OIG Report Threatens Current CAH Swing-Bed Reimbursement Method

By: Ralph Llewellyn

On March 9, the Office of Inspector General (OIG) released the much anticipated report on swing-bed reimbursement in the Critical Access Hospital (CAH) setting. As expected, the OIG was highly critical of the reimbursement methodology for swing-beds in the CAH setting. In the report, the OIG estimated that Medicare could have saved $4.1 billion over a six-year period if the services had been reimbursed under the SNF PPS methodology. The OIG goes on to recommend that CMS seek legislative action to convert CAH swing-bed reimbursement to the SNF PPS methodology.

The report indicates that CMS agreed that swing-bed utilization in CAHs has increased, but did not agree with the recommendations. CMS raised concerns about the study's methodology for calculating savings and on the availability of skilled nursing services at nearby facilities. According to CMS, the findings overstate the savings by not taking into account the level of care needed by swing-bed patients, transportation costs to alternative facilities and the use of point-to-point mileage instead of actual road miles. CMS was also concerned about the methodology to determine the availability of alternative skilled nursing services findings on the availability of skilled nursing services at nearby facilities. The OIG considered the comments, but maintained their findings and recommendations were valid. 

How Accurate are the Findings?

The report is essentially another assault by the OIG on the CAH program, similar to the earlier reports recommending the removal of necessary provider CAHs permanent exemption from the mileage requirement and the report on CAH coinsurance. As in the previous reports, we are concerned about the accuracy of the findings and potential ramification of access to care for our elderly population if these ill-guided recommendations are adopted.

As noted by CMS, the OIG's calculations are based on average reimbursements without any consideration as to the differences in level of care between skilled services rendered in CAHs versus providers subject to the SNF PPS methodology. Since SNF PPS reimbursement varies significantly based on the level of care, the failure to consider this potential impact is concerning at best. The study also failed to address other factors such as average number of days for patients in the CAH swing-bed setting, quality between the two settings, travel costs to alternative providers, etc. These factors can all have an impact on the financial analysis, but were not considered.

The other glaring oversight in the report was the OIG's failure to address the impact such a change in reimbursement methodology would have on the inpatient CAH services. Under the current cost-based reimbursement methodology for swing-bed services, the cost per day for room and board is calculated in a manner that treats all acute and swing-bed days equally. However, under the PPS reimbursement methodology for swing-bed services that was in effect for CAHs for cost report years beginning prior to July 1, 2002, the cost for swing-bed was carved-out under the state-wide Medicare swing-bed rate. This resulted in a much higher inpatient acute per diem. If CMS were to seek legislative authority to move back SNF PPS reimbursement for CAH swing bed, there would be a significant increase in the calculated inpatient per diems for acute care. The additional cost that would be absorbed by CMS in the acute care setting would significantly reduce any potential savings calculated by the OIG.

CMS concerns about the access to alternative skilled nursing providers within the area appear to be warranted. Based on our experience working with critical access hospitals throughout the country, we believe that a significant number of facilities do not have alternative providers nearby. The OIG did little to support its argument that its sample was representative of the population.

Contact Congress to Protest

While there are significant questions surrounding the methodology and accuracy of the findings, the report constitutes a real potential danger to the CAH program and their patients. Providers are encouraged to contact their congressional representation to discuss the weaknesses in the methodology used by the OIG to develop its findings and recommendations. We need our leaders in Washington to understand that the calculated financial savings are overstated, the potential impact to our elderly is understated and the assault on CAHs by the OIG must be stopped.