Deparment of Health and Human Services


OFFCE OF


INSPECTOR GENERAL


INFLUENCES ON MEDICARE'S SKILLED


NURSING FACILITY BENEFIT


t.IlVJCES' 

Richard P. Kusserow 

INSPECTOR GERNERAL 

1-

ollt"..JO 

JUNE 1991 
OFFICE OF INSPECTOR GENERAL


The mission of the Ofce of Insptor Genera (OIG), as madate by Public Law 95-452, as 

amended, is to protect the integrty of the Deparent of Heath and Huma Serces' (HS) 

progrs as well as the health and welfar of beneficiares seed by those prgn. Ths 

statutory mission is cared out thugh a nationwide networ of audits, investigations, and 

insptions conducte by th OIG operatig components: the Ofce of Audit Serces, the 

Ofce of Investigations, and the Offce of Evaluation and Insptions. The OIG also inors the Secta of IfS of progr and maagement prblems and remmends coures to cmt 

them. 

OFFICE OF AUDIT SERVICES 

The OIG' s Ofce of Audit Servces (OAS) provides all auditig servces for IfS, either by 

conducting audits with its own audit resours or by oversing audit wor done by others. 

Audits exame the performance of IfS progr and/or its grtes and contrto 

carg out their resptive responsibilties and ar intende to provide independent 

assessments of IfS progr and operations in orr to reuce waste, abuse, and 

mismanagement and to promote economy and effciency thughout the Deparnt 

OFFICE OF INVESTIGATIONS 

The OIG' s Office of Investigations (OJ) conducts cral, civil, and adstrtive 

investigations of allegations of wrngdoing in IfS programs or to IfS beneficiares and of 

unjust enrchment by providers. The investigative effons of 01 lead to crminal convictions, 

admnistrative sanctions, or civil money penalties. The 01 also oversees State Medcaid frud 

contrl units which investigate and proseute frud and patient abuse in the Medcaid progr 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIG' s Ofce of Evaluation and Inspetions (OEI) conducts shor-tenn management and 

progr evaluations (called inspetions) that focus on issues of concern to the Deparent, the 

Congress, and the public. The fmdings and reommndations contaned in these inspection 

repons generate rapid, accurte, and up-to-te information on the effciency, vulerabilty, and 

effectiveness of deparenta progrs. 

This repon was prepar in Chicago under the dition of Willam C. Moran, Regional 

Inspector Genera, Ofce of Evaluation and Inspctions and Nataie Coen, Deputy Regional 

Inspector Genera, Ofce of Evaluation and Insptions, Region V. Parcipatig in ths project 

were the following people: 

Project Leader Headuarters 

Margaret Shell 

Thoma F. Komaniecki Lead Analyst 

John M. Traczyk, Thomas Noplock, 

Deparment of Health and Human Services 

OFFICE 

INSPECTOR GENERAL


INFLUENCES ON MEDICARE'S SKILLED


NURSING FACILITY BENEFIT


~ o;f.RVJCE$' 

Richard P. Kusserow 

INSPECTOR GERNERAL 

'0 

".1: a 

OEI-05-89-01590 
EXECUTIVE SUMMARY


PURPOSE 

To detenne whether recent changes to the Medicar skilled nuring facilty (SNF) benefit have 

left the program vulnerable to unpredictable growth in expenditurs. 

BACKGROUND 

Medicare policies and procedures used to determne SNF eligibility and program payments have 

undergone few changes since the early seventies. However, as the eighties drw to a close 

several changes occuned in rapid succession. In April 1988, the Health Car Financing 

Admnistration (HCFA) changed the SNF coverage guidelines used by SNFs and fiscal 

intermediares (FIs) to decide which patients qualifed for benefits. Less than 9 months later, in 

Januar 1989, implementation of the Medicare Catastrophic Coverage Act of 1988 (MCCA) 

changed SNF eligibility requirments and reduced out-of-pocket expenses for SNF patients. 

One year later, MCCA was repealed and previous SNF eligibility reuirements reinstated. 

METHODOLOGY 

Durg the course of this inspection, we surveyed 60 SNFs, 10 FIs and 10 Medicaid State 

agencies in 10 States. We also analyzed a 1 percent sample of Medicare patients who received 

SNF benefits between October 1, 1987 and June 30, 1990. The sample was analyzed to 

determne whether the guideline changes and MCCA had an effect on SNF admssions, average 

length of stay and Medicar payments. Additional data was obtained from the Monthly National 

Intermediar Benefit Payment Repon for the period Januar 1988 through December 1990. 

FINDINGS 

Medicare payments to SNFs more than trpled between 1988 and 1989. 

The 1988 SNF coverage guideline changes accounted for 27 percent of the increase in 

SNF payments. Smal increases in number of SNF admssions and slightly longer length 

of stays accounted for most of the increase. 

The MCCA had a significant impact on beneficiares, providers and Medicare program 

expenditures and resulted in an increase in Medicare expenditures which exceeded 300 

percent. 

Barng any unforseen changes, it appears unlikely that admissions and payments wil 

return to anywhere near the levels the Medicar program experienced before MCCA. 
.......................................................... .

.. ,.......... .............. .................................... ........ ........ .... ........ 

TABLE OF CONTENTS


EXECUTIVE SUMMARY 

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


Purose...... ...........................................................................................................


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


Methodology.. ................ ............ .............. 


FIND IN GS ......, ....................................................................................................... .... 


Medicare payments to SNFs more than trpled between 1988 and 1989. ...........


The 1988 SNF coverage guideline changes accounted for 27 percent of 

the increase in SNF payments. Small increases in the number of SNF 

admssions and slightly longer length of stays accounted for most of 

the increase......... ............ ...... ...... ....... 3 

The MCCA had a signifcant impact on beneficiares,providers and 

Medicare progr expenditurs and resulted in an increase in Medicare 

expenditues which exceeded 300 percent .......................................................... 

Barng any unforseen changes, it appears unlikely that adssions 

and payments will retur to anywhere near the levels the Medicar 

progr experienced before MCCA. ................................................................... 

APPENDIX ........................................ ........ ............................................ A­

INTRODUCTION


PURPOSE 

To determe whether recent changes to the Medicar skilled nuring facilty (SNF) benefit have 

left the program vulnerable to unpredictable growth in expenditues. 

BACKGROUND 

The Medicare progr assists patients in paying for extended care services provided by SNFs 

parcipatig in Medicare. These extended car services, commonly called SNF benefits, are 

covered under Par A of the Medicar progr and include varous skilled nuring and 

rehabiltative services. The covered services provided by SNFs ar similar to the services 

received by hospital inpatients, but at a lower intensity of care. 

Medicare assists patients in paying for their SNF car if the beneficiar meets several eligibility 

crteria. The criteria requi a beneficiar to have been hospitazed for at least 3 days before 

admssion to a SNF. The beneficiar must be adtted to a SNF within 60 days of their hospital 

discharge. The admssion must be medically necessar and a SNF would be the best source to 

provide the medical car needed by the patient In addtion to these crteria, the beneficiar must 

be admtted to a certfied SNF which meets Medicare s defmition of skilled. The services a 

patient receives while in a SNF must be provided daly following a physician s order. 

Medicare allows up to 100 covered days of SNF car per beneficiar spell of ilness. A spell of 

illness would begi on the fist day the beneficiar received hospital or SNF services and would 

end when the patient has not been a hospital or SNF patient for 60 consecutive days. 

If a beneficiar is eligible for SNF car, Medicare pays for all covered SNF expenses for the first 

20 days. After the 20th day, patients ar required to pay for par of their SNF care. In 1991 

Medicare beneficiares ' copayments for days 21- 100 wil be $78.50. After 100 days 

beneficiares are financially responsible for al of the expenses they incur for SNF care. 

Beneficiares whose personal resources do not allow them to pay for all of the care they need 

often tur to the Medicaid progrm for financial assistance. Total Medicare payments for SNF 

care are minor when compard to total Medicaid and out-of-pocket payments for SNF care. 

Many beneficiares entering SNFs are unable to meet all of Medicare s eligibility requirements 

for SNF coverage. The primar responsibilty for detennning whether a patient might be 

eligible for Medicare SNF benefits falls on SNF personnel. If a SNF believes a patient would 

qualify for Medicare benefits, it submits a claim for payment. 

Most of the decisions made by SNFs concerning SNF eligibility are not questioned by the fiscal 

intermediares (PIs) that adjudicate the claims for the government. About 20 percent of the 

coverage decisions made by SNFs are reviewed for accuracy. The FI reviews are intended to 
ensure that SNFs make sound medical necessity decisions concerning whether or not an 

individual patient qualifies for Medicare coverage. The reviews also serve as a deterrent to 

discrinatory submission of claims. 

The Fls monitor the error rate of each SNF' s clais. If a SNF' s error rate remains within 

acceptable toleraces, the SNF is granted what is caled a waiver. If a SNF exceeds the 

tolerances, it will lose its waiver and all of its claims could be subject to PI review. This 

intensified PI review could delay futur payments and might result in the SNF having to return 

money to the program. 

The policies and procedures used to determne Medicar SNF eligibility and program payments 

have undergone few changes since the early seventies. However, as the eighties drew to a close, 

several changes occured in rapid succession. In April 1988, the Health Car Financing 

Admnistration (HCFA) changed the SNF coverage guidelines used by SNFs and PIs to decide 

which patients qualified for benefits. Less than 9 months later, in Januar 1989, implementation 

of the Medicar Catastrophic Coverage Act of 1988 (MCCA) changed SNF eligibility 

requirements and reduced out-of-pocket expenses for SNF patients. One year later, MCCA was 

repealed and previous SNF eligibility requirements reinstated. 

METHODOLOGY 

Durg the course of this inspection, we sureyed 60 SNFs, 10 PIs and 10 Medicaid State 

agencies in 10 States. We selected the States at radom, based on a weighted sample of 

Medicare SNF beds in each State. Individual SNFs were selected based on bed size, type of 

ownership and other factors. Strctud discussion guides were used to gather qualitative data 

on respondents ' recollections regarding SNF actions following HCFA' s coverage guideline 

clarfication, and following enactment and repeal of MCCA. 

We also analyzed a 1 percent sample of Medicare patients who received SNF benefits between 

October 1 , 1987 and June 30, 1990. The records came from the Medicare Automated Data 

Retreval System which contains a complete Par A and Par B claims history for a patient. The 

sample was analyzed to determine whether the guideline changes and MCCA had an effect on 

SNF admssions, average length of stay (LOS) and Medicare payments. Additional data was 

obtained from the Monthly National Intermediar Benefit Payment Repons for the period 

Januar 1988 through December 1990. 
...................................... .................. ..... ...................................... .................. ... 

........ .............. ...... ... .... .... ................................................................... .................. .... ......... ......... ..... ...................................... ............

FINDINGS


Finding 1. Medicare payments to SNFs more than trpled between 1988 and 1989. 

Medicare payments to SNFs more than trpled between 1988 and 1989. In April 1988, HCFA 

revised the guidelines used by SNFs and FIs to determe whether or not a person would be 

eligible for Medicare SNF coverage. The revised gudelines provided a clearr understanding of 

the tyes of conditions the Medicar progr would cover under its SNF benefit and added 

nearly $20 millon to Medcar s average monthly outlay for skilled care. 

Monthly SNF Payments


January 1987 - December 1990


Millons 

$350 

$300 ..........


$250 . tiCCA'" ......... . 


$200 .... 

Guideline Change


$150 


$100 

$50 

JFMAMJ JASONDJFMAMJ JASONDJFMAMJ JASONDJFMAMJ JASOND 87 88 89 90 

HCFA 456 

Enactment of MCCA, less than a year later, had an even grater impact on Medicar 

expenditurs for skiled care. The unprecedented $2 bilion expansion in Medicare SNF 

payments under MCCA was due to an incrase in the number of certfied beds, increased 

admssions, changes in coinsurance, increased covered days and longer lengths of stay (LOS). 

Repeal of MCCA, less than a year after its enactment, failed to significantly reduce the amount 

of money the Medicar program spent on skilled car. The changes in the coverage guidelines in 

1988, coupled with more skilled beds brought to the Medicare progr by MCCA, have kept 

Medicare payments for SNF car high. 
Finding 2.	 The 1988 SNF coverage guidline changes accounted for 27 percent of the in 

crease in SNF payments. Small increases in the number of SNF admissions and 

slightly longer length of stays account for most of the increase. 

In Apri 1988, HCFA revised the guidelines used by SNFs and FIs to determe whether or not a 

person would be eligible for Medicare SNF coverage. The revised guidelines provided a clearer 

understandig of the types of conditions the Medicar program would cover under it' s SNF 

benefit. 

The HCFA revised SNF coverage guidelines for many reasons. By 1988, HCFA was faced with 

ever increasing numbers of coun cases chalenging Medicare SNF coverage decisions. There 

was also growing concern within HCFA over inappropriate coverage decisions made by FIs and 

varation among PI reviewers. These concerns, along with a theatened petition for rulemakng 

that would have left changes in SNF coverage in the hands of the couns, prompted HCFA to take 

action to change coverage guidelines. 

Revised guidelines made it eaier for SNFs to obtain Medicare coverage for some 

beneficiaries. 

Revised guidelines brought the Medicar program some patients whose clinical or functional 

needs were previously addrssed in a different setting or not at all. Diagnosis or prognosis were 

no longer the sole factors in decidig whether or not a patient required skilled care. Even in 

cases where full or panal recovery is not possible, the revised guidelines instrcted FIs to 

consider coverage of skilled services that prevent patient deterioration or maintai a patient 

curnt capabilties. By providing SNFs and PIs with specific examples of the types of 

conditions the Medicare progr would cover under the SNF benefit, SNF and PI coverage 

decisions became less subjective. 

For many patients, the SNF guideline revision did not make pursuing Medicare SNF benefits 

any more am'active than they had been previously. According to some SNFs, some patients 

chose to forego Medicar SNF benefits to avoid extr paperwork or to get other services not 

covered by Medicar, such as in-house laundr services. Other SNFs indicated that many of the 

patients they admtted were not interested in pursuing Medicar benefits when biling and 

reimbursement from Medicaid was much more predictable than under Medicare. 

Other forces also appear to have limted the number of patients who might have benefited from 

Medicare s more permssive coverage guidelines. Many SNFs operate at greater than 90 percent 

capacity and in some areas of the United States, the number of beds available for skiled care 

fals shon of demand. The types of patients likely to benefit from the revised guidelines were 

those who would probably require SNF services for a longer period of time. These long-term 

service-intensive and high-overhead patients may not have been attractive to some nursing 

homes. When Medicare ceased to pay for the entire cost of skilled care for these patients after 

20 days, SNFs would have to collect the cost of care from individual patients or settle for 

Medicaid payments which might not cover costs. 
The SNFs and FIs varied in their acceptance of the revised coverage guidelines. 

Medicare encouraged SNFs to bil the program for patients whose coverage might have been 

uncenan in the past. Following the changes to the coverage guidelines, 20 out of 60 SNFs 

interviewed stated that their admssions policies changed and that they actively pursued coverage 

for: (1) nasogastrc, jejunostomy and. gastrostomy patients, (2) insulin dependent diabetics who 

could not self admnister the injection, and (3) patients with multiple medical conditions which 

in the aggrgate, required a skilled level of car. These SNFs, and al of the FIs with whom 

spoke, attbuted the increases they saw in Medicare covered days dictly to the changes HCFA 

made in the SNF coverage guidelines. 

The changes in coverage guidelines did not effect all SNFs. Seven SNFs stated that they 

experienced little or no increases in their payments or admssions after HCFA moded SNF 

coverage guidelines. Severa more reponed that they were not able to meet the medical and 

social needs of patients found in the expanded pool. They felt that they did not have the staf nor 

the equipment to adequately care for the patients, especialy patients fed by tubes. The revisions 

to the SNF coverage guidelines did not provide suffcient financial incentive for SNFs to take on 

additional staf and other operating overhead to expand their existing capacities for skilled care. 

Other reasons also provide insight as to why some SNFs did not readily respond to the revised 

guidelines for SNF coverage. Several of the SNFs reportd that FIs were slow to infonn them of 

the guideline revisions. Analysis of data and SNF responses seems to show that the more readily 

an PI adopted the guideline changes and educated providers, the greater the increase in SNF 

admssions and payments. Those PIs that saw the change in guidelines as.not being a 

fundaental change, and made litte attempt to educate providers, saw little or no change in 

admssions or payments for SNF care. 

Some SNFs reponed a cenan amount of distrst of FI information regarding the guideline 

changes. This skepticism on the pan of some SNFs was also observed by some FIs, who 

reponed that they saw a reluctace by providers to bil for services covered under the revised 

guidelines. A few SNFs admtted that they proceeded slowly and cautiously in adopting the 

revised coverage guidelines. They feared loss of their waiver status. And, they did not wish to 

expand their overhead to accommodte the patients found in the expanded pool if the Medicare 

progr s commtment to revised guidelines would be shon lived. 

The small increase in SNF admissions, coupled with more covered days of care, 

added $20 millon to Medicare s average monthly outlay for SNF benefits. 

After the April 1988 guidelines revisions, Medicare s average monthly payment for SNF care 

rose 27 percent to $90 milion. Medicar s average monthly payment for SNF care was $71 

milion before the guideline changes. After the guideline changes went into effect Medicare saw 

a 16 percent increase in the number of SNF admissions and a 13 percent increase in the average 

length of a patient s stay. On average, more than 31 00 patients were admitted to SNFs each 

month after the guideline revision compard to 27,00 admissions per month before the change. 

The average LOS for the last 6 months of 1988 was 26 days, up 13 percent from the average 

LOS of 23 days before the guideline changes. 
The natur of the medical conditions covered by Medicar after April 1988 probably accounts 

for the increase in average LOS. One out of thee SNFs attbuted increases in their Medicare 

covered days to patients fed by tubes, insulin dependent diabetics and patients with multiple 

debilitating medical conditions who often require SNF services for longer periods of time. 

The revised coverage guidelines did not have a uniform impact on all PIs. The average monthly 

SNF expenditur was not the same for all FIs indicating that the revised guidelines had different 

effects in different aras of the countr. Most of the FIs had increases in their SNF expenditures 

rangig from less than 1 percent to over 120 percent. A number of PIs had decreases in their 

SNF expenditues ranging from 3 percent to over 35 percent (See Appendix A). 

Finding 3. The MCCA ha a signifcant impact on beneficiaries, providers and Medicare 

program expendires and resulted in an increase in Medicare expenditures 

which exceeded 300 percent. 

Less than a year after HCFA revised the SNF coverage guidelines, MCCA was implemented. 

Unlike the coverage guideline changes, MCCA had no impact on the medical conditions needed 

to qualify for SNF care. The MCCA liberalized earlier eligibilty requirments and reduced 

patient out-of-pocket expenses for SNF car. The MCCA: 

Removed the 
 day prior hospital stay required before a SNF admission; 

Increased the numer ofSNF das covered by Medicarefrom 100 to 150; 

Eliminated spell of ilness providing a renewed benefit period of 150 days each 

year for any qualifing medical condition; and 

Changed patient coinsurance, reducing patient financial liabilty and shifing 

most of the cost to the Medicare program. 

The cumulative effect of these changes increased Medicare payments for SNF care dramatically. 

The significant reduction in coinsurance during MCCA provided an incentive for 

patients to pursue Medicare SNF coverage. 

The significant reduction in coinsurance during MCCA provided an incentive for patients to 

pursue Medicare SNF coverage. Before MCCA, Medicar paid the entire cost of patient SNF 

care for the first 20 days. After the 20th day, patients paid approximately $67.50 per day in 

coinsurance. A patient receiving SNF benefits for 100 days in 1988 would have paid $5400 in 

coinsurance. Under MCCA, patient out-of-pocket expenses were reduced to $25.50 per day for 

the first 8 days of coverage. The reduced coinsurace for SNF benefits in 1989 lowered a 

beneficiar s total financial liability to a maximum of $204. 
Out of Pocket Costs 

for a 1 00 day SN F stay


$ 540 $ 20 $ 5920 

Before MCCA During MCCA After MCCA 

The MCCA not only reduced patient financial liabilty but also incrased the number of days 

Medicare would pay for SNF care. Before MCCA, Medicar covered up to 100 days per spell of 

illness. For most patients, permanently confmed to SNFs because of illness, the spell of ilness 

eligibilty requirement meant that in their lifetie, they would probably never receive more than 

100 Medicar covered SNF days. Durng MCCA, patients who qualfied for SNF benefits could 

expect Medicare to pay for up to 150 days of SNF benefits each year. 

Before MCCA, approximately 5 percent of Medicar beneficiares admtted to SNFs had stays of 

100 covered days. Under MCCA, 12 percent of the beneficiares adtted to SNFs had covered 

stays equal to or greater than 100 days. 

The MCCA provided a financial incentive for SNFs to expand. 

Unlike the guideline revision 8 months earlier, MCCA provided a clear financial incentive for 

SNFs to bil Medicare. The financial incentives of MCCA were so strong that some nursing 

facilities which did not pancipate in the Medicare progr reponed having had some of their 

beds certfied for parcipation in the Medicare progr. Other facilities, alady pancipating in 

the Medicare progr, reponed that they increased their skilled care beds. More than 1300 new 

SNFs opened their doors to Medicar beneficiares between June 1988 and Januar 1990. Over 

57,000 additional skilled care beds were certed durg the same period. 
New Medicare SNF Beds 

June 1987 - January 1990 

rea8e in SNF; Beds' 

6/87 - 6/88


+1.2% 

6/88 - 6/89


6/89 - 1/90 +2. 

HCFA, 

Bureau of Data Management and Strategy 

20 

Thousands 

Many of the patients admtted to SNFs durg MCCA may have been receiving care in the 

facility before MCCA was enacted. Nearly 75 percent of the SNFs we interviewed reponed that 

they looked at their in-house patient population to see if any patients would qualify under 

MCCA and that most of their incrase in Medcar adssions durng MCCA came from their 

in-house patient population. Admssions from home, doctor s offces and emergency rooms 

were also reponed, but the incidence of such SNF adssions was not significant. 

Repeal of the 3 day hospitalzation requirment made obtaing addtional Medicare SNF 

benefits for qualfied patients aleady residing in nuring homes as easy as moving them from 

noncertfied beds to Medicar certfied beds. Nearly a third of all the patients who received SNF 

benefits in the first quarer of 1989 did not have a prior 3 day hospitalization, indicating that they 

probably were moved from noncenied to cenied beds within a SNF. 

Some SNFs felt they had a legal obligation to purue Medicare SNF benefits for any potentially 

eligible patients in their facilties. Other SNFs saw it as a financially practical matter when 

Medicare paid more than other sources. A few reponed that their Medicaid State agency advised 

them to bil Medicare for Medicaid recipients that might qualify under the MCCA. 

Some SNFs saw litte ot no change under MCCA. Most of the SNFs that reported litte or no 

change were either hospital based or specialized in rehabiltation. Hospita based SNFs saw 

almost all their SNF admssions continue to come from the hospital. Other SNFs, especially 
those specialzing in rehabiltation, continued to trat the same type of patient they had before. 

The increased pool of patients and additional covered days allowed by the MCCA had minimal 

effect on these facilities. 

Before enactment of MCCA, the pool of Medicar beneficiares potentially eligible for SNF 

benefits was limited. Repeal of the 3 day hospitaization requirement increased the size of the 

pool from which SNFs could select potential admssions. Instead of limiting the pool to the 7. 

millon beneficiares discharged from hospitas MCCA expanded the pool to include the entire 

Medicare Par A population which in 1989 exceeed 30 millon individuals. Under MCCA 

every beneficiar in the Medicar program became potentially eligible for 150 days of SNF 

benefits each year, provided they had a qualifying medical condition. 

After MCCA's implementation, Medicare saw an imediate incrase in SNF admssions, 

covered days and LOS. In 1988, roughly 350,00 Medicar patients were admtted to SNFs. In 

1989, that number rose to 585,00, a 67 percent increase. Not only were more patients being 

admtted to SNFs in 1989, they were staying longer. Pror to the enactment of MCCA, the 

average LOS was about 26 days per admssion. In the fit 6 months following the enactment of 

MCCA, the average LOS had risen to 36 days per adssion. 

The increases in SNF admssions and longer stays accounted for nearly 87 percent of the $2 

billon increase in SNF spending Medicare experienced durng MCCA. The remaining 23 

percent of the increase in SNF spendig is accounted for by the changes in patient coinsurance 

that accompanied MCCA. 

Finding 4.	 Barrng any unforseen changes, it appears unlikely that admissions and payments will return to anywhere near the levels the Medicare program experienced 

before MCCA. 

The enactment of MCCA provided the catayst which changed the SNF care environment by 

briging more skiled care facilities and beds into the Medicar program. The demand for 

skilled care remains high and it appear that keeping as many beds as possible certfied for 

skilled care would be in a SNFs best financial interest. 

Many SNFs made a considerable investment in the Medicar program durng MCCA. Nursing 

homes which had previously avoided parcipation in the Medicar program were lured into 

certfying some beds for skilled car. Other facilities expanded their cenified beds. Patient 

turnover, in these beds, should keep Medicar payIIent levels for SNF car high. 

The repeal of MCCA has reduced the amount Medicare pays for SNF car to some degree. The 

reduction is primary due to reinstatement of a $74.00 per day coinsurance for skiled care 

exceeding 20 days. This coinsurce wil probably deter some patients from pursuing SNF 

benefits beyond 20 days. This reduction in progr outlays, brought about by increased 

coinsurance payments, is likely to be offset by increased use of the certfied beds brought into 

the program during MCCA. Stays are likely to be shoner. Patients wil leave cenified beds 

sooner only to be replaced by other patients. 
A fragile mi of interdependent varables influences the future diection of Medicare SNF 

payments. This fragile mix includes: 

increases or decreases in hospital based or specialized SNFs, 

Federal, State and local changes in laws and regulations, 

tightening or relaxing of SNF claim reviews by payers,


changes in coverage and other program policies,


increases or decreases in the numer of certified beds; and,


increases or decreases in the amount paid for SNF care by Medicare, Medicaid


or other payers. 

Growth in Medicare SNF payments should remain predctable as long as these and other external 

and internal forces in the SNF community remain constat. 
APPENDIX A


The following table shows the average monthly SNF payments made by 43 PIs. The table also 

shows the percentage of change between periods for these 43 FIs. Only PIs with 48 months of 

data were used in the analysis. The four period used to measur dierences in PIs are: 

pre-guideline (January 1987 - April 1988), the period before HCFA changed 

SNF coverage, 

post-guideline (May 1988 - December 1988), the period after the SNF coverage 

guideline changes, 

MCCA (January 1989 - May 1990), the period during which MCCA was in

effect and includes 150 days after the repeal of MCCA, and; 

post-MCCA (June 1990 December 1990), the period after the 150 days grace 

period mentioned above.


The percentage change was calculated by tang the average monthly SNF payment of a later 

period and subtractig from it the average monthly SNF payment of an earlier period. This 

difference was then divided by the earlier period's average monthly SNF payment. 

The box below shows the lowest and highest percentage change in each period. 
PRE- POST POST 

FISCAL INTERMEDIARY GUIDE GUIDE MCCA MCCA 

BLUE CROSS OF ALABAM $211, 179 $150,380 

28 8% 

046,998 

596. 

$855, 

18. 

BLUE CROSS OF ARIZONA $414 673 $590,500 

42.4% 

$2,355,279 

298. 

747,563 

16. 

BLUE CROSS OF ARKASAS $530,867 $630,375 

18. 

$654 414 $616,065 

BLUE CROSS OF 

CALIFORN 

$6,777,740 $7,240,019 $14 284, 

97. 

$15,592,446 

BLUE CROSS OF FLORIDA $869,497 $1,208,013 

38. 

743,227 

127. 1 % 

$3,956,291 

44. 

BLUE CROSS OF GEORGIA $148, $236,978 

59. 

$648,003 

173.4% 

$766,912 

18.4% 

HEALTH CAR SERVICES 

ilINOIS 

$2,394 245 $3,046,749 

27. 

$6,533,240 

114.4% 

$8680663 

32. 

ASSOCIAJD INSURCE 

INIANA 

326,312 . $1,767, 164 

33. 

$5, 160, 192 

192. 

$5,990,398 

16. 

IASD HEALTH SERVICES $1,466,026 528,349 

4.3% 

$2,619,650 

71.4% 

$3,028,748 

15. 

BLUE CROSS OF KASAS $658,350 $574 895 

12. 

$1,06,076 

85. 

$1,311,893 

23.3% 

BLUE CROSS OF KENTCKY $654 984 $768,767 

17.4% 

152 175 

180. 

796,293 

16. 

BLUE CROSS OF LOUISIANA 594 996 740, 192 

9.1% 

$3,224 166 

85. 

$4,034,460 

25. 

HAWAII MEDICAL $203, $218,299 $551,261 

152. 

$613,908 

11.4% 

BLUE CROSS OF MAIN $196, $350,697 

78. 

$676,937 

93. 

$494 760 

26. 
BLUE CROSS OF 

MASSACHUSETTS 

BLUE CROSS OF MICHIGAN


BLUE CROSS OF 

MISOTA 

BLUE CROSS OF 

MISSISSIPPI 

BLUE CROSS OF MISSOURI 

BLUE CROSS OF MONTANA 

BLUE CROSS OF NEBRASKA 

BLUE CROSS OF 

NEW HASHIE-VERMONT 

BLUE CROSS OF 

NEW MEXICO 

EMPIR BLUE CROSS


NEW YORK 

BLUE CROSS OF 

NORTH CAROLINA 

BLUE CROSS OF 

NORTH DAKOTA 

COMMTY MUAL 

INSURANCE OHIO 

BLUE CROSS OF 

OKLAHOMA 

BLUE CROSS OF OREGON


$630,712 $727,430 

15.


$684,726 $777,685


13. 

$747,651 $1,396,780 

86. 

$180,956 $227,582 

25. 

697,873 $3,06,547 

13. 

$246,585 $239,868 

$11,347 $14 153 

24. 

$122,849 $264,884 

115. 

$164,309 $271,847 

65.4% 

$4,649, $5, 158,328 

10. 

$418,062 $433,449 

$161 865 $204,052 

26. 

$2, 184, $2,421 110 

10. 

$912,560 $1,026,987 

12.5% 

$643,401 $983,401 

52. 

A- 3


321,986 $1,455,373 

81.7% 10. 

$1,410,410 $1,275,590 

81.4% 

$6,717, 137 $7,003,025 

380. 

$406,573 $556,253 

78. 36. 

196,201 $7,741 371 

134. 

$821 241 $658,555 

242.4% 19. 

$94 062 $149,015 

564. 58.4% 

$301,338 $375,090 

13. 24.5% 

851,545 $3,767,860 

581.1 % 103.5% 

$10,732 640 $13,284,002 

108. 1 % 23. 

525,485 $1,836,555 

251.9% 20.4% 

$60,504 $602,553 

194. 

$7,800,44 7 $8, 195,512 

222. 

$985,070 $832 871 

-4. 15.5% 

740,901 $2,604,584 

178. 
BLUE CROSS OF 

PHlADELPHI, PA 

COOPERATIA 

PUERTO RICO 

BLUE CROSS OF 

RHODE ISLAN 

BLUE CROSS OF 

SOUT CAROLINA


BLUE CROSS OF TESSEE 

BLUE CROSS OF TEXAS 

BLUE CROSS OF UTAH 

BLUE CROSS OF VIGINA 

BLUE CROSS OF 

WEST VIRGINA 

BLUE CROSS OF WISCONSIN 

BLUE CROSS OF WYOMIG 

TRAVELERS 

MUAL OF OMA 

AETNA TOTAL A 

$966,754 

$86,523 

$189,220 

$382 787 

$1,110,672 

$2,304, 

$416,283 

$517,577 

$233,530 

$870,318 

$34 507 

$2,617,042 

$7,309,716 

$12 043,225 

186,745 

22. 

$74 995 

13. 

$256,954 

35. 

$353,002 

$1,224 131 

10. 

$2,524 985 

9.5% 

$508,591 

22. 

$641 153 

23. 

$243,951 

081,803 

24.3% 

$30, 135 

12. 

$3,809,356 

45. 

$8,556,090 

17. 

$14 320,023 

18. 

$2,611,751 $2,834 427 

120. 1 % 

$109,305 $229, 141 

45. 109. 

$1,279,789 139,088 

398. 11.0% 

$960,588 $949,288 

172. 1 % 1.2% 

$3,619,678 $3,016,784 

195. 16. 

$2,590,484 $3,485,399 

34.5% 

$1,485,970 $1, 105,014 

192. 25. 

646,043 $1,620,768 

156. 1.5% 

$759,773 $887, 130 

211.4% 16. 

$3,090,320 $3,368,907 

185. 

$99,205 $146,984 

229. 48. 

$12,772,469 $13,205, 106 

235.3% 3.4% 

$25,816,096 $24 575,832 

201.7% -4. 

$56,863,843 $63,689,235 

297. 1 % 12.