Skilled Nursing Facilities

Skilled nursing facilities provide posthospital care for people who need more care than is available in the home. Medicare payments to these facilities have grown rapidly, from $456 million in 1983 to nearly $11 billion in 1996. The number of facilities that have sought and been granted payments higher than those normally allowed by Medicare has also grown, from a total of 80 during fiscal years 1979-92 to 552 in fiscal year 1995. The skilled nursing facility industry contends that the higher payments are justified because these facilities care for more complex and costly patients than they did in the past. However, GAO did not find that skilled nursing facilities that collected the higher fees had a larger proportion of patients requiring complex care than did other facilities. Moreover, in the area of therapy, which could be indicative of complex care needs, GAO found no major differences in the amount and types of therapy provided. Although the number of skilled nursing facilities granted exceptions to routine cost limits under Medicare soared from 62 in fiscal year 1992 to 552 in 1995, the Health Care Financing Administration's review process for exception requests does not ensure that facilities actually provide atypical services to their Medicare patients. In addition, the patient-specific data obtained from requesting skilled nursing facilities generally are not used to assess whether the Medicare beneficiaries need or receive atypical services.

GAO found that: (1) SNF use has increased since 1983 when the Medicare hospital prospective payment system (PPS), which pays a predetermined amount per hospital discharge, was introduced and gave hospitals a financial incentive to shorten lengths of stay; (2) the average length of hospital stay for Medicare patients has decreased from 10 days in 1983 to 7.1 days in 1995, indicating that, as expected, some substitution of SNF care for hospital care has occurred; (3) the average length of hospital stay decreased more for those Medicare patients whose diagnoses were more likely to lead to a SNF admission, such as hip fractures, than for Medicare patients as a whole; (4) considering patients with these types of diagnoses, hospitals with SNF units saw larger decreases in the average patient length of stay than did hospitals without SNF units; (5) the increasing number of SNFs granted routine cost limit (RCL) exceptions and the resulting additional payments, almost $100 million in fiscal year 1995, has contributed to the growth in Medicare SNF costs; (6) contrary to expectation, GAO did not find that SNFs with exceptions had a higher proportion of patients requiring complex care than SNFs without exceptions; (7) patients identified as requiring complex care by the medical records GAO reviewed, and who reside in SNFs granted exceptions, were generally provided appropriate care; (8) HCFA's review process for RCL exception requests does not ensure that SNFs actually provide atypical services to their Medicare patients; (9) HCFA's exception screening benchmarks basically take into account only whether requesting SNFs treat a higher than average proportion of Medicare patients; and (10) the patient-specific information obtained from requesting SNFs is generally not used to assess whether the Medicare beneficiaries need or receive atypical services.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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