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Medicare Skilled Nursing Facility Reimbursement And Upcoding

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  • John R. Bowblis
  • Christopher S. Brunt

Abstract

Post‐acute care provided by skilled nursing facilities (SNFs) is reimbursed by Medicare under a prospective payment system using resource utilization groups (RUGs) that adjust payment intensity on the basis of predefined ranges of weekly therapy minutes provided and the functionality of the patient. Individual RUGs account for differences in the intensity of care provided, but there exists significant regional variation in the payments SNFs receive from Medicare due to the use of geographic adjustment factors. This paper is the first to use this geographic variation in the generosity of Medicare reimbursement to empirically test if SNFs respond to payment differences between RUG categories. The results are highly suggestive that SNFs upcode patients by providing additional therapy minutes to increase revenue, whereas we find no evidence of upcoding related to patient functionality scores. Simulating how different payment differentials affect RUG selection, we predict that reducing the financial incentive to upcode could result in significant savings to Medicare. Copyright © 2013 John Wiley & Sons, Ltd.

Suggested Citation

  • John R. Bowblis & Christopher S. Brunt, 2014. "Medicare Skilled Nursing Facility Reimbursement And Upcoding," Health Economics, John Wiley & Sons, Ltd., vol. 23(7), pages 821-840, July.
    • Handle: RePEc:wly:hlthec:v:23:y:2014:i:7:p:821-840
    DOI: 10.1002/hec.2959
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    References listed on IDEAS

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    Cited by:

    1. Bowblis John R. & Brunt Christopher S. & Grabowski David C., 2016. "Competitive Spillovers and Regulatory Exploitation by Skilled Nursing Facilities," Forum for Health Economics & Policy, De Gruyter, vol. 19(1), pages 45-70, June.
    2. Daifeng He & Peter McHenry & Jennifer M. Mellor, 2020. "Do financial incentives matter? Effects of Medicare price shocks on skilled nursing facility care," Health Economics, John Wiley & Sons, Ltd., vol. 29(6), pages 655-670, June.
    3. Christopher S. Brunt, 2015. "Medicare Part B Intensity and Volume Offset," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 1009-1026, August.
    4. Thuy Nguyen & Victoria Perez, 2020. "Privatizing Plaintiffs: How Medicaid, the False Claims Act, and Decentralized Fraud Detection Affect Public Fraud Enforcement Efforts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 1063-1091, December.
    5. Hanming Fang & Qing Gong, 2017. "Detecting Potential Overbilling in Medicare Reimbursement via Hours Worked," American Economic Review, American Economic Association, vol. 107(2), pages 562-591, February.
    6. Simon B. Spika & Peter Zweifel, 2019. "Buying efficiency: optimal hospital payment in the presence of double upcoding," Health Economics Review, Springer, vol. 9(1), pages 1-14, December.
    7. Cook, Amanda & Averett, Susan, 2020. "Do hospitals respond to changing incentive structures? Evidence from Medicare’s 2007 DRG restructuring," Journal of Health Economics, Elsevier, vol. 73(C).
    8. John Bowblis, 2015. "The cost of regulation: More stringent staff regulations and nursing home financial performance," Journal of Regulatory Economics, Springer, vol. 47(3), pages 325-338, June.
    9. Sean Shenghsiu Huang & John R. Bowblis, 2019. "Private equity ownership and nursing home quality: an instrumental variables approach," International Journal of Health Economics and Management, Springer, vol. 19(3), pages 273-299, December.

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