May 12, 1998, the Interim Final Rule was published presenting the SNF PPS (Prospective Payment System). It turned the industry upside down. Away with the retrospective cost based system. Away with certified distinct parts, time studies and weighing of the laundry. Instead, a MDS based payment system which touted reimbursement for resources (the higher the resources, the higher the rate of reimbursement). Within this model, there were 44 RUG levels, of which the top 26 were deemed “automatically skilled” while the lower 18 levels were “at risk for audit”. This was a proxy for the original criterion for skilled coverage (Management of Care Plan, Observation and Assessment, Teaching and Training and the nursing/therapy skills with inherent complexity). Medicare days plummeted across the country. Multiple nursing home chains declared bankruptcy. Why? Nobody understood the system and patients were readily denied benefits solely based on the MDS RUG score….even when the score was incorrectly coded. Within 18 months, the BIPA (Beneficiary and Improvement Protection Act) revised this error and the original coverage criterion was reinstated.