Question: "Will you explain how skilled nursing facilities can receive adequate reimbursement under the new Medicare prospective payment system?"

— Submitted by Sharon Kleive, RN, Duluth, MN

Answer: Glenda J. Motta, BSN, MPH, ET, president of GM Associates in Mitchellville, MD, says in order to receive adequate reimbursement, skilled nursing facilities must understand the minimum data set (MDS), which is the driving force behind the prospective payment system (PPS).

The MDS consists of specific assessment items that are used to assess patients’ clinical conditions and needs. It’s a lengthy checklist. For example, section "M" has components related to skin and wound care focusing on stage of wound, type of wound, skin lesions, skin treatments, and so on. When a patient has a wound, the specific MDS items must be documented. The MDS is a multidisciplinary clinical tool. The physical therapist completes certain items, nurses complete others, the dietitian completes a part, and so does the social worker. It’s a group effort to do this comprehensive resident assessment, and teamwork is critical to success.

The data from your MDS are then converted to a resource utilization grouping (RUG). The needs of the individual as assessed determine which of 44 RUGs the patient fits into, and the RUG determines how much reimbursement you receive.

Every facility gets paid a different rate

Reimbursement under the PPS is divided into two parts: 25% of the reimbursement is a federal payment that is the same for that RUG all across the nation, and 75% of the reimbursement is a facility-specific rate that is administered by your facility’s fiscal intermediary, the insurance company that processes and pays the claim for Medicare Part A. The facility-specific rate is calculated according to your facility’s cost-reporting history. This system is designed to account for local variations in labor costs and materials costs, as well as factors such as the quantity of supplies purchased.

This means every nursing facility has its own rate of reimbursement. The federal part of the reimbursement rate is published; your facility’s fiscal intermediary can tell you what the rate is for your facility.

Next year, the federal-local payment ratio will become 50% federal and 50% facility-specific. In 2001, payment rates will be 75% federal and 25% facility-specific. By 2002, 100% of the reimbursement rate will be federal, which means the rate of payment will be the same in every nursing home. In effect, the government has said, "There are variations in costs, so we’re not going to hit you the first year with a federal government rate. We’re going to give you four years to complete this transition."

Some skilled nursing facilities are taking a financial hit from this. The government has admitted that in certain categories under the RUGs, the reimbursement rate just does not cover what is necessary, but they’ve effectively said: "Although we admit there are certain categories in which some residents’ needs are so complex that the reimbursement rate will not cover it, there are also categories under which the reimbursement rate more than covers other needs, and we expect that it will balance out." The best thing clinicians can do is to go through the documentation very carefully and know what the federal and facility-specific parts of the payment rate are for every RUG.

Cherry-picking’ is not the answer

A key concern is that facilities may "cherry-pick" by turning away prospective residents with complex needs and choosing instead to admit patients who are expected to be less costly. For instance, if you assess a prospective resident and see that the patient is taking 10 oral medications and intravenous antibiotics, and has an infected wound, it would be easy to decide not to admit that person because his or her care would be so expensive. After all, out of its payment rate a facility has to pay pharmaceutical costs, wound care dressings, therapy . . . everything has to come out of this rate! The government’s position is that facilities are going to win some and lose some in reimbursement, but the sum total will balance.

In about six months, there may be extensive hearings on Capitol Hill about what’s going on in nursing homes. The National Citizens’ Coalition for Nursing Home Reform, a big consumer group located in Washington, DC, follows quality of care in nursing homes. Its Web site, www.nccnhr.org, is an excellent one to monitor for this issue. Other good Web sites for information on reimbursement procedural changes are the American Health Care Association (AHCA) at www.ahca.org, the National SubAcute Care Association at www.nsca.net, and the Update Center for Long Term Care at www.longtermcare.com.

The AHCA, which is the lobbying group for the for-profit nursing homes, just published on its Web site the information it sent to HCFA showing that payment rates do not cover what they need to in order to pay for so-called "non-medical ancillaries," which include drugs, wound care supplies, and support services. Facilities used to bill for all of that separately, and they can’t bill for any of it now, so many facilities have responded by reducing utilization or discontinuing use of certain devices, wound dressings, and other things. They’re not using specialty dressings, they’re not using support services, wound care consultants, physical therapy. It’s the patient who’s the loser.

If you have a wound care-related question you would like to have answered, please send it to: The Wound Forum, c/o Wound Care, P.O. Box 740056, Atlanta, GA 30374.