Harmony Healthcare Blog

Revenue Isulation, Documentation and RUG-IV

Posted by The Harmony Team on Thu, Jul 14, 2011

Edited by Kris Mastrangelo


RUG-IV, MDS 3.0The year 2010 brought many changes to the long-term care industry to include but not limited to MDS 3.0, RUG-IV, the Medicare and Medicaid Extenders Act of 2010 and a national increase in RAC and MAC Audits, as well as the implementation of QIS.

The interesting element in any industry is the cyclical events which become evident over time.  For example, the demand for nurses and therapists hit peaks and valleys depending on the landscape of the industry.  The current cycle we are seeing is the resurgence of Medical record reviews. 

In the early 90's, HELP Letters and Denials were at a peak. Proactive Medicare documentation was a critical component to the financial success of a facility's Medicare program.  The Balanced Budget Act of 1997 mandated the implementation of a per diem Prospective Payment System (PPS) for skilled nursing facilities covering all costs (routine, ancillary and capital) related to the services furnished to beneficiaries under Part A of the Medicare program. The frequency of HELP letters and Denials decreased to a rarity. As a reaction to the implementation of a PPS, facilities have altered their documentation practices to manage costs. Detailed Therapy and Nursing documentation was replaced by check off forms and fill in the blank forms that would reduce the time spent on documentation. Documentation has become a formality versus a necessity.

With regards to RUG-IV and the omission of the RUG-III Hybrid, many providers are experiencing an increase in the rate of reimbursement for the Medicare Part A patient.  Facilities with the highest percentages of therapy days benefitted the greatest. This is logical seeing the intent of the system was to decrease the percentage of therapy involvement.  In fact, the % RU days increased first quarter 2011 from Q2 2010 from approximately 37% to 39%. 

This was quite unexpected seeing the government's intent was to remain "budget neutral", i.e., maintain the funding to the Medicare Part A SNF program.  The burning question most commonly asked by providers is "will this financial increase stay?"  The answer to that question lies ahead in the coming months and will be affected by two factors:

  1. Rate adjustment.
  2. Audit intensity.

1. Rate Adjustment: The Office of Inspector General OIG report (Questionable Billing by Skilled Nursing Facilities December 2010) highly recommends that "CMS monitor overall payments to SNFs, and adjust rates, if necessary."  The intent of this recommendation is to ensure that RUG changes do not significantly increase overall payments. CMS is reviewing the current system and will make changes effective FY2012. Details of these changes are still unknown but will likely include rate modification. CMS typically adjusts rates moving forward, and does not penalize providers retroactively. That's good news!

2. Audit Intensity:  This is where the industry is going to relive the early 90's of Help Letters, ADR's, and any other terminology used to describe a review of the medical record. 

CMS will identify providers with levels beyond the "statistical" average and perform medical record reviews.  These reviews may be pre-pay or post-pay.  Either way a review in a facility costs time and money.  These reviews should not be taken lightly and require the full attention of the interdisciplinary team.  Outcomes of these reviews may lead to:

a.   More reviews (10% of Medicare Part A census on a monthly basis)

b.   Denial of claims

c.   Denial of claims with an extrapolation

For example, one facility experienced a review of 9 medical records.  All records were denied payment equating to 90K of recouped dollars.  Harmony assisted the facility in appealing the determinations.  All of the denials were overturned and the facility won the appeal.   However, during this time, the staff lost confidence in servicing the Medicare Part A population leading to a decline in the Part a census from 20 ADC to 10ADC.  This resulted in a monthly revenue dip of 150K per month.  This scenario can be avoided  but one needs to prepare!

The goals of any provider is to take the steps to avoid review.  The OIG report identified metrics as triggers to audit.  These include:

a.   Lower 14 days

b.   % RU Days (top 1%)

c.   ADL scores

d.   Length of Stay

While these are valuable metrics, they may not be indicative of clinically inappropriate care to the Medicare Part A SNF population.  However, these reviews may and can lead to lost revenue if the medical record does not clearly depict the rationale for skilled coverage of care. 

Typically, SNF's lack the internal resources to properly dedicate to such a huge project where the stakes are so high.  A medical review is a monumental burden on the day to day systems of a nursing facility. 

Recommendation:  All providers should be ensuring that the facility Nursing and Therapy staff understands the rules and regulations for skilling the Medicare Part A patient.  This in turn allows for more comprehensive documentation in the medical record.  The Medicare reimbursement is dynamic, complicated and ever changing.  Building a team of contemplative folks enhances the providers chances of breezing through audits if not averting them all together.   

Administrators with an affinity towards gaining knowledge on this subject matter and supporting the team on Medicare Part A discussions will not only succeed in this environment but he/she will thrive.

Some of the many steps to take over the upcoming months. 

  • Understanding RUG-IV Qualifiers.
  • Revisiting Medicare skill requirements.
  • Securing revenue with skilled therapy documentation that reflects the medical necessity of skilled levels of care provided.
  • Securing revenue with skilled nursing documentation that reflects the medical complexity of the patient.
  • Securing revenue with skilled Medicare documentation that reflects the need to receive services as an inpatient at a SNF.


Harmony University is a leader in education and training in the long term care industry and conducts Seminars on various hot button topics across the country! 

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Tags: Medicare, MDS 3.0, Medicaid, RUG-IV;

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