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Regulatory reprieve

January 1, 2011
by Bob Gatty
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When the lame duck Congress last month gave a one-year reprieve to Medicare doctors who were facing a 25% payment cut this month, it also overturned a delay in the RUG-IV classification system and extended the therapy caps exceptions process for nursing home providers through the end of 2011.

“Our profession now has the tools to ensure that in 2011 we can continue delivering the comprehensive, complex and medically necessary health services America's seniors need and deserve,” said a statement by Bruce Yarwood, president and CEO of the American Health Care Association; Alan G. Rosenbloom, president of the Alliance for Quality Nursing Home Care; and Cynthia Morton, executive vice president of the National Association for the Support of Long Term Care.

The Centers for Medicare & Medicaid Services (CMS) also breathed a sigh of relief because the action meant that the agency will not have to create a temporary RUG-III hybrid system, which would have been the case had the provision not been included in the Medicare Extenders Act of 2010. “We're not going to have to reprocess [RUG-IV] claims,” said Sheila Lambowitz, director of the Division of Institutional Post Acute Care at CMS.

The problems resulted when Congress passed the Patient Protection and Affordable Care Act (PPACA), which postponed the implementation of the RUG-IV classification system until October 1, 2011, but required facilities to begin using the minimum data set (MDS) 3.0 a year earlier.

Last year, CMS issued a regulation making three key changes in the Skilled Nursing Facility (SNF) Medicare prospective payment system, which reimburses SNFs through Resource Utilization Groups (RUGs). The changes, to take effect October 1, 2010:

  • Refined the patient classification system, (RUG-III) with a new framework (RUG-IV).

  • Created the new patient assessment tool, MDS-3.0.

  • Changed the methodology to recognize concurrent therapy services times.

Bob Gatty
Bob Gatty


Long-term care providers were concerned about the potential effect of simultaneous implementation of both a new payment system and a new patient assessment tool, so they sought a one-year delay until October 1, 2011, for all three changes.

However, the PPACA only delayed implementation of RUG-IV, causing problems because MDS 3.0 and RUG-IV are linked and must be in place together. CMS said it did not have software to handle a dual system, and so would reprocess claims once hybrid software was in place. The action by Congress means this will be unnecessary.

Although total payments under the RUG-IV system do not change, the distribution of payments does change, with the number of groups increasing from 53 under RUG-III to 66 under RUG-IV, adding two new categories: Special Care High and Special Care Low.

Under the July 2009 rule, beneficiaries would be presumed to be qualified for Medicare Part A when they are classified to the upper 52 groups through Clinically Complex.

The RUG-IV categories from highest to lowest:

  • Rehab Plus Extensive Services (Ultra High, Very High, High, Medium, Low)

  • Rehabilitation (Ultra High, Very High, High, Medium, Low)

  • Extensive Services

  • Special Care High

  • Special Care Low

  • Clinically Complex

  • Behavioral Symptoms and Cognitive Performance

  • Reduced Physical function

The Activities of Daily Living (ADL) score continues to be an important component, and the intent of the new process was to standardize ADL levels across the RUG-IV categories, and to revise the scale to make it more sensitive to functional level differences.

The therapy caps exception has been passed by Congress since Medicare placed limits on physical therapy and speech-language pathology combined and for occupational therapy. Under that action, the patient covered the deductible and paid 20% coinsurance, with Medicare covering the remainder up to an annual cap, which was $1,860 in 2010.

To compensate somewhat for these coverage limits, Congress passed an exceptions process, which it has continued to extend as deadlines approach. Under the Medicare Extenders Act of 2010, the therapy cap exceptions were continued through December 31, 2011. LTL

Bob Gatty has covered governmental developments of the trade and business press for more than 30 years. He is founder and president of G-Net Strategic Communications, Sykesville, Maryland. Long-Term Living 2011 January;60(1):14

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