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MedPAC commissioners discussed a work plan to examine whether fee-for-service Medicare payments for skilled nursing facilities and home health accurately reflect patients’ needs and care costs. The analysis will cover 2021–2025, including coding, provider ownership and patient selection; initial results are expected in fall 2027. The work is designed to identify trends, not prove that payment policies caused provider behavior.
The Medicare Payment Advisory Commission (MedPAC) is planning a study of whether fee-for-service Medicare payments for skilled nursing facilities and home health accurately reflect patients’ clinical needs and care costs. At its October meeting, commissioners urged researchers to examine coding accuracy, provider incentives and access to care, including whether financial considerations may influence which patients nursing homes admit.
The proposed work will analyze data from 2021 through 2025, examining trends in coding, case mix, payment-to-cost relationships and patient selection. Researchers will consider whether those patterns appear consistent with payment incentives, while also accounting for factors such as facility specialization, ownership and workforce pressures. Initial results are expected in fall 2027.
Commissioners raised concerns about possible inaccurate coding and the use of artificial intelligence to increase reported patient complexity. Commissioner Kenny Kan said he worries providers may be ahead of health plans in using AI to support “inappropriate coding intensity” and revenue-cycle optimization, which he said could contribute to higher health costs over time. He also urged researchers to rely on existing claims and assessment data where possible, rather than adding documentation or compliance requirements for providers.
Commissioners also asked the researchers to assess whether payment-to-cost patterns are associated with facility closures or fewer available beds. The work may compare for-profit and nonprofit providers and examine whether high-cost cases are concentrated in particular facilities. MedPAC’s researchers stressed that the study is intended to identify trends, not establish that payment changes caused shifts in coding, admissions or provider conduct.
How Payment Rules May Affect Access
Medicare payment accuracy matters to both program spending and patients seeking post-acute care. If payments do not reflect the resources needed to care for particular patients, facilities may face financial pressure; if coding or reported complexity does not accurately reflect care needs, payments may not track costs as intended. The planned study could help Congress and federal health officials assess these issues, although it will not itself change payment policy.
The patient-selection analysis is especially relevant to people discharged from hospitals who need skilled nursing care. Researchers have heard concerns that facilities may be reluctant to admit some high-cost patients. If the analysis finds that potentially unprofitable cases are concentrated at certain facilities, that could inform scrutiny of access and payment design. However, a difference in the patients facilities serve does not by itself show inappropriate selection.
Commissioners also want the work to account for the possibility that payment pressures coincide with reductions in beds or facility closures. Establishing whether such patterns are connected will require interpreting financial data alongside local conditions and providers’ clinical capabilities.
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MedPAC’s Planned Payment Review
MedPAC is a congressional advisory body that analyzes Medicare payment policies and recommends changes to Congress and the Department of Health and Human Services. Its work is intended to inform policy on payment accuracy, access, quality and the program’s long-term sustainability. The October discussion concerned a research work plan covering both skilled nursing facility and home health payment systems in fee-for-service Medicare.
Ownership and profit incentives were raised as questions for the research, not as findings of the study. Commissioner Scott Sarran described nursing facilities as increasingly for-profit and said some have “Byzantine ownership arrangements,” with private equity involved in some cases. He linked financial incentives to concerns about coding variability, while also pointing to medical advances that have increased the need for rehabilitation and post-acute care.
Sarran recommended that researchers distinguish fee-for-service Medicare from Medicare Advantage when examining payment incentives and patient selection. He also suggested interviewing hospital discharge planners to understand whether people with different clinical needs have equitable access to skilled nursing care.
““Most especially nursing facilities, have become increasingly for profit in a variety of Byzantine ownership arrangements – and many of them characterized by private equity injected somewhere in the mix.””
— MedPAC Commissioner Scott Sarran
Separating Incentives From Care Needs
The planned analysis has not yet established that providers are changing coding or admission decisions to increase payments. Researcher Brian Klein-Qiu said the work is intended to identify trends, not to prove that payment reforms caused changes in coding, patient selection or provider behavior.
Patient differences across facilities can have legitimate explanations. A nursing home with on-site dialysis may appropriately serve more dialysis patients, while a facility with bariatric equipment may be better suited to care for patients with obesity. Researchers must distinguish those clinical capabilities from admission decisions driven by financial considerations. The source material does not report study findings or quantify the scale of any suspected coding distortion, AI use or access problem.
Analysis Runs Through 2025
MedPAC researchers are expected to carry out the planned analysis using data covering 2021–2025, examining coding, patient complexity, costs, ownership and patient selection. The work may include comparisons between for-profit and nonprofit facilities, as well as investigation of whether payment-to-cost relationships coincide with closures or bed reductions.
The next stated milestone is the release of initial results in fall 2027. Those findings are expected to inform MedPAC’s advice to Congress and HHS; no specific payment recommendation or policy change has been announced in the source material.
Key Questions
What is MedPAC planning to study?
MedPAC plans to examine whether fee-for-service Medicare payments for skilled nursing facilities and home health reflect patients’ clinical complexity and care costs. The work will look at coding, case mix, payment-to-cost relationships and patient selection.
Does the study show that nursing homes are upcoding patients?
No. Commissioners raised concerns about coding accuracy and possible financial incentives, but the planned research has not reported findings. Researchers say the analysis is intended to identify trends, not prove that payment policies caused particular behavior.
When are findings expected?
The analysis will cover data from 2021 through 2025, with initial results expected in fall 2027.
How will researchers assess patient selection?
They plan to examine whether potentially high-cost or unprofitable cases are distributed across facilities or concentrated in particular providers. They will also need to account for clinical specialization and other reasons facilities may serve different patient groups.
Will this work change Medicare payments?
No payment change has been announced. MedPAC advises Congress and HHS; its analysis may inform future recommendations, but the study itself is not a payment-policy decision.
Source: rss
