‘Byzantine Ownership Arrangements’: Calls To Scrutinize Coding And Profit Incentives In Nursing Home Medicare Payments

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MedPAC commissioners have urged researchers to examine whether coding practices, payment incentives and provider ownership patterns affect Medicare payments and access to skilled nursing care. The analysis will cover 2021–2025, and initial results are expected in fall 2027; the commission says it is looking for trends, not proving that payment policy caused them.

The Medicare Payment Advisory Commission (MedPAC) is planning an analysis of whether Medicare payments accurately reflect patient needs and care costs in skilled nursing facilities and home health, after commissioners called for scrutiny of coding, financial incentives and access to care. The review will examine data from 2021 through 2025, with initial results expected in fall 2027.

At its October meeting, the commission discussed a research work plan covering fee-for-service Medicare payment systems for skilled nursing facilities (SNFs) and home health. Researchers will examine trends in coding, case mix, payment-to-cost relationships and patient selection, and assess whether those patterns appear consistent with payment incentives. They will also consider facility specialization, ownership and workforce pressures.

Commissioner Scott Sarran raised concerns about the growth of for-profit nursing home providers and ownership structures that can include private equity investment. He said care may respond to financial incentives, while stressing that researchers should also account for medical advances that increase demand for rehabilitation and post-acute care. Sarran urged the commission to distinguish Medicare fee-for-service from Medicare Advantage and suggested interviewing hospital discharge planners about whether patients with different clinical needs have equitable access to SNF care.

Commissioner Kenny Kan warned that providers could use artificial intelligence to intensify coding or reported patient complexity to increase revenue. He asked researchers to focus on improving payment accuracy with existing claims and assessment data, rather than adding documentation or compliance requirements for providers. Researcher Brian Klein-Qiu said the project is designed to identify trends, not to establish that payment changes caused shifts in coding, patient selection or provider conduct.

Payment Patterns Could Affect Access

The review matters because Medicare payment methods can influence how providers report patient needs and which patients they accept. If payment-to-cost patterns are linked to decisions about admission, the findings could help policymakers assess whether patients with complex or costly needs have comparable access to skilled nursing care.

Researchers have heard concerns that some SNFs may be reluctant to admit patients whose care is expensive. The planned analysis will examine whether potentially unprofitable cases are spread across facilities or concentrated in particular providers. Commissioners also want researchers to consider whether payment pressures are associated with facility closures or fewer available beds, which could affect local access.

Any differences among facilities will require careful interpretation. A facility’s patient mix may reflect its clinical capabilities, not a financial decision to avoid certain cases. The commission’s findings could inform recommendations to Congress and the Department of Health and Human Services, but the work plan itself does not announce a change to Medicare payment policy.

How MedPAC Will Read the Data

MedPAC is a nonpartisan advisory body that analyzes Medicare payment policy and recommends changes to Congress and the U.S. Department of Health and Human Services. Its role is to help inform decisions about payment accuracy, access, quality and the program’s sustainability; it does not set Medicare rates through this research project.

Commissioners said comparisons should account for differences between for-profit and nonprofit providers and for patterns that predate newer payment models. Commissioner Cheryl Damberg recommended comparing those provider groups, noting that earlier work had found differences and that for-profit entities historically had larger margins. Commissioners also urged researchers to examine cost variation within payment classification groups rather than relying only on averages.

Specialization is another factor. A facility with on-site dialysis may appropriately care for more dialysis patients, while a facility with bariatric equipment may be better prepared to treat patients with obesity. Researchers will need to separate these clinical explanations from possible financial incentives when interpreting admission patterns.

““The care responds to the incentives.””

— MedPAC Commissioner Scott Sarran

What the Analysis Cannot Yet Show

The work plan is not a finding that providers are improperly coding claims or selecting patients for financial reasons. MedPAC researchers have not yet reported results, and the proposed analysis is intended to identify patterns rather than prove that payment rules caused them.

It is also unclear whether differences in patient mix reflect payment incentives, appropriate specialization, local provider arrangements or other factors. Commissioners have asked researchers to consider these explanations, along with workforce pressures and historical differences between provider types. The project’s early results will not be available until fall 2027.

Results Expected in Fall 2027

Researchers are expected to analyze 2021–2025 trends in coding, case mix, costs, payments and patient selection, while considering ownership, specialization and workforce conditions. The work will also examine whether payment-to-cost relationships appear associated with facility closures or changes in bed availability.

MedPAC has not announced a specific policy recommendation arising from the project. After the analysis is presented, commissioners can consider whether its findings support recommendations to Congress or HHS. Until then, the questions raised at the October meeting remain subjects for study, not established conclusions about provider conduct.

Key Questions

What is MedPAC planning to investigate?

MedPAC plans to study payment accuracy in Medicare fee-for-service skilled nursing facility and home health systems, including coding, case mix, payment-to-cost relationships and patient selection.

Does the work plan prove that nursing homes are manipulating coding?

No. The commission has not reported findings of improper coding. Researcher Brian Klein-Qiu said the analysis is intended to identify trends, not establish that payment reforms caused changes in coding or provider behavior.

Why are commissioners concerned about patient selection?

Researchers have heard concerns that SNFs may be reluctant to admit some high-cost patients. The planned work will assess how potentially unprofitable cases are distributed, while accounting for clinical specialization and other explanations.

When are initial results expected?

MedPAC’s initial results are expected in fall 2027. The planned analysis covers data from 2021 through 2025.

Will the study change Medicare payments?

The work plan does not itself change Medicare payments. MedPAC advises Congress and HHS; any future policy changes would depend on subsequent recommendations and decisions by policymakers.

Source: rss