To respond to this request, we addressed the following questions:
How have SNF costs and use grown in relation to hospital use? Do patients in SNFs granted exceptions receive appropriate care? To address whether HCFA’s RCL exception process ensures that SNFs granted exceptions actually furnish atypical services, we reviewed HCFA’s statutory authority and responsibilities for establishing and administering Medicare’s SNF RCL exception process and HCFA’s regulations and guidance to intermediaries for reviewing exception requests filed by SNFs. To assess whether the care Medicare beneficiaries received in SNFs granted exceptions was appropriate, we asked officials in the SNFs we visited to identify a universe of their Medicare patients who they believed needed or likely needed more intense or complex care. SNF Use Increased as Hospital Length of Stay Decreased

The average length of hospital stay for Medicare patients has gone down since the prospective payment system (PPS) was introduced in 1983. At the same time, SNF use has gone up, indicating that some substitution of SNF care for hospital care has occurred under PPS. Average length of hospital stay has decreased more for those patients whose diagnoses are more likely to lead to a SNF admission. Moreover, for patients with these diagnoses, hospitals with a SNF unit saw even larger decreases in average length of stay than hospitals without a SNF unit. Table 2.1 shows for fiscal years 1983 through 1995 the number of discharges from hospitals and admissions to SNFs along with the average length of stay in each setting. Patients and Services Appear Similar in SNFs With and Without Exceptions

Because SNFs with exceptions are supposed to be furnishing atypical services, they might be expected to have a higher proportion of patients requiring more nursing assistance or more complex care than SNFs without exceptions. Patients in Both Groups Were Similar in Several Characteristics We Examined

When comparing data about the characteristics of residents in SNFs that received exceptions and SNFs that did not, we found that facilities in both groups care for some Medicare patients who required complex care. Therefore, treating a higher proportion of Medicare patients will usually get a SNF past the benchmarks, but this does not mean the patients require atypical services. This was an expected result of Medicare’s hospital PPS. Almost all exception requests claim that routine costs are higher than the RCL because the SNF provides atypical services. Moreover, the patient-specific information submitted with exception requests is not used to evaluate them.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed: (1) the growth of skilled nursing facility (SNF) costs and SNF use in relation to hospital use; (2) the characteristics of Medicare SNF patients and the types of services they receive in SNFs being paid higher than normal amounts compared to other SNFs, as well as whether patients in such facilities receive appropriate care; and (3) whether the Health Care Financing Administration's (HCFA) process for assessing requests for higher payments ensures that only SNFs furnishing atypical services are granted exceptions.

What GAO Found

GAO found that: (1) SNF use has increased since 1983 when the Medicare hospital prospective payment system (PPS), which pays a predetermined amount per hospital discharge, was introduced and gave hospitals a financial incentive to shorten lengths of stay; (2) the average length of hospital stay for Medicare patients has decreased from 10 days in 1983 to 7.1 days in 1995, indicating that, as expected, some substitution of SNF care for hospital care has occurred; (3) the average length of hospital stay decreased more for those Medicare patients whose diagnoses were more likely to lead to a SNF admission, such as hip fractures, than for Medicare patients as a whole; (4) considering patients with these types of diagnoses, hospitals with SNF units saw larger decreases in the average patient length of stay than did hospitals without SNF units; (5) the increasing number of SNFs granted routine cost limit (RCL) exceptions and the resulting additional payments, almost $100 million in fiscal year 1995, has contributed to the growth in Medicare SNF costs; (6) contrary to expectation, GAO did not find that SNFs with exceptions had a higher proportion of patients requiring complex care than SNFs without exceptions; (7) patients identified as requiring complex care by the medical records GAO reviewed, and who reside in SNFs granted exceptions, were generally provided appropriate care; (8) HCFA's review process for RCL exception requests does not ensure that SNFs actually provide atypical services to their Medicare patients; (9) HCFA's exception screening benchmarks basically take into account only whether requesting SNFs treat a higher than average proportion of Medicare patients; and (10) the patient-specific information obtained from requesting SNFs is generally not used to assess whether the Medicare beneficiaries need or receive atypical services.