United States General Accounting Office

GAO Report to the Chairman and Ranking

Minority Member, Committee on

Finance, U.S. Senate and the Chairman,

Special Committee on Aging, U.S. Senate

December 1999 SKILLED NURSING

FACILITIES

Medicare Payment

Changes Require

Provider Adjustments

But Maintain Access

GAO/HEHS-00-23

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-283347 

December 14, 1999

The Honorable William V. Roth, Jr.

Chairman

The Honorable Daniel Patrick Moynihan

Ranking Minority Member

Committee on Finance

United States Senate

The Honorable Charles E. Grassley

Chairman

Special Committee on Aging

United States Senate

Since the mid-1980s, Medicare spending for skilled nursing facility (SNF)

services has risen dramatically. Between 1986 and 1998, spending

increased, on average, 30 percent annually, climbing from $578 million to

$13.6 billion. This spending growth is due to a number of factors. SNF care,

which once comprised relatively low-intensity nursing care and therapy,

has in recent years included a growing number of services that previously

were provided only in hospital settings. Changes in the nature of the

services delivered and in the facilities that furnish SNF care, as well as the

incentives of Medicare’s payment method for acute hospital services, have

expanded the range of services offered. At the same time, the former

cost-based payment method for SNF services and a lack of appropriate

program oversight encouraged SNFs to provide excessive ancillary services

to SNF patients. As a result, the number of Medicare beneficiaries using SNF

care and the number of services furnished to each patient have surged,

making the Medicare SNF benefit one of the fastest growing components of

Medicare spending.

In an effort to control spending growth, the Congress directed the Health

Care Financing Administration (HCFA) in the Balanced Budget Act of 1997

(BBA) to develop a prospective payment system (PPS) for skilled nursing

facility services provided to Medicare beneficiaries.1

 In July 1998,

Medicare began the transition to a PPS, paying fixed, predetermined rates

for each day of care—a major change from the former system of

cost-based reimbursement. Previously, facilities benefited from furnishing

more ancillary services to Medicare patients, without regard for their

services’ price or necessity. The PPS attempts to create incentives for

providers to control their daily costs and deliver care more efficiently.

1

P.L. 105-33, section 4432(a).

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Since implementation of the PPS began, concerns have been raised that

weaknesses in the payment system’s design may threaten access to SNF

care for some high-cost beneficiaries. At the same time, some nursing

home chains have claimed that their eroding financial performance is a

result of the PPS. These concerns have prompted Congressional debates on

modifications to the SNF PPS. You asked us to assess (1) the initial effect of

the SNF PPS on Medicare beneficiaries’ access to care, (2) the initial effect

of the SNF PPS on providers, and (3) the role the SNF PPS has played in the

poor financial performance of large nursing home chains. To do this, we

conducted a nationwide survey of hospital discharge planners, interviewed

industry analysts as well as representatives from several nursing home

chains, and reviewed financial information from two chains, Sun

Healthcare Group, Inc., and Vencor, Inc., which were experiencing large

losses and recently filed for bankruptcy. Our work was performed in

accordance with generally accepted government auditing standards

between June and October 1999. (For a detailed discussion of our scope

and methodology, see appendix I.)

Results in Brief Medicare beneficiaries’ ability to obtain needed care does not appear to

have decreased since the implementation of the SNF PPS, although some

patients may stay longer in the hospital before being admitted to a nursing

home or may receive care from other post-acute-care providers. The PPS

does appear, however, to have affected the willingness or ability of some

nursing homes to accept certain types of Medicare patients. Hospital

discharge planners reported that facilities are reluctant to admit patients

requiring certain high-cost services, including some expensive drug

treatments and infusion therapy, indicating that the payments for some

types of SNF patients may be too low. We also found that Medicare patients

needing short-term rehabilitation are preferred by nursing homes, raising

concerns that payments for these patients may be too high. These findings

are confirmed in recent surveys of hospital discharge planners and nursing

home administrators by the Office of Inspector General of the Department

of Health and Human Services (OIG).

Although the new payment system results in major changes in financial

incentives, it is likely that aggregate SNF payments to providers are

adequate, given that inflated costs were used to establish the per diem

payment rates. However, the case-mix classification system used to adjust

payments to reflect the needs of patients may not appropriately allocate

payments across patients and providers. Payments, therefore, may be too

low for certain types of patients and too high for others. Congress’ recent

Page 2 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

modifications to the PPS will temporarily increase payments for certain

types of patients and thus may alleviate any current disincentives to admit

patients. But even without these modifications, the generally low

proportion of patient-days covered by Medicare at most nursing homes

dampens the initial effects of PPS on providers, and the transition to the full

PPS rates was intended to give them time to adjust. Some facilities will

have to make bigger changes in their treatment patterns, particularly

facilities with a large proportion of patient-days covered by Medicare,

those with inefficient practices, and those that historically furnished

excessive services to patients to maximize revenues. Other facilities, such

as those that care for patients with extensive resource needs and those

that have changed their mix of patients since 1995 (the year upon which

payments were based), may be more selective in their admission policies,

at least in the short term, until refinements in the classification system

fully account for differences across patients.

The SNF PPS is only one of many factors contributing to the poor financial

performance of Sun Healthcare Group, Inc., and Vencor, Inc., two

corporations that operate a large number of nursing homes. The large total

losses reported by the corporations stem from high capital-related costs

that have shrunk SNF margins; reduced demand for ancillary services,

related to several BBA provisions; and substantial nonrecurring expenses

and write-offs, reflecting reductions in future anticipated earnings.

Background The Medicare SNF benefit consists of inpatient skilled nursing and

rehabilitative services furnished by a nursing home that is

Medicare-certified.2

 To qualify for SNF services, a Medicare beneficiary

must need daily skilled nursing or rehabilitative therapy services, generally

within 30 days of a hospital stay of at least 3 days in length, and must be

admitted to the nursing home for a condition related to the hospitalization.

When the beneficiary meets these conditions, Medicare covers all

necessary services, including room and board; nursing care; and ancillary

services such as drugs, laboratory tests, and physical therapy, for up to 100

days of care per benefit period.3

 Beginning on the 21st day of care, the

beneficiary is responsible for a daily coinsurance payment, which equals

$96 in 1999. Medicare beneficiaries residing in nursing homes who are not

2

Such facilities are referred to as SNFs.

3

A benefit period begins on the first day of an inpatient hospital stay and ends 60 days after the

beneficiary is discharged from the hospital or from skilled care in a SNF or other inpatient facility

providing skilled nursing or rehabilitative services. There is no limit to the number of benefit periods a

beneficiary may have.

Page 3 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

eligible for part A coverage of the inpatient stay4 may continue to receive

coverage for some ancillary services, subject to limitations on the

coverage for rehabilitation therapy services under part B.5

Skilled nursing services are provided by both hospital-based and

freestanding facilities. In addition, rural hospitals designated as swing-bed

facilities can use acute-care beds to provide SNF services.6

 The number of

Medicare-certified SNFs has grown, on average, about 6 percent per year

throughout the 1990s, reaching 14,860 in 1998. About three-quarters are

freestanding facilities. A majority (66 percent) of nursing homes are

for-profit entities, and about half are owned or operated by corporations

operating multiple facilities, known as chains. Most patients in nursing

homes have their care paid for through the Medicaid program.

Medicare-covered SNF days account for about 9 percent of total nursing

home days. Prior to implementation of the PPS, Medicare revenues

accounted for about 10 percent of nursing home revenues, on average.

The range of services furnished by nursing homes varies substantially.

Some facilities provide traditional, low-intensity nursing care and therapy.

Others furnish higher-intensity rehabilitative therapies and complex

medical services, such as parenteral feeding and ventilator care, that

previously were provided only in hospital settings.

Growth in Medicare

Spending for SNF Services

The Medicare SNF benefit has been one of the fastest-growing components

of Medicare spending. Since 1990, Medicare expenditures for SNF services

have increased, on average, 25 percent annually, reaching $13.6 billion in

1998. This growth is due primarily to a rise in the number of beneficiaries

using SNF services and an increase in the number and type of services

provided to SNF patients. Between 1990 and 1997, the number of

beneficiaries receiving SNF care more than doubled, rising from 638,000 to

4

Medicare part A (or hospital insurance) covers inpatient hospital, skilled nursing facility, hospice, and

certain home health care services. Medicare part B (or supplementary medical insurance) covers

physician and hospital outpatient services, outpatient rehabilitation services, home health services

under certain conditions, diagnostic tests, and ambulance and other medical services and supplies.

5

BBA required a $1,500 per-beneficiary cap on payments for part B-covered physical and speech

therapy services and a separate $1,500 cap on part B-covered occupational therapy. See 42 U.S.C.

§ 1395l(g)(2). Recent changes in the law delay implementation of the spending caps until fiscal year

2002.

6

Hospitals participating in the Medicare swing-bed program may use their beds for either acute care or

post-acute care. To be certified as a swing-bed provider, a hospital must have 100 beds or fewer and be

located in a rural area. Payments for routine SNF services provided in swing-bed hospitals continue to

be based on Medicare’s average routine payment for freestanding SNFs within each region. Capital and

ancillary costs continue to be reimbursed on a facility-specific cost basis. Beginning in July 2001,

swing-bed hospitals will receive prospective payments comparable to those to other SNFs.

Page 4 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

1.6 million; Medicare’s average payment per SNF day also more than

doubled, from $98 in 1990 to $262 in 1998. At the same time, the number of

days of care per SNF patient served dropped from 37 to 32. Much of the

growth in Medicare per diem expenditures was due to increases in

payments for ancillary services. Those payments increased 17 to

20 percent annually between 1992 and 1995, compared with 5 to 7 percent

for routine services.

Medicare’s cost-based reimbursement method, combined with a lack of

appropriate program oversight, provided few checks on the growth in

Medicare spending for SNF services. Ancillary cost growth, in particular, is

considered to have been excessive.7

 Before implementation of the BBA,

nursing homes were paid the reasonable costs they incurred in providing

Medicare-covered services. Routine costs, which include general nursing,

room and board, and administrative overhead, were subject to cost limits,8

but payments for ancillary services and capital-related costs were virtually

unlimited. Indeed, as a facility’s costs of ancillary services rose, more of its

overhead costs could be assigned to the program.9

 Because higher

ancillary service costs triggered higher payments, Medicare’s payment

method offered providers no financial incentive to furnish only clinically

necessary services or to deliver them efficiently. Indeed, high ancillary

costs could be used to justify a request for exceptions payments for

routine costs over and above the cost limits.10 As a result, a provider’s mix

of services did not necessarily reflect the complexity of its cases or the

true needs of its patients.

7

See Medicare Post-Acute Care: Better Information Needed Before Modifying BBA Reforms

(GAO/T-HEHS-99-192, Sept. 15, 1999); Department of Health and Human Services, Office of Inspector

General, Office of Evaluation and Inspections, Physical and Occupational Therapy in Nursing Homes:

Cost of Improper Billings to Medicare (OEI-09-97-00122, Aug. 1999); Medicare: Tighter Rules Needed to

Curtail Overcharges for Therapy in Nursing Homes (GAO/HEHS-95-23, Mar. 1995).

8

For cost reporting periods beginning on or after October 1, 1997, the cost limits (before applicable

wage index adjustments) were $110.82 for urban freestanding facilities, $108.28 for rural freestanding

facilities, $155.96 for urban hospital-based facilities, and $137.52 for rural hospital-based facilities.

9

Contract arrangements with ancillary service providers were found to result in markups of

800 percent or more over the direct cost of the therapy service. See Medicare: Tighter Rules Needed to

Curtail Overcharges for Therapy in Nursing Homes (GAO/HEHS-95-23, Mar. 1995), p. 13.

10Under cost-based reimbursement, providers with reasonable costs that exceeded the routine cost

limits could be granted exceptions from the limits if they provided information indicating that they

served patients requiring more services than average. Those providers were paid an amount equal to

the applicable cost limit plus an adjustment to reflect their higher costs.

Page 5 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

Balanced Budget Act

Provisions Aim to Better

Control Costs

On July 1, 1998, HCFA began phasing in a Medicare PPS for SNF care, as

required by the BBA. Under the new system, facilities receive a fixed

payment for each day of care provided to a Medicare-eligible beneficiary.11

During a 3-year transition period, each facility’s per diem payment is a

blend of a facility-specific (cost-based) rate and a federal per diem rate.12

The facility-specific rate is based on the facility’s 1995 average allowable

costs for SNF services, updated to the current year.13 The federal portion of

the rate is based on the average daily cost of providing all

Medicare-covered SNF services in fiscal year 1995. Total costs were

updated for inflation between the 1995 base year and 1999 by the SNF

market-basket index minus 1 percentage point, as required by the BBA.

14

Because not all patients require the same amount of care, the federal per

diem rate paid for each patient is case-mix adjusted. Patients are classified

into 44 case-mix groups based on their clinical condition, functional

status, and expected use of certain services (particularly physical,

occupational, and speech therapy).15 Each case-mix group has an

associated relative weight that reflects the costliness of providing services

to patients in that group relative to the average costliness of patients

across all groups. The relative weight adjusts the per diem rate up or

down. A facility then receives the same daily payment for all its patients in

each group. By establishing fixed payments and including all services

under the per diem payment, the PPS attempts to provide incentives for

nursing homes to deliver care more efficiently. Facilities that can care for

beneficiaries for less than the case-mix adjusted per diem payment can

retain the difference as profit. Those with average costs higher than the

per diem payments they receive will suffer a loss.

In addition to calling for a SNF PPS, the BBA requires nursing homes to

submit to Medicare all bills for Medicare-covered services furnished to

11The per diem payments are adjusted to account for differences in area wages.

12In the first year of the transition, the blended rate is 75 percent facility-specific, dropping to

50 percent in the second year and 25 percent in the third year. Subsequently, payments will be based

on the federal rate only.

13Base-year costs are updated to the current year by applying an annual update factor for each

intervening year equal to the increase in the SNF market-basket index minus 1 percentage point, as

required by the BBA. See 42 U.S.C. § 1395yy(e)(3)(B)(i). The 1-percentage-point reduction reflects

congressional concern that the base year included inappropriate costs.

14The market-basket index measures the annual change in the prices of goods and services providers

use in producing SNF services.

15The groups are defined by a classification system developed by HCFA contractors. The categories of

this system are known as Resource Utilization Groups, or RUGs. For the Medicare SNF PPS, version

III of the classification system is being used.

Page 6 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

their residents, regardless of who provides the services.16 Previously, when

facilities had agreements with external providers to furnish ancillary

services, Medicare allowed those external providers to bill directly for

services covered under part B, even for patients in a Medicare-covered

(part A) SNF stay. Requiring consolidated billing for all services furnished

during a Medicare-covered SNF stay in conjunction with the PPS was

necessary so that facilities could not reduce their costs simply by shifting

the provision of ancillary services to part B providers, thereby stymieing

Medicare’s efforts to control total expenditures.17

The BBA also includes a per-beneficiary payment cap of $1,500 for part

B-covered physical and speech therapy and a $1,500 cap for part

B-covered occupational therapy.18 These limits do not pertain to Medicare

beneficiaries during a Medicare-covered SNF stay, but can affect Medicare

beneficiaries if their nursing home stay is not covered by Medicare. The

provision likely will limit the revenues nursing homes and other providers

earn from furnishing therapy services to nursing home patients under part

B. Recent changes in the law delay implementation of the spending caps

until fiscal year 2002.

PPS May Slow SNF

Placements for

Certain Medicare

Beneficiaries

Our nationwide survey of 153 randomly selected hospital discharge

planners suggests that nursing home behavior is changing with regard to

admission practices. Nursing homes have become more cautious in

accepting patients, favoring some types of patients over others when

making admission determinations. Forty-three percent of our survey

respondents mentioned that facilities prefer to admit patients needing

short-term rehabilitation treatment, while nearly two-thirds reported a

recent increase in difficulty placing Medicare beneficiaries needing certain

types of treatment, including some costly nontherapy ancillary services.

Yet, despite slower placements for some Medicare beneficiaries, few

beneficiaries are experiencing barriers to appropriate care.

According to the discharge planners, facilities have become more

cautious. Before accepting any patient, most facilities now appear to be

assessing the beneficiary’s condition more closely, requesting medical

records, reviewing drug administration charts, and even sending staff to

the hospital for in-person assessments. This behavior is confirmed in a

16See 42 U.S.C. § 1395y(a)(18).

17Implementation of the consolidated billing requirement has been delayed for residents of SNFs who

are not covered by Medicare (that is, patients who have exhausted their part A SNF benefit or who

were not eligible for part A coverage).

18The caps are not applicable to services furnished through hospital outpatient departments.

Page 7 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

recent survey of nursing home administrators conducted by the OIG in

which most administrators stated that they now scrutinize patients’

medical status to a greater extent than they did prior to implementation of

the PPS.

19 In so doing, the nursing home may delay the hospital discharge

process and extend the beneficiary’s hospital stay.

Hospital discharge planners indicated that nursing homes favor some

types of patients over others when making admission determinations.

About 43 percent of those surveyed indicated that, under the PPS, nursing

homes prefer to admit patients needing short-term rehabilitation for

conditions such as stroke and hip replacement. In fact, 31 percent of

respondents reported that facilities are actively recruiting such patients. A

recent survey of hospital discharge planners conducted by OIG also found

that patients with some conditions (including orthopedic and stroke

patients and those requiring physical, rehabilitative, speech, and

occupational therapies) are easier to place than before the payment

change.20 OIG’s survey of nursing home administrators supports this finding

as well: 46 percent of administrators in that survey reported that under PPS

they were more likely to admit patients requiring special rehabilitation

services, such as physical, occupational, or speech therapy.

By contrast, nearly two-thirds of the discharge planners we surveyed

reported a recent increase in difficulty placing certain Medicare

beneficiaries for a Medicare-covered SNF stay. Urban and rural hospitals

reported difficulty placing patients at nearly an identical rate. The most

frequently mentioned difficult placements were those patients requiring

expensive drug treatment or infusion therapy (see table 1). Intravenous

antibiotics, which fall into both of these categories, were cited most

frequently of all specific medical treatments. Other treatments mentioned

repeatedly included chemotherapy and total parenteral nutrition.21 A few

medical needs were cited as problems, not because of the treatments

themselves, but because of the transportation costs involved in providing

19Department of Health and Human Services, Office of Inspector General, Office of Evaluation and

Inspections, Early Effects of the Prospective Payment System on Access to Skilled Nursing Facilities:

Nursing Home Administrators’ Perspective (OEI-02-99-00401), Oct. 1999.

20Department of Health and Human Services, Office of Inspector General, Office of Evaluation and

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

(OEI-02-99-00400, Aug. 1999).

21This form of intravenous feeding supplies all of a person’s nutritional requirements. It is a skilled

service, requiring an intravenous tube or catheter placed in a large vein to administer the feeding

solution.

Page 8 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

the treatment.22 This appeared to be the problem for the respondents who

cited difficulty placing dialysis patients. Our findings are consistent with

those of OIG; 58 percent of the hospital discharge planners surveyed by OIG

reported that Medicare patients requiring extensive services such as

intravenous feedings, intravenous medications, or ventilator/respirator

care have become more difficult to place in nursing homes in the past

year. Similarly, 53 percent of the nursing home administrators surveyed by

OIG reported that they were less likely under PPS to admit patients requiring

expensive services and supplies.

Table 1: Discharge Planners Reporting

Slowed SNF Placements, by Type of

Medical Need Medical needa

Percentage

reporting

Expensive drugs 48

Infusion therapy 4

Ventilator care 29

Dialysis 28

Wound care 26

Care for decubitus ulcers 24

Tube feeding 22

aCategories are not mutually exclusive.

Source: GAO Survey of hospital discharge planners, Aug. 1999.

While citing a recent increase in SNF placement delays among Medicare

beneficiaries, several discharge planners noted that patients requiring

certain types of complex services (such as ventilator care) have always

been more difficult to place, particularly in areas not served by specialty

facilities. Despite this, the reports of difficulty finding SNF beds for some

patients needing certain costly nontherapy ancillary services are

consistent with our previous work, suggesting that the case-mix

classification system may not adequately account for some high-cost

groups.23

22Once a beneficiary has been admitted to a SNF, it may be necessary to transport the beneficiary to a

hospital or other site for specialized care. In this instance, the specialized services are furnished under

arrangements made by the SNF. Following the treatment, the beneficiary is returned to the SNF to

complete the inpatient stay. This movement of the beneficiary, considered patient transportation, is

covered as a SNF service under part A and is included in the per diem rate.

23Nontherapy ancillary services include drugs, laboratory tests, radiology procedures, respiratory

therapy, medical supplies, intravenous therapy, and other nonroutine services. See Skilled Nursing

Facilities: Medicare Payments Need to Better Account for Nontherapy Ancillary Cost Variation

(GAO/HEHS-99-185, Sept. 1999).

Page 9 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

At present, few Medicare beneficiaries are experiencing barriers to care.

Nearly all (98 percent) of the discharge planners in our survey indicated

that other arrangements are being made for patients who are difficult to

place. Eighty-five percent of respondents reported that difficulty in placing

patients results in longer hospital stays. Seventy-three percent reported

finding alternative types of post-acute care, such as home health care and

long-term care hospitals, for patients they could not place in nursing

homes.

Longer hospital stays are probably not detrimental to most patients

because they receive the care they need during their extended stay. Those

Medicare patients who do stay in the hospital longer may subsequently

require fewer days of care once they are admitted to a nursing home or

may no longer need SNF care at all. To the extent that additional days in the

hospital replace some SNF days, longer hospital stays generally reduce

Medicare spending for the entire episode of illness.24

Aggregate Payments

to SNFs Are Likely

Adequate, but Some

Providers Must Make

Adjustments

In aggregate, PPS payments are probably adequate and may, in fact, be

excessive given that insufficient oversight allowed base-year costs

associated with inefficient service delivery, unnecessary care, and

improper billings to be included in both the facility-specific and the federal

rates. But the rates established for individual patients may not

appropriately reflect differing resource needs, and hence payments may

not be adequate for certain types of patients, especially those with more

extensive needs. Some facilities will need to modify their treatment

patterns in response to the PPS. The adjustment to PPS may be eased,

however, by two factors. First, Medicare patients generally constitute a

small share of most nursing homes’ patients; and second, a transition

period, during which rates are based in part on each facility’s own

historical costs, is intended to give providers more time to make necessary

changes.

Facilities that furnished excessive ancillary services or purchased services

inefficiently will need to make the most modifications under PPS. Facilities

that changed their mix of patients since the base year may make

temporary adjustments, such as applying more selective admission

policies, during the transition period. In addition, chains that deliver

ancillary services to SNFs may need to make substantial changes in

response to other BBA requirements that limit the provision of therapy

24This is because Medicare’s per-case payment to the hospital for a patient with a given condition is the

same, regardless of the length of stay. Longer hospital stays can increase hospital operating costs, but

not Medicare operating payments, unless the patient reaches the threshold for cost outlier payments.

Page 10 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

under part B and require SNFs to bill for all services provided to their

patients.

Aggregate Payments to

SNFs Adequate, but

Refinements Needed to

Help Match Payments to

Patients’ Service Needs

HCFA used 1995 reported SNF costs as the basis for the federal per diem

rates under PPS. We believe these base-year costs are likely to be too high

as a result of inefficient service provision, unnecessary care, and improper

billing for services, which went undetected due to minimal program

oversight.25 From 1992 to 1995, payments for ancillary services grew at

triple the rate of routine services, which despite cost limits still increased

20 percent over the period. The low level of utilization review makes it

difficult to know how much of the increase in ancillary service use was

legitimate (because patient needs had also grown), and how much was

due to excessive provision of services to generate additional revenues. GAO

and the OIG also identified inappropriate billing practices and inclusion of

unreasonable costs as contributors to the rise in SNF costs. For example, a

recent OIG report found that, during the 12-month period ending June 30,

1998, Medicare reimbursed nursing homes almost $1 billion for improperly

billed physical and occupational therapy.26 Limited audits of cost reports

meant that HCFA had little ability to identify whether facilities were paying

unreasonable amounts for services or were charging Medicare for costs

unrelated to patient care or other unallowable costs.

OIG recently noted in its review of the SNF PPS that the rate-setting process

did not adequately exclude improper SNF payments or the costs for

medically unnecessary care.27 The level of overpayments is not known, but

it is likely that the PPS payment rates developed from the 1995 costs are

high enough to cover appropriate care.

Though the total dollars in the payment system are at least adequate, two

weaknesses in the case-mix classification system used in the PPS may

hamper the proper allocation of payments across patients and facilities.

First, the classification system does not directly account for variation in

the costs of nontherapy ancillary services across patients. To the extent

that payments do not adequately reflect nontherapy ancillary costs, some

25Balanced Budget Act: Any Proposed Fee-for-Service Payment Modifications Need Thorough

Evaluation (GAO/T-HEHS-99-139, June 10, 1999).

26Department of Health and Human Services, Office of Inspector General, Office of Evaluation and

Inspections, Physical and Occupational Therapy in Nursing Homes: Cost of Improper Billings to

Medicare (OEI-09-97-00122), Aug. 1999.

27Department of Health and Human Services, Office of Inspector General, Review of the Health Care

Financing Administration’s Development of a Prospective Payment System for Skilled Nursing

Facilities, A-14-98-00350 (July 1998).

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B-283347 

SNFs could be overpaid, while others could be underpaid. Facilities treating

many patients with high nontherapy ancillary costs may be disadvantaged

and might respond by declining to admit certain types of patients.28

Second, the classification system may not adequately differentiate among

patients and may classify them into too few groups to accurately reflect

their expected resource variation. Because the same payment is made for

all patients in each case-mix group, patients assigned to a group should be

relatively homogeneous in terms of their resource use. There is some

concern, however, that this is not the case, particularly for patients

needing extensive medical ancillaries (including medication therapy and

other nontherapy ancillary services) and rehabilitative therapy.29 Again,

there may be significant overpayment or underpayment for patients within

the case-mix groups, benefiting some facilities and putting others at a

disadvantage. Recent changes in the law will temporarily increase

payments for certain types of patients, thereby alleviating this concern. In

addition, certain costly nontherapy ancillary services, such as ambulance

services for patients needing regular dialysis at a facility outside of the SNF,

will be excluded from the PPS and paid for separately.

Adjustments Required by

PPS Larger for Some

Providers

The BBA provides for a 3-year transition period to allow facilities time to

adjust to the new payment system. Under this transition plan, a majority of

nursing homes currently receive per diem payments from Medicare that

are based largely on their own historical costs.30 For most facilities, the

adjustments required should be modest because Medicare payments

represent a small share of revenues (about 10 percent, on average). HCFA

estimates that Medicare payments under the fully implemented SNF PPS

would decline, on average, 17 percent, which would reduce total nursing

home revenues by an average of 1.7 percent.31 For individual facilities,

reductions in revenues under the PPS will be larger or smaller; for some

facilities, Medicare revenues will increase. Facilities that historically have

served a higher proportion of Medicare patients may experience bigger

changes in their revenues, either positive or negative, and may need to

modify their treatment patterns more than other facilities.

28Skilled Nursing Facilities: Medicare Payments Need to Better Account for Non-Therapy Ancillary

Cost Variation (GAO/HEHS-99-185, Sept. 1999).

29Research currently under way by HCFA indicates that potential refinements to the case-mix model

may include the division of the current 44 groups or the addition of new ones. See Medicare Program;

Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities, 64 Fed. Reg.

41,644, 41,648 (1999) (to be codified at 42 C.F.R. pts. 409, 411, 413, and 489).

30There is no transition period for facilities that were not participating in the Medicare program in

1995. Those facilities began to receive the federal rate immediately.

31See Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing

Facilities, 64 Fed. Reg. 41,644, 41,678 (1999) (to be codified at 42 C.F.R. pts. 409, 411, 413, and 489).

Page 12 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

PPS requires larger adjustments for providers that were inefficient or that

furnished a large number of ancillary services. Facilities that overprovided

services in the past will have to permanently modify their treatment

patterns by furnishing fewer services. Those that were not cost-conscious

in purchasing ancillary services and supplies will now need to seek better

prices from ancillary providers. Neither of these changes should adversely

affect patient care.

For some facilities, the payment rates under the fully implemented PPS may

be higher than they are during the transition. Among these facilities are

those that, since the base year of 1995, have changed the mix of patients

served to include more with intensive needs. The facility-specific portion

of the rates reflects their costs of serving patients in 1995 who had fewer

needs. Only the federal portion of their rates will be adjusted to reflect the

needs of current patients. During the transition period, these facilities may

adjust to the payment system by declining to admit certain patients with

greater needs. Due to recent changes in the law, beginning on December

15, 1999, facilities may opt to make the transition to the federal rate

immediately for cost-reporting periods beginning on or after January 1,

2000.

Financial Condition of

Sun and Vencor

Related to Factors

Other Than SNF PPS

The troubled financial positions of two corporations that operate a large

number of SNFs, Sun Healthcare Group, Inc., and Vencor, Inc., have

received much public attention in recent months. Both corporations

reported significant losses in fiscal year 1998—$700 million and

$573 million, respectively. Sun expects a similar loss for fiscal year 1999

($612 million), while Vencor’s estimated loss is much smaller ($90 million).

Industry reports have blamed Medicare payment policies for these losses

and for the companies’ recent filings for bankruptcy protection. Our

analysis, however, suggests that the financial difficulties of Sun and

Vencor are the result of several factors beyond the SNF PPS. In fact, the SNF

operations of Vencor have remained profitable after the implementation of

the PPS, and those of Sun would have as well, had that company’s capital

costs been in line with the industry average. The losses reported by the

companies stem in large part from high capital-related costs; the reduced

demand for ancillary services, related to several BBA provisions; and

substantial nonrecurring expenses and write-offs.

SNF Operations Not Major

Contributor to Financial

Losses

In annual reports to the U.S. Securities and Exchange Commission and in

public statements, both Sun and Vencor attribute their poor financial

position primarily to Medicare’s new SNF reimbursement method. Sun’s SNF

Page 13 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

operating revenues are expected to drop 14 percent in FY 1999, while

Vencor’s SNF operating revenues will decline about 6 percent.

Nevertheless, Sun’s SNF operating shortfalls represent only 13 percent of

total losses in fiscal year 1998 and 37 percent of estimated total losses in

fiscal year 1999. Vencor posted gains in its SNF operations in fiscal year

1998 and expects positive SNF operating income in fiscal year 1999 as well.

Thus, factors other than PPS have affected their financial performance.

Sun’s focus on serving a patient population with higher service needs is

one factor affecting its performance. The corporation invested in the

equipment and staff needed to provide complex medical and rehabilitative

care during a time when doing so meant getting higher payments from

Medicare. Thus, it may be affected more than other facilities by any

shortcomings in the PPS case-mix classification system.

The losses experienced by the SNF business operations of Sun and Vencor

are primarily due to increasing capital-related costs rather than operating

shortfalls. In fact, both companies have cut their SNF operating expenses,

such as the costs of labor and supplies, consistent with their declines in

revenues, to improve their operating performance. Sun also indicates it

has modified its admission policies. As a result, although Sun estimates a

14 percent drop in operating revenue in fiscal year 1999, it projects that its

net SNF operating income (excluding capital) will decline only 9 percent.

Likewise, Vencor estimates its net SNF operating income (excluding

capital) will increase 5 percent in fiscal year 1999, despite a 6 percent

decrease in operating revenue.

Page 14 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

Table 2: SNF Operating Revenues and

Expenses for Sun Healthcare Group,

Inc., and Vencor, Inc., Fiscal Years

1997-99

Dollars in millions

FY 1997 FY 1998 FY 1999 (annualized)

Sun Healthcare Group, Inc.

Net operating revenuesa $1,156 $1,913 $1,652

Operating expensesb $950 $1,633 $1,398

Capital-related expenses $211 $368 $481

Net operating income

(loss) ($5) ($87) ($227)

Vencor, Inc.

Net operating revenuesa $1,721 $1,621 $1,529

Operating expensesb $1,454 $1,370 $1,267

Capital-related expenses $121 $193 $218

Net operating income

(loss) $147 $57 $45

Note: Columns may not sum to total due to rounding.

aNet operating revenues are gross charges minus contractual and other adjustments.

bOperating expenses do not include capital-related expenses.

Source: Sun and Vencor data provided to GAO.

But capital-related costs for both Sun and Vencor have substantially

increased. Sun’s capital costs, already a larger share of total costs than the

industry average, are expected to grow 30 percent in FY 1999 as its interest

expenses double32 (see fig. 1). Similarly, Vencor’s SNF capital-related costs

are expected to rise nearly 80 percent between fiscal year 1997 and fiscal

year 1999, driven by a four-fold increase in rental expenses (see fig. 2).

During that period, Vencor reorganized into two separate, publicly held

corporations, divesting the real property side of its business from the

operating side. Ventas, a real estate investment trust, now leases formerly

owned real estate holdings, including nursing homes, to the operating

company, Vencor. Under the new structure, Vencor’s rental expenses rose

from $42 million in fiscal year 1997 to nearly $170 million in FY 1999.

SNFs operated by Sun and Vencor will likely be more affected by the SNF

PPS than will typical facilities because a larger share of their revenues

comes from Medicare. Although Medicare patients constitute about

10 percent of total SNF patient days for both Sun and Vencor (similar to the

32While capital costs for nursing homes average about 12 percent of total costs, Sun’s and Vencor’s

capital costs are estimated to be 26 and 15 percent, respectively, for fiscal year 1999.

Page 15 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

industry average), the corporations report that Medicare revenues are at

least 25 percent of their SNF businesses.

Figure 1: SNF Capital-Related

Expenses for Sun Healthcare Group,

Inc., Fiscal Years 1997-99

Dollars in Millions

0

100

200

300

400

500

FY 1997 FY 1998 FY 1999

Fiscal Year

Other Capital-Related Costs

Depreciation/Amortization

Interest (Including Intercompany)

Rent

Source: Sun data provided to GAO.

Page 16 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

Figure 2: SNF Capital-Related

Expenses for Vencor, Inc., Fiscal Years

1997-99

Dollars in millions

0

50

100

150

200

250

FY 1997 FY 1998 FY 1999

Fiscal Year

Other Capital-Related Costs

Depreciation/Amortization

Interest (Including Intercompany)

Rent

Page 17 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

Declining Ancillary

Revenues Reflect Multiple

BBA Provisions

Ancillary revenues from the sale of therapy and other services to their own

nursing homes and to others have represented a substantial share of both

Sun’s and Vencor’s total revenues. Prior to BBA (fiscal year 1997), Sun

reported net income for its ancillary services business of $165 million

while Vencor had net income of nearly $104 million.

Several BBA provisions have affected the market for ancillary services.

First, the SNF PPS has made SNFs more cost-conscious in purchasing

contracted services—reducing both the demand for these services and the

prices SNFs are willing to pay for them. Second, the BBA prohibits billing

Medicare part B for services furnished to nursing home patients covered

under part A. Third, it has revised the payments for therapy services under

part B, establishing a fee schedule instead of cost-based reimbursement

and thus limiting payments for many services. Finally, it has imposed a

per-beneficiary cap of $1,500 for part B-covered physical and speech

therapy services and a per-beneficiary cap of $1,500 for part B-covered

occupational therapy services. These caps primarily affect therapy

services for nursing home patients and are therefore likely to affect

ancillary providers like Sun and Vencor that furnish services to nursing

homes. Following implementation of these provisions, Vencor’s reported

net operating income for its ancillary operations fell from $104 million to

$59 million in fiscal year 1998 and is expected to decline further to

$44 million in fiscal year 1999. Sun’s net operating income is expected to

plummet from $230 million in fiscal year 1998 to $9 million in fiscal year

1999.

Table 3: Net Operating Revenues From

Ancillary Businesses of Sun

Healthcare Group, Inc., and Vencor,

Inc., Fiscal Years 1997-99

Dollars in millions

FY 1997 FY 1998

FY 1999

(annualized)

Sun Healthcare Group, Inc.

Net operating revenuesa $775 $1,185 $732

Net expenses $611 $995 $724

Net operating income (loss) $165 $230 $7

Vencor, Inc.

Net operating revenuesa $641 $581 $440

Net expenses $538 $522 $396

Net operating income (loss) $104 $59 $44

Note: Columns may not sum to total due to rounding.

aNet operating revenues are gross charges minus contractual and other adjustments.

Source: Sun and Vencor data provided to GAO.

Page 18 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

Unusual Transactions

Account for Bulk of

Corporate Losses

Most of the fiscal year 1998 and 1999 losses reported by Sun and Vencor

relate to unusual transactions, or nonrecurring charges, such as asset

impairment losses and restructuring costs (see table 4). Vencor reported

unusual transactions of $439 million in fiscal year 1998 and estimates

another $35 million to be posted in fiscal year 1999. These entries account

for more than 75 percent of Vencor’s losses for fiscal year 1998 and almost

40 percent of those for fiscal year 1999. Similarly, nearly $394 million of

Sun’s total fiscal year 1998 losses and $425 million of its total fiscal year

1999 losses are unusual transactions.

The bulk of these unusual transactions for both companies are the result

of asset impairment losses. Accounting principles require corporations to

calculate and recognize asset impairment losses on their balance sheets

when it is determined that future expected revenue streams will be lower

than anticipated.33 This is necessary to inform investors of the

performance of the company. The loss appearing on the income statement

reflects the difference between an asset’s original value and its revised

value, based on the revenue the asset is expected to generate in the future.

These values do not reflect the patient-care costs that are recognized by

the Medicare program. The losses posted by Sun and Vencor may reflect a

combination of inflated purchase prices as well as reduced future

expected revenues from their assets. For example, approximately

$200 million of Vencor’s impairment loss is attributable to an anticipated

reduction in the value of its goodwill. Goodwill is an intangible

asset—such as name recognition, good customer relations, or high

employee morale—that represents the amount paid for an asset in excess

of fair market value. These unusual transactions reflect business and

accounting practices rather than losses from current operations. It is not

known what share of these companies’ lower projected value reflects

changes due to the implementation of the SNF PPS or other BBA provisions.

33The American Institute of Certified Public Accountants’ Statement of Financial Accounting Standards

No. 121 (SFAS No. 121), entitled Accounting for the Impairment of Long-Lived Assets and for

Long-Lived Assets to be Disposed of, requires such impairment losses to be recognized.

Page 19 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

Table 4: Net Operating Income,

Nonoperating Expenses, and Total

Income for Sun Healthcare Group, Inc.,

and Vencor, Inc., for FYs 1997, 1998,

and 1999

Dollars in millions

FY 1997 FY 1998 FY 1999 (annualized)

Sun Healthcare Group, Inc.

Net operating income (loss) $116 $29 ($72)

Nonoperating revenues $12 $22 $16

Nonoperating expenses:

Unusual transactions $20 $394 $425

Other nonoperating expensesa $22 $302 $125

Nonoperating expenses $42 $696 $550

Net nonoperating income (loss) ($30) ($674) ($534)

Income tax $43 $56 $0.8

Total post-tax income (loss) $43 ($701) ($606)

Vencor, Inc.

Net operating income (loss) $320 $116 $82

Nonoperating revenues $0 $0 $0

Nonoperating expenses

Unusual transactions ($14) $439 $35

Corporate overhead $80 $123 $113

Nonoperating expenses $95 $613 $172

Net nonoperating income (loss) ($96) ($613) ($171)

Income tax $89 $76 $0.2

Total post-tax income (loss) $135 ($573) ($90)

Note: Columns may not sum to total due to rounding.

aSun’s other nonoperating expenses include bad debt/losses on accounts receivable, gain (loss)

on sale of assets, dividends on convertible preferred securities.

Source: Sun and Vencor data provided to GAO.

Conclusions The BBA mandated a Medicare PPS for SNF services to replace the

cost-based reimbursement system, with the goal of fostering more efficient

provision and use of services to lower spending growth rates. We found

little evidence that this change in payment method has reduced access to

appropriate care, although facilities are assessing patients’ conditions and

projected costs of treatment more closely, even reportedly denying

admission to patients needing certain types of services. As a result, some

beneficiaries may stay longer in the hospital before being admitted to a

nursing home for SNF care or may receive care from other post-acute-care

providers. Monitoring of hospital and SNF lengths of stay and admissions is

Page 20 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

required to ensure that Medicare beneficiaries continue to have access to

medically necessary services. The PPS represents a major change to the

previous incentives of cost-based reimbursement and, as a result, facilities

may need to modify treatment practices and business strategies that were

advantageous under the previous payment method if they are to operate

profitably.

Agency and Other

Comments

In written comments on a draft of this report, HCFA emphasized its

commitment to ensuring that Medicare beneficiaries retain access to

quality skilled nursing care. HCFA acknowledged concerns that the

payment system may not fully reflect the costs of treating certain types of

patients and stated its intent to continue monitoring access to care under

the SNF PPS and to refine and improve the payment system. HCFA also noted

that, in light of the recent reports of financial troubles in some nursing

home chains, it has taken steps to ensure that states develop contingency

plans for protecting nursing home patients. In addition, it has provided

guidance to help states monitor conditions in nursing homes that are

experiencing financial difficulties. HCFA also provided technical comments,

which we incorporated where appropriate. The agency letter is

reproduced in appendix II.

In their comments on portions of the draft related to them, both Sun and

Vencor agreed that their financial situations were accurately represented.

Both corporations acknowledged that their financial difficulties are the

result of many factors, not just of the PPS. Both expressed general

concerns that the effect of the BBA is only beginning to be felt and

predicted that there will be more bankruptcy filings among nursing home

chains and perhaps among independent nursing homes as well.

Vencor also submitted updated financial information, consistent with data

shown in the report, illustrating that their SNF operations remain profitable

and that a substantial portion of the corporation’s overall losses pertains

to other lines of business. (We did not include this updated information in

the report because it did not change our conclusions. In addition, its

format was different from that of the original data submitted and therefore

was difficult to compare with information from previous years.)

Sun pointed out that part of the company’s financial difficulties stems

from having higher-than-average costs. Sun noted that such costs were not

excessive under cost-based reimbursement. PPS, however, a system based

on national averages, will not fully cover these costs. Sun also said that we

Page 21 GAO/HEHS-00-23 SNF Access Under New Payment System
B-283347 

did not appropriately attribute the reductions in the demand and pricing

for ancillary services to the implementation of PPS. In fact, the report

clearly states that PPS is a factor in the reduced demand for ancillary

services. Finally, Sun noted that its impairment losses are an accounting

recognition of the economic reality that PPS has materially devalued Sun’s

nursing home assets. At the same time, Sun acknowledged that the

company may have paid too much for the assets it acquired.

Representatives of the corporation went on to express concern that any

reduction in the value of nursing home assets would discourage the

construction of new nursing facilities and thus adversely affect access to

care. At the present time, however, our evidence indicates that

beneficiaries continue to receive needed care.

Sun also expressed concern that their views about the PPS, obtained in

interviews with GAO staff, were not included in the portions of the report

Sun reviewed. Although not attributed directly to any individuals, the

views of representatives from Sun and Vencor, as well as from other

industry participants and analysts, were an important source of

information and were incorporated into the report.

We are sending copies of this report to Michael Hash, Acting Administrator

of HCFA, interested congressional committees, Sun Healthcare Group, Inc.,

Vencor, Inc., and other interested parties. We will also make copies

available to others upon request.

If you have any questions, please call me or Laura Dummit, Associate

Director, at (202) 512-7119. Major contributors to this report are listed in

appendix II.

William J. Scanlon, Director

Health Financing and Public Health Issues

Page 22 GAO/HEHS-00-23 SNF Access Under New Payment System
Page 23 GAO/HEHS-00-23 SNF Access Under New Payment System
Contents

Letter 1

Appendix I 

Scope and

Methodology

26

Appendix II 

Comments From the

Health Care Financing

Administration

28

Appendix III 

GAO Contacts and

Staff

Acknowledgments

30

Tables Table 1: Discharge Planners Reporting Slowed SNF Placements,

by Type of Medical Need

9

Table 2: SNF Operating Revenues and Expenses for Sun

Healthcare Group, Inc., and Vencor, Inc., Fiscal Years 1997-99

15

Table 3: Net Operating Revenues from Ancillary Businesses of

Sun Healthcare Group, Inc., and Vencor, Inc., Fiscal Years

1997-99

18

Table 4: Net Operating Income, Nonoperating Expenses, and

Total Income for Sun Healthcare Group, Inc., and Vencor, Inc.,

for FYs 1997, 1998, and 1999

20

Figures Figure 1: SNF Capital-Related Expenses for Sun Healthcare

Group, Inc., Fiscal Years 1997-99

16

Figure 2: SNF Capital-Related Expenses for Vencor, Inc., Fiscal

Years 1997-99

17

Page 24 GAO/HEHS-00-23 SNF Access Under New Payment System
Contents

Abbreviations

BBA Budget Balance Act of 1997

HCFA Health Care Financing Administration

OIG Office of Inspector General

PPS prospective payment system

SNF skilled nursing facility

Page 25 GAO/HEHS-00-23 SNF Access Under New Payment System
Appendix I 

Scope and Methodology

To assess the effect of the prospective payment system (PPS) on access to

skilled nursing facility (SNF) care, we interviewed hospital discharge

planners about their recent experiences placing Medicare beneficiaries

needing SNF care in nursing homes. Because SNF reimbursement under

Medicare is dependent on a minimum 3-day hospital stay, nearly all

Medicare beneficiaries receiving SNF services are first evaluated by a

member of the hospital discharge staff. Discharge planners offer valuable

information because they are professionals who help Medicare patients

leaving the hospital find nursing homes that will provide them with

appropriate care. We used structured interviews to elicit their opinions on

whether changes in reimbursement policies have affected beneficiary

access to care.

We identified and categorized hospitals using the Medicare Cost Reports

for calendar year 1997. Only general short-term hospitals were included

for study.34 Swing-bed hospitals and hospitals with an affiliated SNF were

eliminated from the pool to focus the study on those hospitals where

patients would be most at risk of experiencing access problems. A simple

random sample was used to choose the hospitals from the remaining

population. We contacted discharge planners by telephone in 200 of these

hospitals and completed interviews with 153. Urban hospitals represented

two-thirds of the respondents, although they make up only 55 percent of

hospitals nationwide. All 50 states (and the District of Columbia) were

eligible for participation in the study; 43 were represented by the

completed surveys.

We obtained testimony from Wall Street industry analysts to gain an

understanding of the financial incentives driving the SNF industry before

and after implementation of the Balanced Budget Act of 1997, as well as

insight into the operational history of specific nursing home chains.

In addition, we interviewed the presidents and, in some cases, other senior

management representatives of Sun, Vencor, and Beverly Enterprises, Inc.

(Beverly). Sun and Vencor were chosen for examination because of their

highly publicized financial problems and the distinct possibility that they

would petition for bankruptcy protection under Chapter 11 of the U.S.

Bankruptcy Code. As a national nursing home chain not in danger of filing

for bankruptcy, Beverly offered perspective on the circumstances of Sun

and Vencor.

34Psychiatric hospitals, rehabilitation hospitals, cancer hospitals, childrens’ hospitals, and

long-term-care hospitals (those with an average length of stay exceeding 25 days) were excluded from

the analysis.

Page 26 GAO/HEHS-00-23 SNF Access Under New Payment System
Appendix I 

Scope and Methodology

Documentary evidence used in analyzing the effect of PPS included both

financial information provided by Sun and Vencor, and their corporate

filings from the United States Securities and Exchange Commission. The

filings are available under the 1934 Exchange Act and contain material

financial and business information on publicly traded companies. Under

the act, companies are obliged to keep such public information current by

filing periodic reports on Forms 10-Q and 10-K, and on current event Form

8-K, as applicable.

Page 27 GAO/HEHS-00-23 SNF Access Under New Payment System
Appendix II 

Comments From the Health Care Financing

Administration

Page 28 GAO/HEHS-00-23 SNF Access Under New Payment System
Appendix II 

Comments From the Health Care Financing

Administration

Page 29 GAO/HEHS-00-23 SNF Access Under New Payment System
Appendix III 

GAO Contacts and Staff Acknowledgments

GAO Contact Laura Dummit, (202) 512-7119

Staff

Acknowledgments

Carol Carter, Dana Kelley, Erin Kuhls, and Carolyn Manuel-Barkin made

key contributions to this report.

(101854) Page 30 GAO/HEHS-00-23 SNF Access Under New Payment System
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