Medicare Advisor—Following definitions within RUGS categories.

Question: When a patient is seen for skilled services therapy in a RUGS category, for example Rehab High (325 minutes), is it necessary that the definition for that category be strictly followed? Once the therapists achieve the minutes, does the patient absolutely need to be seen for the specified number of days? Also, are there any specific guidelines on whether the patient needs to be seen on the day of discharge?

Answer: The answer to the first part of the question can be found in two different sources from the Centers for Medicare and Medicaid Services (CMS). The first source is in the Program Memorandum (PM) Transmittal No. A-00-08, Payment Safeguard Review of Skilled Nursing Facility Prospective Payment Bills — Updated instructions, dated March 2000. In this memorandum, CMS instructs its fiscal intermediaries (FI) on how to conduct medical review of skilled nursing facilities under the Prospective Payment System (PPS).

It states: "PPS payments are per diem rates based on the patient's condition as determined by classification into a specific Resource Utilization Group (RUG). This classification is done by the use of a clinical assessment tool, the Minimum Data Set (MDS) and is required to be performed according to an established schedule for purposes of Medicare payment. Medicare expects to pay at the rate based on the most recent clinical assessment, (i.e., MDS), until the next required assessment is due or until skilled care is no longer needed. This means that the level of payment for each day of the SNF stay may not match exactly the level of service provided."

With this statement, Medicare acknowledges and indicates to the FI that there are going to be times when they will be paying for services provided at a level less than the established RUG level, as well as for times when they will be paying a per diem for services provided at a much higher level. According to the transmittal, the determination of the appropriateness of provision of these services (i.e., minutes of services provided) will occur at the MR level when the FI will be deciding on medical necessity of the services based on "the observation, look-back periods relevant to the MDS(s), and supporting documentation for the claim period."

The number of days one discipline is provided needs to meet the RUG level requirement for the predominance of the stay. There may be occasions when, because of certain circumstances, the patient misses a day of treatment and that treatment cannot be made up. Here, the requirements of the RUG frequency will not be met—but the documentation must justify why this occurred. Should this become a standard practice with the patient, the question would be raised whether services were provided in the appropriate setting, risking denial for SNF stay. If treating residents for fewer than the RUG required days is found to be a standard practice for the facility, then it would represent a deliberate abuse of the system with possible subsequent investigation for fraud.

The second area that identifies this topic is in the Federal Register, Section K. RUG-III Groups in which CMS identifies that the RUG levels are not meant to impose "upper limits" on the therapist and that there is expectation that services will be provided according to the patient's need, not the RUG level.

In answer to your second question, there are no guidelines from CMS regarding rehab treatment on the day of discharge. Since the facility does not receive a per diem payment for the day of discharge, some companies have a policy stating the patient will not be treated in rehab on the day of discharge. This logic does not take into account that the facility is paid a rehab per diem for days on which the patient is not receiving rehab services (such as weekends). Further, if the facility withholds rehab on the day of discharge because there is no reimbursement, is this reasoning extended so that the patient does not receive nursing services, medicine and breakfast on that day? It is our belief that the determination of whether or not a patient should be treated on the day of discharge should be made by the therapist based on the needs of the patient.


HCFA. (2000). Program memorandum transmittal No. A-00-08: Payment safeguard review of skilled nursing facilities prospective payment bills — updated instructions. Washington, DC: Department of Health and Human Services.

Department of Health and Human Services. (July 30, 1999). Medicare program; prospective payment system and consolidated billing for skilled nursing facilities-update; final rule and notice. Federal Register, 64(146), 41643-41683.

  • If you have a question about Medicare reimbursement you would like the authors to address, send your question and contact information to Medicare Advisor, c/o Linda Jones, ADVANCE for PTs & PTAs, 2900 Horizon Dr., King of Prussia, PA 19406; fax (610) 278-1425; ljones@merion.com.

    Pauline Watts and Danna Mullins are the co-founders of and principal lecturers for Encompass Education Inc., a rehabilitation education and consulting firm in Palm Harbor, FL. Contact the authors at medicareadvisor@encompasseducation.com


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