OIG targets swing-beds at critical access hospitals, pitches reimbursement cut

Office of the Inspector General report said Medicare could have saved $4.1 billion between 2005 and 2010 if critical access hospitals were being paid for swing-bed skilled nursing services at the same rates as skilled nursing facilities.

Federal healthcare watchdogs are trying to convince Medicare that “swing beds” at critical access hospitals should be reimbursed at lower skilled nursing rates.

The Department of Health and Human Services’ Office of the Inspector General in a new report said Medicare could have saved $4.1 billion between 2005 and 2010 if critical access hospitals were being paid for swing-bed skilled nursing services at the same rates as skilled nursing facilities.

Currently, Medicare pays critical access hospitals 101 percent of their reasonable costs for healthcare services, including “swing-bed” services that provide seniors with skilled nursing care for conditions like stroke, Parkinson’s disease or infections.

The OIG, however, believes that kind of skilled nursing care could be reimbursed at a lower cost, whether at critical access hospitals or other facilities.

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Auditors with the OIG sampled data from 100 critical access hospitals and found that 90 had alternative facilities within a 35-mile radius with skilled nursing care available. Swing-bed usage at critical access hospitals, the OIG said, “significantly increased” 2005 through 2010 — with related swing-bed spending increasing on average four times as much as the costs of similar services at alternative facilities.

The OIG is recommending that the Centers for Medicare & Medicaid Services seek legislation that allow Medicare to adjust critical access swing bed reimbursement rates and bring them in line with skilled nursing facility payments.

CMS leaders disagree with this idea and claim the report “overestimates savings by failing to incorporate important factors such as the level of care needed by swing-bed patients, transportation fees to alternative facilities, and the use of point-to-point mileage distances instead of road miles.”

The American Hospital Association also cast criticism on the OIG’s recommendations. The OIG report “demonstrates an unfortunate lack of understanding of how healthcare is delivered in rural communities,” said AHA senior associate director of policy Priya Bathija. “It inappropriately focuses on potential savings Medicare could realize, rather than the needs of individuals living in rural America.”

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Bathija also reiterated the AHA’s support for “maintaining the CAH program as it is currently structured,” the issue being a perennial interest to budget hawks such as OIG auditors.

In both 2013 and 2014, the OIG suggested that Congress should allow CMS to review the designation of the nation’s 1,300-some critical access hospitals and consider removing the special protection for the almost 1,000 hospitals with a state-ordered “permanent exemption.”

Skilled nursing swing rates a moving target

Among the trends in critical access hospital care, the rise of swing-bed use started after a 2002 Medicare exemption of critical access hospital swing services from the skilled nursing facilities prospective payment system. The decision encouraged critical access hospitals to close skilled nursing facility units but keep providing similar care through swing-beds, according to a study led by John Gale, at the Maine Rural Health Research Center.

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From 2004 through 2007, 42 critical access hospital closed their skilled nursing units, although many chose to keep operating dedicated units. In 2010, there were 456 critical access hospitals operating their own skilled nursing facilities and getting paid at the lower reimbursement.

Gale and colleagues found that most of the critical access hospitals that closed their skilled nursing facilities did so because of financial challenges such as pay mix and because of the local availability of alternative long-term care. They could then use swing-beds for similar care as-needed, such as for rehabilitation post-inpatient stay or intravenous antibiotic treatment.

Critical access hospitals that continued to operate skilled nursing units “were driven primarily by community need, despite the financial disincentive for doing so,” Gale and colleagues wrote. “Most hospitals provided services in dual certified beds and were able to provide LTC services to a range of Medicare, Medicaid, and private pay patients.” Four of the hospitals interviewed were the primary source of skilled nursing and other long-term care services in the community, within at least 15 miles. 

Twitter: @AnthonyBrino