A study by the General Accounting Office (GAO) has found that a system instituted in 1998 to control Medicare's payments to nursing facilities has resulted in patients receiving less care.
In 1998, Medicare implemented a prospective payment system (PPS) for skilled nursing services provided to Medicare beneficiaries. Under the system, Medicare pays skilled nursing facilities (SNFs) a daily rate to cover most skilled nursing and rehabilitation services provided to a patient during each day of a Medicare-covered stay. The rate is adjusted for the patient's expected care needs. The PPS is intended to control the growth in Medicare spending for such services.
One way nursing facilities who are being paid a flat rate can reduce costs is to provide less therapy, which appears to be what is happening. Two years after the PPS was implemented, the majority of patients in Medicare-covered rehabilitation received less therapy than was provided in 1999. The patients categorized into the two most common (high and medium) rehabilitation payment group categories typically received 30 minutes less therapy during their first week of care, a 22 percent decline. Across all rehabilitation group categories, fewer patients received the highest amounts of therapy associated with each group.
To download the GAO report, "Skilled Nursing Facilities: Providers Have Responded to Medicare Payment System by Changing Practices," GAO-02-841 (23 Aug 2002), go to: https://www.gao.gov/new.items/d02841.pdf