‘Byzantine Ownership Arrangements’: Calls To Scrutinize Coding And Profit Incentives In Nursing Home Medicare Payments

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MedPAC commissioners have backed research into whether Medicare fee-for-service payments for skilled nursing facilities and home health accurately reflect patients’ needs and care costs. The work will examine coding, provider incentives and patient selection across 2021–2025; researchers say it will identify trends, not prove that payment policies caused them. Initial results are expected in fall 2027.

The Medicare Payment Advisory Commission is planning an analysis of whether fee-for-service Medicare payments accurately reflect the clinical needs and care costs of patients served by skilled nursing facilities and home health providers. At its October meeting, commissioners urged researchers to examine coding accuracy, financial incentives and patient selection, including possible differences between for-profit and nonprofit facilities.

The planned work will study data from 2021 through 2025, examining trends in coding, patient case mix, payment-to-cost relationships and which patients providers admit. MedPAC researchers said the analysis will assess whether those patterns appear consistent with payment incentives, while also accounting for factors such as facility specialization, ownership and workforce pressures. Initial findings are expected in fall 2027.

Commissioners raised concerns that providers could use coding practices to increase reported patient complexity and payments. Commissioner Kenny Kan said he worried that some health systems and providers were ahead of health plans in using AI to support what he described as inappropriate coding intensity. He also urged researchers to identify ways to improve accuracy using existing claims and assessment data, rather than adding documentation or compliance work for providers.

Researchers stressed that the study is not designed to establish that payment changes caused shifts in coding, admissions or provider behavior. Brian Klein-Qiu said its purpose is to identify trends, not causation. Commissioners also cautioned that differences in the patients treated by facilities may reflect clinical capabilities rather than financial selection: a center with on-site dialysis, for example, may appropriately serve more dialysis patients.

Payment Incentives and Patient Access

The findings could inform how policymakers evaluate whether Medicare’s payment structure reflects the cost and complexity of care, and whether it creates incentives that affect which patients facilities accept. If certain high-cost cases are concentrated in particular facilities, or if payment-to-cost patterns are linked with closures or fewer available beds, that could help explain potential pressures on access. The proposed analysis will look for such patterns, but those associations alone would not establish that financial incentives caused them.

The debate also touches on ownership and profitability. Commissioner Scott Sarran pointed to increasingly complex ownership arrangements in nursing facilities, including private equity investment, and argued that care can respond to financial incentives. These were commissioners’ concerns and questions for the research, not findings that the planned study has already confirmed. The eventual results may give Congress and federal health officials evidence to consider when reviewing Medicare payment policy.

How MedPAC Will Test Payment Accuracy

MedPAC is a nonpartisan advisory body that analyzes Medicare payment policy and makes recommendations to Congress and the Department of Health and Human Services. Its work plan covers fee-for-service payment systems for skilled nursing facilities and home health; the discussion also included calls to distinguish those results from Medicare Advantage where relevant, because payment incentives and patient selection may differ.

Commissioners urged researchers to compare provider types and look beyond average costs within payment categories. Cheryl Damberg recommended examining for-profit and nonprofit providers, while accounting for differences in financial performance and selection patterns that predate newer payment models. Researchers are also expected to assess whether potentially unprofitable cases are spread across facilities or concentrated in particular providers. Specialization and local arrangements could explain some of those patterns, so comparisons will require care.

“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

What the Planned Study Cannot Yet Establish

No findings from the proposed analysis have been reported, and it is not yet clear which patterns researchers will identify. The work is intended to describe trends and assess whether they appear consistent with payment incentives; it will not by itself prove causation. Claims that providers are using AI to increase coding intensity, or that private equity ownership affects care or admissions, remain concerns raised by commissioners rather than established results in this research.

It will also be difficult to distinguish financially driven admission decisions from appropriate clinical specialization. A facility’s patient mix may reflect its equipment, expertise or local provider arrangements. Researchers have also been asked to consider whether payment pressures are associated with facility closures and bed reductions, but the meeting materials do not establish that such a relationship exists.

Research Findings Due in Fall 2027

MedPAC researchers are expected to carry out the analysis using 2021–2025 data, including claims and assessment information, and present initial results in fall 2027. The work plan calls for examining coding, case mix, payment-to-cost relationships, provider ownership and patient selection, while considering possible access effects and differences between fee-for-service Medicare and Medicare Advantage where useful.

After the results are available, MedPAC can use them to inform recommendations to Congress and HHS. Until then, the questions raised at the October meeting remain subjects for investigation; the commission has not announced findings or specific payment changes stemming from this work.

Key Questions

What is MedPAC planning to study?

MedPAC plans to examine whether Medicare fee-for-service payments for skilled nursing facilities and home health reflect patients’ clinical complexity and care costs. The work will review coding, case mix, payment-to-cost relationships and patient selection.

When will the findings be available?

The planned analysis covers 2021–2025, with initial results expected in fall 2027.

Has MedPAC found that providers are manipulating coding?

No. Commissioners raised concerns about coding intensity, including possible AI use, but the planned study has not produced findings. Those concerns are questions for researchers to examine, not confirmed conclusions.

Will the study prove that payment incentives cause patient selection?

No. Researcher Brian Klein-Qiu said the analysis is meant to identify trends, not establish that payment reforms caused changes in coding, admissions or provider behavior. Patient mix may also reflect a facility’s specialized services and capabilities.

Source: rss