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MedPAC plans to study whether fee-for-service Medicare payments for skilled nursing facilities and home health accurately reflect patients’ needs and care costs. Commissioners raised concerns about coding incentives, ownership structures and access for high-cost patients, but the analysis is designed to identify trends, not prove that payment policies caused provider behavior.
The Medicare Payment Advisory Commission (MedPAC) plans to investigate whether fee-for-service Medicare payments for skilled nursing facilities and home health accurately reflect patients’ clinical needs and the cost of care. At its October meeting, commissioners urged researchers to examine possible coding distortions, financial incentives and patient selection, with initial results expected in fall 2027.
The planned analysis will cover 2021 through 2025 and examine trends in coding, case mix, payment-to-cost relationships and the distribution of patients among providers. Researchers will assess whether those patterns appear consistent with payment incentives, while also considering factors such as facility specialization, ownership and workforce pressures. MedPAC advises Congress on Medicare policy; it does not itself set payment rates.
Commissioners raised questions about for-profit providers and complex ownership structures, including the possible role of private equity. Commissioner Scott Sarran said ownership arrangements in nursing facilities had become increasingly complex and that private equity was involved in some cases. He also cautioned that growing medical needs can increase demand for rehabilitation and post-acute care, and asked researchers to account for barriers to access as well as payment accuracy.
Commissioner Kenny Kan warned that providers may be using artificial intelligence to increase coding intensity or reported patient complexity in ways he considers inappropriate. He said researchers should seek ways to improve payment accuracy using existing claims and assessment data, rather than adding documentation or reporting burdens. These comments were concerns raised during the meeting, not findings established by the planned study.
Payment Rules and Patient Access
The study could help inform future decisions about whether Medicare’s payment methods match the clinical complexity and cost of care in skilled nursing and home health. If payment and cost patterns differ across providers or types of patients, the findings may help policymakers identify where further review is warranted. The analysis could also examine whether financial pressures coincide with facility closures or fewer available beds, issues that may affect access to post-acute care.
Patient distribution alone, however, cannot show that providers are selecting patients for financial reasons. A facility may admit more people with a particular condition because it has relevant staff or equipment. Researchers’ challenge will be to distinguish those clinical and operational explanations from patterns that may be consistent with payment incentives.
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How MedPAC Plans to Test Payment Accuracy
MedPAC’s work plan is intended to assess whether Medicare payments reflect patient complexity and provider costs. Researchers will examine claims and assessment information across the study period and compare patterns involving coding, case mix and costs. Commissioners also suggested examining differences within payment classification groups rather than relying only on average costs, and comparing for-profit and nonprofit providers.
Researchers have heard concerns that skilled nursing facilities may be reluctant to admit some high-cost patients. The planned work will assess whether potentially unprofitable cases are spread across facilities or concentrated in particular providers. Commissioners stressed that such comparisons need to account for specialization: a facility with on-site dialysis, for example, may appropriately care for more dialysis patients, while one with bariatric equipment may be better equipped to serve patients with obesity.
Commissioner Cheryl Damberg urged comparisons between for-profit and nonprofit providers, noting that past work had found differences and that for-profit entities historically had larger margins. She also said researchers should account for provider behavior and financial differences that existed before newer payment models. MedPAC researcher Brian Klein-Qiu said the analysis is designed to identify trends, not establish that payment reforms caused changes in coding, selection or provider conduct.
““Most especially nursing facilities, have become increasingly for profit in a variety of Byzantine ownership arrangements – and many of them characterized by private equity injected somewhere in the mix.””
— MedPAC Commissioner Scott Sarran
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What the Study Cannot Yet Establish
No findings from the planned analysis were presented in the source report, and the questions commissioners raised remain concerns to be tested. The work is not designed to prove that payment policies caused changes in coding, admissions or provider behavior. It is also unclear whether researchers will find patterns consistent with inappropriate coding or financially driven patient selection.
Even if facilities differ in the kinds of patients they admit, those differences may reflect clinical specialization, local arrangements or workforce constraints rather than financial motives. The source report does not give a detailed final study design or specify which comparisons will be possible from existing data.
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Results Expected in Fall 2027
MedPAC researchers are expected to continue the planned analysis of 2021–2025 data, including coding trends, payment-to-cost relationships and patient selection. Initial results are expected in fall 2027. The commission may use its findings to inform recommendations to Congress and the U.S. Department of Health and Human Services, but the report does not specify what policy changes, if any, will follow.
As the work develops, a key issue will be whether available claims and assessment data can distinguish financial incentives from appropriate differences in facility capabilities and patient needs—without imposing additional reporting burdens on providers.
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Key Questions
What is MedPAC investigating?
MedPAC plans to examine whether fee-for-service Medicare payments for skilled nursing facilities and home health reflect patients’ clinical complexity and care costs. The work will look at coding, case mix, payment-to-cost relationships and patient selection.
Has MedPAC found that providers are improperly coding patients?
No. Commissioners raised concerns about possible coding distortions, including possible AI use, but the planned analysis has not reported findings. Those concerns are questions for researchers to examine, not established conclusions.
Could patient selection reflect clinical needs rather than payment incentives?
Yes. Facilities may admit different patient groups because of specialized staff, equipment or other capabilities. Researchers plan to consider those factors when examining whether potentially high-cost patients are concentrated in particular providers.
When are initial results expected?
Initial results are expected in fall 2027. The analysis is set to cover data from 2021 through 2025.
Will the study show that Medicare payment rules caused provider behavior?
Not necessarily. MedPAC researcher Brian Klein-Qiu said the work is intended to identify trends, not establish that payment reforms caused changes in coding, patient selection or provider behavior.
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