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Are Skilled Nursing Facilities Fraudulently Billing Medicare?

A typical way that these skilled nursing facilities have falsely billed Medicare is by improperly utilizing the Resource Utilization Group (“RUG”) Rates.

By Vera Gruessner

Skilled nursing facilities are an essential part of improving the health among the elderly and the disabled. However, some skilled nursing facilities and rehabilitation centers have taken advantage of Medicare beneficiaries by fraudulently billing the Medicare program.

Medical Billing Claims

A typical way that these skilled nursing facilities have falsely billed Medicare is by improperly utilizing the Resource Utilization Group (“RUG”) Rates. The way this is done is by placing Medicare beneficiaries in higher levels of RUG categories in order to ensure the rehabilitation center receives larger amounts of reimbursement from the Medicare program. This also negatively affect Medicare beneficiaries since it leads to unnecessary therapies that could even harm the patients.

To learn more about fraudulent billing among skilled nursing facilities as well as other medical organizations, spoke with Brian Markovitz, a False Claims Act attorney at Joseph, Greenwald & Laake’s Civil Litigation Group. How common is it to see skilled nursing facilities commit fraudulent billing like the Resource Utilization Group (“RUG”) Rates issue?

Brian Markovitz: “My understanding is that it’s fairly common. I wouldn’t say that as quite a matter of course, but it’s close. It happens more often than people would think. It seems pretty rampant throughout the industry.”

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“A few years ago, HHS [the Department of Health and Human Services] essentially issued a warning in the federal register. There were five areas and one of the areas it talked about was the inappropriate use of these RUG rates. It’s been on the Health and Human Services Inspector General’s radar - it was 2009 when it came out - for several years. It’s been something they’ve been looking at.”

“They would only do that if it was pretty rampant. In my experience dealing with various therapists, it’s coming up more and more.” What steps has the Medicare program taken to prevent fraudulent  medical claims?

Brian Markovitz: “I know that they’ve issued the warnings. I know that they’ve put statements in the federal register. I do believe they’re assigning more agents to look into complaints that come into the fraud hotline, but outside of that more reactive, ‘forcing what’s on the books’ system, I’m not aware of them taking proactive steps other than having agents and putting other resources into investigations.”

“It certainly is cropping up in the False Claims Act area. There was just a settlement that came up not so long ago. In fact, there have been a couple recently in the last few months.”

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“The Justice Department has been getting involved too so they’ve been throwing resources into that as well. There was one settlement for $28 million and another one for $38 million.” Have skilled nursing facilities among other healthcare organizations committed fraudulent billing practices with health insurance companies as well? If so, how common is this?

Brian Markovitz: “I don’t know how well this is tracked so I couldn’t say for sure that that’s as prevalent. My thought is essentially if a facility is billing Medicare and Medicaid in this fashion, it’s just the standard way it does business. I would think that it would be just as common. It’s a matter of how things are billed and whether facilities have a private insurer or they have a government payer, it would be how the facility is operating.”

“Usually the way it works is there is somebody - often someone who’s bonus is tied to how much is billed - who puts a lot of pressure on therapists to bill the higher RUG rates. That’s leading to more time spent on medical care and more complex services performed more frequently. That’s how they do things as a matter of course and that could bleed its way into private insurance.” What methods can payers and providers take to ensure a prosperous, collaborative relationship that benefits both parties?

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Brian Markovitz: “The really important way to make sure that things run more smoothly is to make sure your compliance department is truly independent. If your compliance official is beholden to someone who is within the billing practice that puts pressure on them unnecessarily. That may not lead to as effective internal compliance. I think those two sections need to be very separate. There needs to be a wall between them so that if the compliance people go in to do an audit and find something that’s wrong, there won’t be pressure to take some of the edge off of it.”

“If you don’t listen to your compliance officer and they warn you about these things, then you may end up with a fraud case against you down the road. That to me seems to be one way to smooth things out so that way you’re billing accurately.”

“I see that time and time again that the compliance person can be neutralized and that’s unfortunate. I think that leads to all sorts of bad practices, including between the payers and the facilities.”


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