Updated rules improve accuracy of nursing home payments

ANN ARBOR, Mich. - Federal Medicare payments to the nation's nursing homes will more accurately match the different levels of care that elderly patients require, under rule changes that have just been announced for implementation in 2010.

U-M researcher Brant Fries led the data analysis for a federally funded project that aims to set fairer payments for nursing home care. Some patients have conditions that require more extensive care than others. Since 1998, Medicare has reimbursed federally funded skilled nursing facilities using a case-mix classification system, Resource Utilization Groups or RUGs, that Fries developed to reflect these differences. The new analysis, called STRIVE, was launched in 2006 to update the RUG system to reflect changes in the nursing home population.

"We know that the characteristics of nursing home residents have changed in the last decade, for example with more individuals who have severe mental illness and serious disabilities. But we were surprised that the old system, with only a bit of modification, is still very effective in predicting the cost of care," says Fries, research professor in the U-M Institute of Gerontology and professor of health management and policy at the U-M School of Public Health. He is also chief of health systems research at the Veterans Affairs Ann Arbor Healthcare System Geriatric Research, Education and Clinical Center.

Fries has led the analysis of data for STRIVE, the Staff Time and Resource Intensity Verification Project. The Iowa Foundation for Medical Care led the study under a contract with the Centers for Medicare and Medicaid Services. The study involved assessments and careful time measurements for over 10,000 nursing home residents across the nation. Data from STRIVE also provide states with a basis for assessing and updating their Medicaid payment systems for nursing home care. More than half the states already use Fries' case-mix classification system for Medicaid payments.

Medicare nursing home costs in the United States are estimated at $26.4 billion for 2009. Medicare covers short-term skilled nursing and rehabilitation care for patients 65 and older. Many frail elderly rely on Medicaid to cover less intensive, longer-term nursing home care once their own financial resources are exhausted, with payments expected to total another $60.3 billion this year.

"With the current financial squeeze seen by the federal and state governments, it is more critical than ever that care for this vulnerable population is accurately reimbursed," says Fries. 


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