improve the accuracy of the MDS 

and has taken, or agreed to take, the following actions: 

o CMS recently awarded a contract to expand upon the DAVE 

project, called DAVE2. The purpose of this new project is to 

assess the accuracy and reliability of national CMS data through 

focused onsite reviews of the MDS assessment. 

o CMS will take the findings of this report into consideration in 

developing a Web-based training program for the Resident 

Assessment Instrument Manual. 

o CMS will maintain ongoing communications with stakeholders, 

such as State and regional staff, consultants, and trade 

associations, regarding the MDS. 

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EXE CUTIVE S U MMAR Y 

o CMS will have fiscal intermediaries and Program Safeguard 

Contractors continue to assess MDS information through the 

routine medical review process. 

o CMS will incorporate the findings of this report into educational 

efforts to improve the accuracy of the MDS. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

We agree with the actions CMS plans to take to improve the accuracy of 

the MDS. However, it is important to note that, because of 

methodological differences, the results of this report cannot be 

compared to the results of the previous OIG report. 

The methodologies of the two reports differed in two main ways. First, 

for the previous report, reviewers completed an MDS based on the 

resident’s medical record without referring to the original MDS and 

then compared the results of the two assessments. In its comments to 

the previous report, CMS noted that the MDS is a part of the medical 

record. Therefore, for the current report, the reviewers included the 

MDS in their review of the medical record. They compared the original 

MDS to the rest of the medical record to determine whether they were 

consistent. Second, for the previous report, we only reviewed the 14-day 

MDS, while for the current report we reviewed the 5-day, 14-day, and 

30-day MDS assessments. Because of these differences, the current 

report cannot necessarily be used as evidence to show that MDS 

accuracy has improved over time. 

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Δ T ABLE OF CONTENTS T

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

INTR O D U C T I ON ........................................... 1

FINDI NGS ................................................. 7

Differences found in 26 percent of RUGs ..................... 7

Certain MDS items contribute to differences in RUGs .......... 8

RECOM M E NDATI O N ...................................... 11

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

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

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

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

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

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

E: Confidence Intervals for Key Findings ................... 25

F: Agency Comments .................................. 26

ACKN O W LEDGMENTS .................................... 29
ΔINTROD UCT ION

 INTRODU C TION 

OBJECTIVE 

To determine the extent to which Resource Utilization Groups (RUGs) 

on claims submitted by nursing facilities are different from those 

generated based on evidence in the medical record. 

BACKGROUND 

This inspection is a followup to a 2001 Office of Inspector General report 

entitled “Nursing Home Resident Assessment, Resource Utilization 

Groups” (OEI-02-99-00041). That report found both upcoding and 

downcoding differences between RUGs submitted by the skilled nursing 

facilities and those generated based on a review of the medical record. 

Specifically, it found that 46 percent of residents in an overall sample of 

640 received an upcoded RUG, whereas 30 percent of residents received 

a downcoded RUG. It further noted that these problems needed 

continued attention and that we planned to revisit them after the 

prospective payment system had been implemented. 

This inspection determines the extent to which RUGs on claims 

submitted by skilled nursing facilities are different from the ones that 

would be generated based on evidence in the medical record. The 

results of this review are determined from an independent review of the 

resident assessment known as the Minimum Data Set (MDS) and looks 

at whether the responses on the MDS are consistent with other 

documentation in the medical record. 

Resource Utilization Groups 

Medicare pays skilled nursing facilities a daily rate to cover services 

provided to Medicare residents during each day of a covered skilled 

nursing facility stay. Medicare pays skilled nursing facilities based on a 

prospective payment system that categorizes each resident into a 

different group depending upon his or her care and resource needs. 

These groups are called RUGs, and each represents a different Medicare 

payment rate. CMS requires that each covered resident be correctly 

assigned to one of the RUGs designated as representing the required 

level of care.1 

Skilled nursing facilities determine each resident’s RUG based on the 

MDS. The Social Security Act, as amended by the Omnibus Budget 

1 42 CFR § 424.20(a)(ii). 

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INTROD UCT ION

Reconciliation Act of 1987, requires Medicare skilled nursing facilities 

to complete the MDS for each resident.2 CMS further requires that the 

MDS be completed by the 5th, 14th, and 30th day of the resident’s stay, 

and every 30 days thereafter, as appropriate for each resident covered 

by Medicare Part A.3 CMS also requires that the MDS be conducted or 

coordinated by a registered nurse in the skilled nursing facility. See 

Appendix A for a copy of the MDS. 

There are 553 items on the MDS. Data from 108 of the items are used 

to determine the RUG and, therefore, the payment rate for each 

resident covered in a Medicare Part A stay. There are seven major RUG 

categories: Rehabilitation, Extensive Services, Special Care, Clinically 

Complex, Impaired Cognition, Behavior Problems, and Reduced 

Physical Function. These categories are further divided into 44 

subcategories, each of which has a different Medicare payment rate. 

See Appendix B for a list of the RUGs. 

CMS considers the MDS to be part of the medical record and does not 

require duplicative documentation.4 CMS expects that information 

contained in the rest of the medical record supports, rather than 

conflicts, with the MDS. Specifically, CMS’s Resident Assessment 

Instrument Manual states that CMS expects that documentation 

maintained by a skilled nursing facility in a resident’s medical record 

will “chronicle, support, and be consistent with the findings of each 

MDS assessment.”5 The manual further states that the MDS can be 

“verified by a review of the entire record to verify that the medical 

record supports and is consistent with the responses on the MDS.”6 

CMS oversight 

CMS conducts or has conducted five main oversight activities to monitor 

the accuracy of the MDS: 

o CMS contracts with fiscal intermediaries to process Medicare 

Part A skilled nursing facility claims. Fiscal intermediaries 

2 42 USC § 1395i-3(b)(3)(A). 

3 63 Federal Register 26265, May 12 ,1998. 

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

Manual, FY 2002,” Chapter 1.14, Clarifications Regarding Documentation Requirements, 

p. 1-23. 

5 Ibid. 

6 Ibid. 

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INTROD UCT ION 

identify outlier payments for extensive onsite and offsite medical 

record reviews as part of their review of these claims. 

o CMS uses its Comprehensive Error Rate Testing (CERT) 

Program to produce national error rates and error rates by 

contractor, provider type, and benefit category-specific paid 

claims. The project’s independent medical reviewers periodically 

conduct medical reviews on random samples of Medicare claims. 

o CMS contracts with State agencies to conduct standard surveys 

of nursing homes as part of the survey and certification process. 

The State agencies look at MDS accuracy as part of the survey. 

o CMS regional offices monitor States’ nursing home survey and 

certification processes by conducting comparative and 

observational surveys, both of which assess MDS accuracy. 

o From 2001 to 2005, CMS contracted with Computer Science 

Corporation for the Data Assessment and Verification project. 

One of the primary goals of this project was to improve the 

accuracy of MDS data through the establishment of State, 

territory, and national MDS accuracy thresholds. The project 

conducted both onsite and offsite medical record reviews to 

determine these thresholds.

7 It has not released any findings. 

7 To do this analysis, the project selected a sample of skilled nursing facility stays which 

contained multiple RUGs. The project compared the RUGs based on a medical record 

review to the RUGs generated from the State MDS database (which are the data 

submitted to the National Repository), the RUGs billed on the claim, and the RUGs 

submitted by the skilled nursing facilities. 

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INTROD UCT ION

METHODOLOGY 

Scope 

This inspection determines the extent to which RUGs submitted on 

skilled nursing facility claims are different from the ones that would be 

generated based on evidence in the medical record. The results of this 

review are determined from an independent review of the MDS and 

documentation in the rest of the medical record for a random sample of 

272 claims submitted by skilled nursing facilities and from interviews 

with staff responsible for completing the MDS at the skilled nursing 

facilities. 

This inspection does not determine the extent to which claims 

submitted by skilled nursing facilities are medically necessary or 

adequately supported by medical documentation. It also does not 

compute total improper payments for nursing facilities. Rather, it 

focuses on whether the MDS is consistent with the rest of the medical 

record. 

Sample 

We selected a simple random sample of 300 skilled nursing facility 

claim line items from the National Claims History File. The population 

from which we selected our sample included all claim line items that 

contained a RUG calculated from a 5-day, 14-day, or 30-day MDS 

assessment that had been submitted between October 1, 2001, and 

September 30, 2002. We excluded 60-day and 90-day assessments, 

readmission/return assessments, and other Medicare- or State-required 

assessments from the population to simplify the medical record review.

 8 

For ease of presentation, we refer to claim line items as claims 

throughout this report. Please see Appendix C for the number of claims 

in each RUG for our sample. 

For each of the 300 claims, we requested the resident’s medical record 

from the skilled nursing facility for the date of admission through the 

first 35 days of residence. We received medical records for 272 of the 

300 claims.9 For the remaining 28 claims, we contacted each of the 

facilities at least three times to obtain the medical records, but we 

8 The 5-day, 14-day, and 30-day assessments represent about 87 percent of all Medicare 

prospective payment system MDS assessments. 

9 These claims were submitted by 267 skilled nursing facilities. 

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INTROD UCT ION 

were unsuccessful. For these claims, we were unable to make key 

comparisons between respondents and nonrespondents because we did 

not have the medical records. 

Medical Record Reviews 

We contracted with an independent consulting firm to conduct a medical 

record review. The medical record reviewers, two registered nurses,10 

followed guidelines defined in the “Revised Long Term Care Resident 

Assessment Instrument User’s Manual for the Minimum Data Set 

Version 2.0.” They limited their review to the time period that coincided 

with the assessment, i.e., the assessment reference date for the 5-day, 

14-day, or 30-day assessment. The reviewers also considered 

information from other time periods if it enhanced their understanding 

of the case. 

The reviewers focused their review on the 108 items on the MDS that 

determine payment rates for Medicare Part A skilled nursing facility 

stays. The reviewers determined whether the responses submitted by 

skilled nursing facilities for these 108 MDS items were consistent with 

evidence in the rest of the medical record. For example, if item J1h, 

fever, was not indicated on the MDS, but the medical record indicated 

that the resident had a fever in the last 7 days, reviewers considered 

item J1h to be inconsistent with evidence in the rest of the medical 

record.11 

The reviewers made a determination based on the documentation 

available. They did not draw any conclusion about an MDS item if 

there was no documentation in the rest of the medical record or if, for 

some other reason, they could not determine the appropriate response to 

that item. This does not mean that the MDS item was accurate, only 

that it was not possible to compare it to any related documentation in 

the medical record. 

The medical record reviewers generated a new RUG for each RUG in 

our sample based on their review of the MDS and documentation in the 

rest of the medical record. The reviewers used CMS’s Statistical 

Analytical Software program script to generate a RUG. If a particular 

10 One reviewer has a Ph.D. and the other is Masters-prepared. 

11 As explained earlier, this methodology is consistent with CMS’s Resident Assessment 

Instrument Manual, which states that the MDS can be verified by a review of the medical 

record that verifies that the record supports and is consistent with the responses on the 

MDS. 

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INTROD UCT ION

MDS item was inconsistent with the rest of the medical record, the 

reviewer recoded that item based on the evidence in the rest of the 

medical record. Reviewers used the recoded item to recalculate the 

RUG. In 155 of the 272 claims, the reviewers did not find any 

documentation in the rest of the medical record or the medical record 

did not contain enough information to make a judgment for at least one 

item on the MDS. For these items, the reviewers did not make an 

independent determination. This method resulted in a conservative 

estimate of RUG differences. 

Finally, we determined the potential effects of the RUG differences on 

total Medicare payments. We calculated the net difference between the 

payment amounts for the RUGs on the claims submitted by nursing 

facilities and the payment amounts for the RUGs generated from 

evidence in the medical record. For each RUG, we multiplied the urban 

payment rate12 by the number of days on the claim and calculated the 

difference. We then calculated the total net difference and projected it 

to all claims with a RUG based on a 5-day, 14-day, and 30-day MDS 

assessment in fiscal year 2002. 

Interviews 

MDS coordinators are responsible for overseeing and processing MDS 

assessments for their nursing homes. We conducted a mail survey of 

the 300 MDS coordinators in the skilled nursing facilities with a 

resident in our sample of claims and received a response from 245. We 

asked them about their experiences with the MDS and about any 

problems they may have with the MDS. 

Limitations 

The size of our sample was not large enough to determine whether there 

were certain RUGs that were more likely than others to differ from 

those generated based on evidence in the medical record. 

Standards 

Our review was conducted in accordance with the “Quality Standards 

for Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

12 There is an urban and a rural payment rate for each RUG. The urban payment rate is 

lower than the rural rate for the rehabilitation RUGs, which comprise 80 percent of the 

RUGs in our sample. We used the urban rate to provide a more conservative estimate. 

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Δ FINDINGS

Twenty-six percent of Resource Utilization 

Groups on claims were different from the ones 

generated based on evidence in the medical 

record 

Based on a comparison of the 

MDS and the rest of the medical 

record, we found that 26 percent 

of RUGs on claims submitted by 

skilled nursing facilities (71 of 

272 claims in our sample) differed from the ones generated based on 

evidence in the rest of the medical record. The medical record 

reviewers identified differences by reviewing the responses to the 108 

MDS items used to generate the RUG and documentation in the rest 

of the medical record. 

The differences between the RUGs on the claims and the ones generated 

based on evidence in the medical record resulted in both potential 

underpayments and overpayments. As shown in Chart 1, 22 percent of 

claims, or 59 of the 272 claims in our sample, had a RUG with a higher 

associated payment rate than the one generated based on evidence in 

the medical record. These differences represented potential 

overpayments. The remaining 4 percent of claims, or 12 of the 272 

claims in our sample, had a RUG with a lower associated payment rate 

than the one generated based on evidence in the medical record, 

representing potential underpayments. Appendix D includes a list of 

the differences between the RUGs on the skilled nursing facility claims 

and the ones generated based on evidence in the medical record for our 

sample. Appendix E includes the confidence intervals for the key 

estimates. 

CHART 1 

A Comparison of Claim RUGs to Medical Record RUGs 

Claim RUG same as medical record RUG 22% 

4% 

Claim RUG lower than medical record RUG 

74% 

Claim RUG higher than medical record RUG 

Source: OIG medical record review, 2003. 

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F I NDING S 

These differences represented a net $542 million in potential Medicare 

overpayments for fiscal year 2002 

To determine the potential effects of these differences on total Medicare 

payments, we calculated the net difference between the payment 

amounts for the RUGs on the claims submitted by nursing facilities and 

the payments for the RUGs generated from evidence in the medical 

record. We found the net difference to be about $36,000 for our sample. 

We then projected this estimate to all claims with a RUG based on a 

5-day, 14-day, and 30-day MDS assessment in fiscal year 2002. This 

estimate amounted to a net $542 million in potential Medicare 

overpayments for fiscal year 2002.13 

Minimum Data Set items that require look-back 

periods, multiple assessors, or calculations 

contributed to differences in Resource 

Utilization Groups 

RUGs are generated from 

108 items on the MDS. In the 71 

claims in our sample that had a 

RUG different from the one 

generated based on evidence in 

the medical record, 11 MDS items were most frequently inconsistent 

with documentation in the rest of the medical record. These 11 MDS 

items accounted for 54 percent of the 291 total instances in which a 

response on the MDS was inconsistent with the rest of the medical 

record for the 71 claims. 

These 11 MDS items have one or more of the following characteristics: 

a look-back period (i.e., observation over time), multiple assessors (i.e., 

two or more staff assess a resident to determine these items), or 

calculations. These measures are described below and are shown in 

Table 1 on page 10. 

Look-back 

All 11 items require that the nurse completing the MDS evaluate the 

resident by looking back over a period of time. For example, item 

P1bba is the total number of days the resident has received 

occupational therapy out of the last 7 days. 

The look-back periods for these 11 MDS items range from 7 to 30 days 

and can be difficult to code. For example, one MDS coordinator noted 

that the varying number of days in the look-back is a particularly 

confusing component of the MDS process. Also, several of these 

13 In fiscal year 2002, Medicare payments to skilled nursing facilities totaled $14.2 billion. 

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F I NDING S 

look-back periods require information about the period prior to 

admission, such as when the resident was in the hospital, which can be 

difficult to obtain. 

Determination by multiple assessors 

Seven of the eleven items require a determination of the resident’s 

performance by multiple assessors (i.e., two or more staff assess a 

resident to determine these items). More than 25 percent of MDS 

coordinators we interviewed suggested that one of the following 

factors may contribute to differences between the MDS and the rest of 

the medical record for these types of items: 

o Different staff may have added varying observations of a 

resident’s abilities to the medical record. 

o A resident’s condition can change daily or throughout the day, 

making it difficult to code these items. 

o Guidelines for these measures are not always clear, causing some 

confusion about the appropriate coding. 

Calculations 

Four of the eleven items require the nurse completing the MDS to 

calculate the total number of treatments, therapies, or physicians’ 

visits received by a resident during a specified time period. For 

example, item P1bcb requires the assessor to calculate the total 

number of therapy minutes the resident received during the prior 

7 days. 

We found that the most common issue for these items was that the 

number of minutes or days of therapy recorded on the MDS did not 

match the number recorded in the rest of the medical record. These 

inconsistencies may be due in part to miscalculations. For example, 

one MDS coordinator pointed out that it is particularly difficult to 

calculate the number of doctors’ visits when there are multiple visits 

on 1 day. 

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F I NDING S 

Table 1: The 11 MDS Items Most Frequently Inconsistent With the Rest of the Medical Record 

 in Claims With RUG Differences 

MDS Item Description Characteristics of Item 

Number of Claims 

With Conflicts 

(n = 71) 

P1bbb - Occupational Therapy, Minutes Calculation, look-back 25 

P1bcb - Physical Therapy, Minutes Calculation, look-back 24 

P1bba - Occupational Therapy, Days Calculation, look-back 19 

P1bca - Physical Therapy, Days Calculation, look-back 15 

G1aA - Bed Mobility Self-Performance, How Resident Moves 

From Lying Position, Turns Side to Side, and Positions Body 

Multiple assessors, 

look-back 13 

G1aB - Bed Mobility Support 

Multiple assessors, 

look-back 12 

G1bB - Resident’s Transfer Support 

Multiple assessors, 

look-back 11 

G1iA - Resident’s Self-Performance With Toileting 

Multiple assessors, 

look-back 11 

G1bA - Resident’s Self-Performance for Transfer 

Multiple assessors, 

look-back 10 

G1ib - Resident’s Support for Toilet 

Multiple assessors, 

look-back 9 

G1Ha - Resident’s Self-Performance With Eating 

Multiple assessors, 

look-back 9 

Total occurrences 158 

Source: OIG medical record review, 2003. 

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ΔR E C O MMENDA T I O N

 RECOMME NDA TION 

Based on a comparison of the MDS and the rest of the medical record, 

we found that approximately one-quarter of RUGs on claims submitted 

by skilled nursing facilities differed from the ones generated based on 

evidence in the medical record. These differences represented a net 

$542 million in potential Medicare overpayments for fiscal year 2002. 

We recommend that CMS take steps to ensure that skilled nursing 

facilities complete the MDS accurately and assign each resident to the 

correct RUG. These steps could include (1) continuing the type of 

analysis conducted by the Data Assessment and Verification (DAVE) 

project and (2) more carefully examining the 11 MDS items that we 

found were most often inconsistent with the rest of the medical record. 

In addition, we have forwarded to CMS for appropriate action 

information on the 71 claims in our sample that had a RUG with a 

payment rate different from the one generated based on evidence in the 

medical record. 

AGENCY COMMENTS 

CMS concurred with our recommendation. CMS sees this report as 

showing a significant improvement in the assignment of RUG categories 

at the facility level compared to our 2001 report. CMS commented that 

it would continue current efforts to improve the accuracy of the MDS 

and has taken, or has agreed to take, the following actions: 

o CMS recently awarded a contract to expand upon the DAVE 

project, called DAVE2. The purpose of this new project is to 

assess the accuracy and reliability of national CMS data through 

focused onsite reviews of the MDS assessment. 

o CMS will take the findings of this report into consideration in 

developing a Web-based training program for the Resident 

Assessment Instrument Manual. 

o CMS will maintain ongoing communications with stakeholders, 

such as State and regional staff, consultants, and trade 

associations, regarding the MDS. 

o CMS will have fiscal intermediaries and Program Safeguard 

Contractors continue to assess MDS information through the 

routine medical review process. 

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R E C O MMENDA T I ON 

o CMS will incorporate the findings of this report into educational 

efforts to improve the accuracy of the MDS. 

The full text of CMS’s comments is included in Appendix F. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

We agree with the actions CMS plans to take to improve the accuracy of 

the MDS. However, it is important to note that, because of 

methodological differences, the results of this report cannot be 

compared to the results of the previous OIG report. 

The methodologies of the two reports differed in two main ways. First, 

for the previous report, reviewers completed an MDS based on the 

resident’s medical record without referring to the original MDS and 

then compared the results of the two assessments. In its comments to 

the previous report, CMS noted that the MDS is a part of the medical 

record. Therefore, for the current report, the reviewers included the 

MDS in their review of the medical record. They compared the original 

MDS to the rest of the medical record to determine whether they were 

consistent. Second, for the previous report, we only reviewed the 14-day 

MDS, while for the current report we reviewed the 5-day, 14-day, and 

30-day MDS assessments. Because of these differences, the current 

report cannot necessarily be used as evidence to show that MDS 

accuracy has improved over time. 

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Δ APPENDIX A 

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APP E N D I X A 

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APP E N D I X A 

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APP E N D I X A 

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APP E N D I X A 

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APP E N D I X A 

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APP E N D I X A 

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APP E N D I X A 

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Δ APPENDIX B 

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Δ APPENDIX C 

Sampled RUGs 

RUG Group 

Number in 

Sample 

Percentage of 

Sample 

Number in 

Reviewed 

Sample 

Percentage of 

Reviewed 

Sample 

RUC - Rehabilitation Ultra High C 5 1.8% 5 1.8% 

RUB - Rehabilitation Ultra High B 10 3.3% 8 2.9% 

RUA - Rehabilitation Ultra High A 4 1.4% 4 1.4% 

RVC - Rehabilitation Very High C 9 3.0% 8 2.9% 

RVB - Rehabilitation Very High B 32 11.0% 30 11.0% 

RVA - Rehabilitation Very High A 14 4.6% 13 4.7% 

RHC - Rehabilitation High C 53 17.6% 46 16.9% 

RHB - Rehabilitation High B 48 16.0% 46 16.9% 

RHA - Rehabilitation High A 19 6.3% 17 6.2% 

RMC - Rehabilitation Medium C 14 4.6% 13 4.7% 

RMB - Rehabilitation Medium B 22 7.3% 20 7.3% 

RMA - Rehabilitation Medium A 11 3.6% 10 3.6% 

RLA - Rehabilitation Low A 1 0.3% 1 0.3%

 Total Rehabilitation 242 80.6% 221 81.2% 

SE3 - Extensive Services 3 13 0.4% 9 3.3% 

SE2 - Extensive Services 2 12 4.0% 11 4.0% 

SE1 - Extensive Services 1 1 0.3% 1 0.3% 

 Total Extensive Services 26 8.6% 21 7.7% 

SSC - Special Care C 3 1.0% 3 1.1% 

SSB - Special Care B 6 2.0% 6 2.2% 

SSA - Special Care A 10 3.3% 10 3.6% 

 Total Special Care 19 6.3% 19 6.9% 

CC2 - Clinically Complex C2 2 0.6% 2 0.7% 

CC1 - Clinically Complex C1 1 0.3% 1 0.3% 

CB2 - Clinically Complex B2 1 0.3% 1 0.3% 

CB1 - Clinically Complex B1 1 0.3% 2 0.7% 

CA1 - Clinically Complex A1 4 1.3% 4 1.4% 

 Total Clinically Complex 10 3.3% 10 3.3% 

IB1 Impaired Cognition 1 1 0.3% 0 0.0% 

 Total Impaired Cognition 1 0.3% 0 0.0%

 Total Behavior Problems 0 0.0% 0 0.0% 

PD1 Reduced Physical Functioning 1 2 0.6% 1 0.3% 

 Total Physical Functioning 

 Reduced 2 0.6% 1 0.3%

 Totals All RUG Categories 300 272 100% 

Source: OIG medical record review, 2003. 

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Δ APPENDIX D 

Differences in RUGs Between Claim and Reviewer 

Claim 

RUG 

Daily Payment 

Rate for Claim 

RUG 

Reviewer 

RUG 

Daily Payment 

Rate for Reviewer 

RUG Difference 

RUC $441.18 RUB $391.65 $49.53 

RUC $441.18 RUB $391.65 $49.53 

RUC $441.18 RVC $341.68 $99.50 

RUC $441.18 RHC $317.76 $123.42 

RUB $392.78 RVB $330.22 $62.56 

RUB $392.78 RVB $330.22 $62.56 

RUB $392.78 RVB $330.22 $62.56 

RUB $392.78 RHB $291.02 $101.76 

RVC $342.67 RHC $318.68 $23.99 

RVC $342.67 RHC $318.68 $23.99 

RVC $342.67 RVB $330.22 $12.45 

RVB $330.22 RVA $298.41 $31.81 

RVB $330.22 RHC $318.68 $11.54 

RVB $330.22 RHB $291.02 $39.20 

RVB $330.22 RHB $291.02 $39.20 

RVB $330.22 RHB $291.02 $39.20 

RVB $330.22 RHB $291.02 $39.20 

RVB $330.22 RMB $279.99 $50.23 

RVB $330.22 RMB $279.99 $50.23 

RVB $330.22 CB1 $188.42 $141.80 

RVA $298.41 RVB $330.22 ($31.81) 

RVA $298.41 RHB $291.02 $7.39 

RVA $298.41 RHA $264.74 $33.67 

RVA $298.41 RHA $264.74 $33.67 

RHC $318.68 RHB $291.02 $27.66 

RHC $318.68 RHB $291.02 $27.66 

RHC $318.68 RHB $291.02 $27.66 

RHC $318.68 RHB $291.02 $27.66 

RHC $318.68 RMC $315.94 $2.74 

RHC $318.68 RMB $279.99 $38.69 

RHC $318.68 RMB $279.99 $38.69 

RHC $318.68 SSA $211.93 $106.75 

RHB $291.02 RVB $330.22 ($39.20) 

RHB $291.02 RHA $264.74 $26.28 

RHB $291.02 RHA $264.74 $26.28 

RHB $291.02 RMB $279.99 $11.03 

 Source: OIG medical record review, 2003. 

 Daily payment rates are based on FY 2002 urban rates. 

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APP E N D I X D 

Differences in RUGs Between Claim and Reviewer (continued) 

Claim 

RUG 

Daily Payment 

Rate for Claim 

RUG 

Reviewer 

RUG 

Daily Payment 

Rate for Reviewer 

RUG Difference 

RHB $291.02 RMB $279.99 $11.03 

RHB $291.02 RMB $279.99 $11.03 

RHB $291.02 RMB $279.99 $11.03 

RHB $291.02 RMA $262.01 $29.01 

RHB $291.02 SE2 $264.48 $26.54 

RHB $291.02 SE2 $264.48 $26.54 

RHB $291.02 SE2 $264.48 $26.54 

RHA $264.74 RUA $369.27 ($104.53) 

RHA $264.74 RMA $262.01 $2.73 

RHA $264.74 RMA $262.01 $2.73 

RHA $264.74 RMA $262.01 $2.73 

RHA $264.74 SSA $211.93 $52.81 

RMC $315.94 RMB $279.99 $35.95 

RMC $315.94 SSC $228.53 $87.41 

RMC $315.94 CB1 $188.42 $127.52 

RMB $279.99 RHC $318.68 ($38.69) 

RMB $279.99 SE2 $264.48 $15.51 

RMB $279.99 PB1 $141.14 $138.85 

RMA $262.01 RHA $264.74 ($2.73) 

SE3 $307.35 RHB $291.02 $16.33 

SE3 $307.35 RMB $279.99 $27.36 

SE3 $307.35 CC1 $209.17 $98.18 

SE3 $307.35 PA1 $135.87 $171.48 

SE2 $264.48 RUB $392.78 ($128.30) 

SE2 $264.48 SSA $211.93 $52.55 

SE2 $264.48 CA2 $187.55 $76.93 

SE2 $264.48 IA1 $145.55 $118.93 

SE1 $234.06 SE3 $307.35 ($73.29) 

SSC $228.53 RMC $315.94 ($87.41) 

SSB $217.46 CB1 $188.42 $29.04 

SSA $211.93 SE1 $234.06 ($22.13) 

CC1 $209.17 SSC $228.53 ($19.36) 

CB1 $188.42 CC1 $209.17 ($20.75) 

CA1 $175.98 PA1 $135.87 $40.11 

PD1 $169.06 SSA $211.93 ($42.87) 

Source: OIG medical record review, 2003. 

 Daily payment rates are based on FY 2002 urban rates.

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Δ APPENDIX E 

Confidence Intervals for Key Findings 

Key Findings Point Estimate Confidence Interval 

26 percent of RUGs on claims submitted by skilled nursing 

facilities were different from the ones generated based on 

evidence in the medical record (n=272) 

26.1% 20.9% - 31.3% 

These differences in RUGs represent a net $542 million in 

potential Medicare overpayments for fiscal year 2002 

(n=272) 

$542,173,340 $258,705,071 - $825,641,610 

Source: OIG medical record review, 2003. 

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Δ APPENDIX F 

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APP E N D I X F 

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APP E N D I X F 

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This report was prepared under the direction of Jodi Nudelman 

Regional Inspector General for Evaluation and Inspections in the New 

York regional offce. Other principal Offce of Evaluation and 

Inspections staff who contributed include: 

Miriam Anderson Team Leader 

Judy Kells Program Analyst


Patricia Banta Program Analyst 

Tricia Davis Director, Medicare and Medicaid Branch 

Sandy Khoury, 
 Program Specialist 

Technical Assistance 

Barbara Tedesco Mathematical Statistician 

Scott Horning, Program Analyst


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