Nursing Homes Face New Medicare Reimbursement Methods

NYSSCPA Health Care Committee Chair Eric Holzberg

Beginning January 1, most skilled nursing facilities (SNFs) in New York needed to alter their billing methods for services provided under Medicare Part A to address changes in Medicare's reimbursement policy.

The Medicare services affected by the change usually cover the first 100 days of treatment in a nursing facility following a qualifying hospital stay lasting three days or more. In the past, Medicare reimbursed SNFs for the reasonable cost of providing the care, but now it bills on a prospective basis determined by the services provided. It is a pricing system, not a cost-reimbursement system.

"There is an opportunity here for CPAs and health care consultants to assist skilled nursing facilities in managing the transition to the new system, which is being phased in over a three-year period," NYSSCPA Health Care Committee Chair Eric Holzberg
(Westchester) said.

Committee member Christopher J. McCarthy (Westchester) explained the new system at the committee's December meeting. He cautioned that the new "consolidated" method (known as the Prospective Payment System, or PPS) is more than a change in how Medicare reimburses the facilities; it reflects a major shift in responsibility in contracting for the care.

According to McCarthy, before the change Medicare reimbursed nursing facilities for their costs but physicians and suppliers billed physician care, certain ancillary services such as radiology treatments or lab work, and special medical supplies and equipment directly to Medicare Part B. The nursing facility was not a party to the billing.

"Not so any longer," McCarthy said. "Except for physician services, physician extender services, and a few other excluded services, the Medicare payment, based upon the medical needs assessment of the patient, is payment in full for all that was done, including laboratory work or special supplies."

There are 44 categories of care, with a price for each service.

"The challenge to nursing facilities will be to manage all the services, including entering into contractual relationships with suppliers," McCarthy said. "I can see nursing homes negotiating with third parties to provide specific kinds of care."

Under the old system, nursing homes had no problems serving Medicare Part A patients. Physicians could order whatever tests and supplies they deemed necessary and Medicare usually paid the bill. Now the nursing facility must pay for virtually all tests, services, and supplies rendered to Part A patients. If the cost of rendering these services exceeds the prices paid for such services, the nursing facility could find itself with a financial loss.

McCarthy concluded his presentation by informing the committee that a switch to a similar program for Part B of Medicare is on hold until the Health Care Financing Agency and its payers (fiscal intermediaries and carriers) are Y2K compliant.

Holzberg noted that the Prospective Payment System will be one of the topics included in this year's Health Care Conference, scheduled for August 5 at the Holiday Inn Airport in Rochester and August 11 at the Sheraton New York Hotel and Towers in New York City. Watch future issues of The Trusted Professional for details. For more information on the committee's activities, contact James L. Craig, Jr., at (212) 719-8350, (800) 633-6320, or jcraig@nysscpa.org. *