Review of Complaints Which Caused Three Nursing Homes to Withdraw from the Medicare Program

Published by the Government Accountability Office on 1977-09-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                               ,~rtb er SC
                             DOCURENT RESUME
 63493 -   A2553675]
 [Review of Complaints Which Caused Three Nursing Homes to
 Withdraw from the Medicare Program]. HRD-77-137; B-164031(4).
 September 9, 1977. Released September 12, 1977. 7 pp.
 Report to Sen. Strom   T hurmond;
                                     by Elmer B. Staats, Comptroller
Issue Area: Health Programs: Compliance with Financing Laws
     Fegulaticns (1207).
Contact:   uian Resources Div.
Budget Function: ealth: Health Care Services (551).
Organization Concerned: Blue Cross of South Carolina; Blue
    Shield f South Carolina; Department of Health, Education,
    and Welfare; Social Security Administration.
Congressional Relevance: Sen. Strcm Thlrmond.
Authority: Social Security Act.

          Complaints made by three nursing homes in South
 Carclina involved many of the same issues which have caused
 cther nursing hcmes to withdraw from the edJcare nproaram
 past. The most important criticism of the program r +hnt in the
 Medicare's payment of services already provided may be denied
the intermediary determines that the services were not           if
necessary. his problem can only be eliminated by liberalizing
 Medicarces law and regulations. Findings/Conclusions: The
Honorage Nursing Center and the Commander Nursing Home in
Florence, South Carolina, and the Hampton Nursing Center
Sumter, South Carolina, all complained of the large amountin
paperwork required by the edicare program. A cursory review
the forms and documents required showed the paperwork to be of
voluminous and frequent, but necessary to control of the
program. The nursing homes also complained that the
guidelines do not allow for adequate compensation of Medicare
cwner-administrator of the homes. The amount of money the
allowed due to limitations on compensating the
owner-administratcr does not seem significant, since the
administratcr's salaries are a small part of the nursing
total cost. 711 three of the hcmes complained of the uncertainty
of the intermediary's decisions with regard to the necessity
the medical services and the level of care provided and f      of
possible financial losses which could result from losing     the
waivers of liability. (SC)                                 their
,I (.   ,.COMFROLLER                   (.LNERAL OF TH I   NITED SriATIS                  ,
                                      WASHINGTON. D.C                                ,

                                                                  SEP 9     1977

OWN          B-164031(4)   RESTRICTED        Not to be released        utside the Generdf
                           Accounting Office except on t      basise of specific approval
                           by the fr;ce of Cong. ens;0onnI        nr

             The Honorable Strom Thurmond
             United States Senate

             Dear Senator Thurmond:

                  We visited the three nursing homes in South Carolina
             mentioned in your October 8, 1976, ltter, and discussed
             with management their complaints which led to their
             withdrawal from the Medicare program. We also talked to
             Blue Cross and Blue Shield of South Carolina officials who
             were responsible for reimbursing these nrsing homes.

                  These complaints involve many of the same issues that
             caused other homes to withdraw from the program in t':e
             past. We believe that the major reason for withdrawing
             from Medicare is the risk of financial loss if it is
             determined that the health care provided a beneficiary was
             unnecessary.  This risk can only be eliminated by changing
             the Medicare law and regulations.

                 Although these three nursing homes withdrew from the
            Medicare program, the total number of homes participating
            in the program, nationwide, has remained about the same.


                  The primary purpose of a skilled nursing facility is
             to provide skilled nursing care for inpatients or enabil-
             itation services for the injured, sick, or disabled.

                 The Social Security Act provides for Medicare payments
            to skilled nursing facilities based on the reasonable "cost"
            of services. Payments based on this method can not include
            profits, although proprietary institutions are allowed a
            return on equity.  The act authorized the Secretary of
            Health, Education, and Welfare to prescribe regulations
            establishing the methods to be used in determining
            reasonable co£- '


Medicare payments are made eithe direcUly  by the Government
or by an intermediary selected by the provider of services.
The homes we visited had selected Blue Cross and Blue Shield
of South Carolina as their intermediary.

     To qual.fy for skilled nursing care, a patient must
have stayed for medical reasons in a hospital for at least
3 consecutive days and mst be admitted to the skilled
nursing facility within 14 days of discharge from the hospital.
The patient must need and receive a skilled level of nursing
care; custodial care is not covered.

     The facility is responsible for deciding the level of
necessary care on admission and this decision must be
certified by a doctor. For continued coverage, a doctor
is required to recertify the necessity of skilled nursing
services within 14 days after admission. Subsequent
recertifications must be made at least every 30 days.

     The intermediary is responsible for reviewing if, and
for how long, the patient needs skilled nursing care and
may determine that some or all of the care should not be
covered by Medicare.

     Under Medicare regulations, a skilled nursing facility
may be reimbursed for noncovered services if it makes at
least 90 percent of its covered care decisions correctly
and meets other conditions, such as timely submittal of
admission notices. In this situation, Medicare will accept
liability for an incorrect decision and pay the facility.
If the error rate is greater than 10 percent  the facility
loses its "waiver of liability" and must bear the cost of non-
covered services for at least the following 60 days, with
no right to reimbursement from the patient. It may regain
its waiver status if the intermediary determines that at
least 90 percent of the facility's covered care decisions
are correct during the 60 days following the date it lost
its waiver.

     As of February 1977, there were about 4,000 skilled
nursing facilities participating in Medicare.  Payments
to skilled nursing facilities for fiscal year 1976 amounted
to about $264 million.

                         - 2-
B-164031 (4)


     We discussed the complaints made by Honorage Nursing
Center and CommaTrder Nursing Home in Florence, South
Carolina, and Hampton Nursing Center in Sumter, South
Carolina with the owner-administrator or manager.

     All three complained of the large amount of paperwork
required by the Medicare program.  A cursory review
forms and documents required showed the paperwork to of
voluminous and frequent.

     Although the requirements are time consuming, we
believe they are necessary to control the program. We
discussed this problem with intermediary officials, and
they said that they considered either reducing the number
of required forms or combining scme of them, but determined
that no changes can be made.

     The nursing homes lso complained tt.at the Medicare
guidelines do not allow for adequate compensation of the
owner-administrator. In 1976, two were allowed $6,500,
and one was allowed $18,000. According to a Medicare Bureau
official, these amounts were based on the intermediaLy's
recent studies of salaries paid to nonowner-administrators
in the Bureau's Atlanta region in accordance with Medicare
regulations.  Bureau officials said that these salaries
were in the upper range for this region and are liberal
for the area of South Carolina where the homes are

     Since the administrators' salaries are a small part of
the nursing homes' total cost, and an average of only about
4 percent of the homes' patient days were for Medicare
beneficiaries, the amount of money not allowed due to
limitations on compensating the owner-admiristrator does
not seem significant.

     The nursing homes complained that their patients'
use f Medicare was too low to ustify the time needed
to Prepare the required paperwork. The intermediary
said that the nursing homes discourage Medicare usage
bv their patients because they are afraid of making


incorLect level-of-care decisions which could cost them
money. The homes also said that they receive less reim-
bursement for their services from Medicare than they
receive from Medicaid or private patients. Officials of
all three facilities said they believed the Medicare law
was too restrictive in its reimbursement for services
because profit was not allowed. They also stated tha: they
discouraged the use of Medicare coverage by prospective
patients if the individual also qualified for Medicaid.
None of the three had difficulty filling their facilities
with Medicaid and private patients. Therefore, there was
little incentive to secure Medicare patients.

     The nursing home officials said that nursing review
teams sent by the intermediary sometimes overrule the
medical-necessity determinations of doctors. This
upsets the nursing homes because it affects their error
rates and upsets the doctors because it offends their
professional pride.   The intermediary officials said that
physicians' decisions are overruled, not because of
professional judgment, but because the physicians do not
understand Medicare program criteria. They added that
their nursing review teams' decisions were reviewed by
intermediary physicians.
     Complaints by two of the nursing homes that the
intermediary was consistently late in paying them or pro-
cessing case information were not substantiated by case
files we reviewed,
     Officials of two nursing homes stated that the Medicare
program provides little benefit to beneficiaries regarding
skilled nursing coverage. They said that when skilled care
is no longer needed by Medicare standards, Medicare coverage
ceases because the program does not reimburse for custodial
services. Tey feel the beneficiaries do not receive enough
coverage to pay for their full ecovery at the facility,
even though the physician recommends continued service.
In addition, there are Medicare patients whose doctors
recommend nursing care following hospitalization, but whose
conditions do not meet the program criteria for skilled
care. In these cases, either the beneficiary or another
program must pay fox the services.

                           - 4-

     All three homes complained of the uncertainty of
the intermediary's decisions and possible financial losses
which could result from losing their waivers of liability.
This appears to e the major reason why they left the
program. Two of the homes had lost their waiver status
becau3e they did not meet the 10-percent error rate
criteria. Although the losses involved for their last
fiscal year were less than $1,000, the fear of not being
reimbursed or services provided was of great concern.

     The Social Security Administration's statistics show
that as of July 1, 1976, 82 percent of the skilled nursing
facilities in South Carolina were on waiver, as compared
to 79 percent nationwide. Although the major reason for
the loss of waiver in the Medicare Bureau's Atlanta region
was that program data was submitted late; the error rate
was the major reason in South Carolina.

     Blue Cross and Blue Shield of South Carolina officials
said that they were beginning to review cases at an earlier
stage in the beneficiaries' stay than they had in the past.
This should reduce the possible losses of the facilities
for incorrect length-of-stay decisions. Also, they are
spoIsoring Medicare workshops to further educatL skilled
nursing facilities regarding Medicare coverage criteria
to try to improve the accuracy of the facilities' decisions.


     Our report, "Sizable Amounts Due the Government by
Institutions that Terminated Their Participation in the
Medicare Program" (B-164031(4), Aug. 4, 1972), discussed
the reasons why many skilled nursing facilities withdrew
from Medicare. We listed the nine most prevalent reasons
of nursing homes for ending thei. participation between
July 1966 and April 1970. The complaints made by the
three nursing homes in South Carolina are generally the
same as those reasons.

     We were concerned in 1972 that facilities continuing
to withdraw from Medicare could reduce the elderly's
access to needed health care. However, as shown below,
this treind seems to have leveled off.

   Skilled Nursing Facilities Participating in Medicare

Fiscal year       Number of facilities       Available-beds

   1976                    3,928                 309,800
   1975                    3,932                 287,500
   1974                    3,952                 294,Cj0.
   1973                  . 3,977                 287,600
   L972                    4,041                 291,600
   1971                    4,287                 307,500
   1970                    4,U56                 333,600
   1969                    4,849                 341,700
   1968                    4,702                 329,600
     The number of participating facilities has remaired
about the same since 1973, while the corresponding number
of available beds has increased slightly. Statistics for
1976 show that about the same number of skilled nursing
facilities joined the Medicare program as hose which left.

     The complaints made by the three nursing homes we
visited involve many of the same issues that caused other
nursing homes to withdraw from Medicare in the past. We
believe that the most important criticism of the program is
that Medicare's payment of services already provided may
be denied if the intermediary determines the services were
not medically necessary. As with most of the complaints,
the problem can only be eliminated by liberalizing
Medicare's law and regulations.

     Blue Cross and Blue Shield of South Carolina officials
have tried recently to reduce the effects of retroactive
denials and increase the facilities' understanding of the
Medicare program by (1) writing simplified covered-care
guidelines, (2) holding Medicare wrkshops, and (3) imple-
menting prepayment audits and reducing postpayment audits
to once a year. We believe that these steps should help
improve some o the problem areas mentioned above.

                          - 6-

     As your office requested, agency comments were not
obtained on this report. We will send copies to interested
parties and make copies available upon request.

                             Sin   ly   yo

                             Comptroller General
                             of the nited States

                         -   7 -