Reg's Blog

Senior and Post-Acute Healthcare News and Topics

SNFs, Therapy Companies, and Billing Risk

Readers, followers (Twitter, etc.) and folks who have attended one or more of my industry conference presentations know that I routinely harp on the “risk/reward” relationship between SNFs and therapy companies (the contract therapy provides).  Last year at LeadingAge’s annual conference in Dallas, the principals from Theracore Management Group and me did a full session on the differences between in-house vs. contracted therapy programs, focusing on the risk areas of contracted therapy programs in the SNF.  In a recent post on this site regarding SNF compliance issues, I covered this topic “briefly” again ( ). Just today, a daily briefing from McKnight’s reinforces “why” I harp on this subject as often as I can.  The article link is here:

Summarizing: Two SNF companies contracted with a division of RehabCare.  In the process of providing therapy services through the SNFs, RehabCare provided inappropriate levels of therapy services to residents covered by Medicare.  The problem here however, is that the liability for the inappropriate care and thus the repayment is the responsibility of the SNF, not the therapy company or in this case, RehabCare.  Why?  The provider of the service under the Provider Agreement with Medicare/Federal Government is the SNF, not the therapy company.  The SNF failed to exercise the required oversight to assure that the bills it was submitting to Medicare were accurate and clinically relevant.  As the same were not in this case, the Department of Justice on behalf of CMS collected $3.8 million in inaccurate payments.  The message (and one I HAVE POINTED OUT TIME AND AGAIN) is the SNF holds all the liability with respect to Medicare billing and the services/care provided.  This cannot be shifted to any contractor – therapy or other.  If the care is determined unwarranted or inappropriate, the SNF has the duty to identify the same, correct it, and file a notice with CMS to provide repayment.  Failure to do so opens the door for Civil Monetary Penalties and other damages, in addition to the amount inappropriately billed and received (see related posts on this site with regard to False Claims Act, Fraud, etc.).

In closing, I have five reminders/recommendations for SNFs on this subject area.  These are my standard “cautions” or action items in this arena but clearly, they bear repeating.

  1. Review in detail, your contract with your therapy provider.  The standard immunity clause in the industry is for the therapy company to immunize the SNF against the cost of therapy for any claim deemed inappropriate and thus, non-paid or requiring repayment from Medicare.  This language means that the therapy company will “write-off” the cost of the therapy services associated with the claim(s) to the SNF – a mere fraction of the overall revenue lost from the denied claim ($450 per day in revenue vs. $125 per day in therapy cost, for example).  The risk is that SNF can lose hundreds per day in this kind of contractual relationship.  Require shared risk agreements between your SNF and the therapy company.  For more on this concept, drop me a note in the comment section of this post with contact information and I’ll follow-up.
  2. Establish a “triple-check” system for all therapy related Medicare claims.  Don’t ever assume that any single claim or case doesn’t require a level of review beyond the RUG determined through the MDS process. This requires the SNF and the therapy company to review each claim.
  3. Have a member or group of members on your team that are MDS Bulls**t proof.  Get current on the MDS process (trained and ideally certified) and task that person or persons with periodic reviews of bills submitted and documentation.
  4. Utilize an outside resource to conduct periodic audits of your Medicare utilization, billed RUGs, etc. plus documentation.  Again, contact me for recommendations.  A few thousand is far “cheaper” than a few million.
  5. Never, never, ever dance the “happy dance” to higher revenue PPDs or greater billed volumes.  Take the skeptic approach which requires the question of, “why us”?  The old adage of something being too good to be true is right-on.  Any utilization pattern that is generating lots of days, lots of Ultra High days, high PPDs, etc. better be justified by your case-mix (high ortho, neuro, etc.) and lots of admission traffic.  If this isn’t reality, then the risk is high that the Medicare “envelope” is being pushed – and inappropriately so.

September 8, 2014 - Posted by | Skilled Nursing | , , , , , , , ,


  1. Hi Reg I was wondering if you would share your info on SNF and Therapy with me. Thank you Renee

    Sent from my iPhone


    Comment by Renee Halfhill | September 15, 2014 | Reply

  2. Reg, Do you have any information on the ICP demonstration project starting in Michigan in regards to SNF stays?

    Comment by Lynn | October 6, 2014 | Reply

    • Lynn:
      I do not. I do have some tangential information from Illinois as we have an office in the state and I do have some folks that follow the Integrated Care Program initiatives in other states. Michigan has not been on our radar as of yet. Anything in particular that you are interested in?


      Comment by Reg Hislop III | October 6, 2014 | Reply

      • Thanks Reg. I was looking for any information on the ICP as we begin the passive enrollment at the start of next year and are currently in the process of contracting with the various insurance companies. I really wanted to know how smooth of a transition it was for other states. Each forum I attend has more questions than answers and the implementation date will be here in the blink of an eye.

        Comment by Lynn | October 23, 2014

      • Lynn:

        Checking with the folks in my firm that follow ICPs, primarily in Illinois, the experience has been somewhat rocky. Illinois’ program was implemented in phases – the first being physician and core access services (emergency, lab, x-ray, etc.). Long-term care and HCBS came second. The State had a goal of getting 50% of their Medicaid, particularly the dual eligible into the program by 2015 – that number is not going to occur as access problems and provider participation in rural areas is still a struggle. The larger counties are ahead (Chicago region). A second and more pressing issue in Illinois is budgetary – the state’s Medicaid program is horrendously underfunded and principally broke as is the State. Here is a good report on Illinois’ Medicaid issues –

        The purpose of these programs primarily is to “save money” but the reality is, none of them have shown a real trend in bending the cost curve – perhaps too new but more likely, too ambitious. We have seen other states struggle as well particularly with information clearing (no central way to confirm participation and eligibility), different benefit interpretations among the insurers, different payment trends, different access and pre-qual issues, etc. In short, none of these have gone as initially touted. Feel free to ask more and I’ll endeavor to get additional information.


        Comment by Reg Hislop III | October 24, 2014

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