SNF Improper Payments and Fraud: What the Big Numbers Actually Measure

SNF improper payments and fraud statistics answer different questions, and no established national figure measures how much skilled nursing facility fraud occurs. Medicare’s payment reviews identify billions in errors. An MDS coordinator, therapist or billing employee may know something those totals cannot show: who changed the assessment, why the therapy continued, or how a claim came to describe care the resident never received.

When revenue targets dictate unnecessary care, residents bear the treatment and taxpayers pay the bill.

What CMS’s SNF Improper-Payment Figures Measure

The Centers for Medicare & Medicaid Services estimates payment errors through its Medicare fee-for-service payment review. Its broader skilled nursing facility category combines inpatient services, outpatient services and inpatient Part B services.

$4.3 billion

in projected improper payments for SNF services in CMS’s 2025 report.

11.8% of payments in that broader SNF category.

CMS, Medicare Fee-for-Service Supplemental Improper Payment Data, 2025

The same report’s narrower SNF Inpatient row puts projected improper payments at $4,042,025,227, or 12.1%. The inpatient row sits inside the broader category.

The 2024 Medicare supplement reported $5.9 billion and 17.2% for the broader category.

That decline concerns estimated payment errors. An employee may still know that management is manipulating assessments.

What the Documentation Errors Tell an Insider

Both Medicare reports identify missing or inadequate support for case-mix classifications, orders and physician certifications, as well as payment levels changed after reviewers examined the documentation. The earlier report also identifies missing evidence of the required level of care. The later report identifies missing support for diagnoses reported on the MDS.

For someone inside a facility, those are recognizable handoffs. A clinician records the resident’s condition. The assessment translates it into payment inputs. Billing uses the resulting classification. The useful comparison is between the underlying observations and the version that reached the claim.

Medicare acknowledges that its review can leave fraud undetected. The employee who saw an instruction to change a diagnosis or disregard a therapist’s assessment can explain how the discrepancy arose and who controlled it.

How the Payment Incentive Changed

Older skilled nursing facility therapy cases concern a payment system that rewarded reported therapy volume. The Patient Driven Payment Model, introduced on October 1, 2019, shifted classification toward diagnoses, function, nursing characteristics and nontherapy ancillary needs.

The Office of Inspector General’s study of 2009 claims estimated $1.5 billion in inappropriate Medicare payments. Its medical review found widespread upcoding, often into the ultrahigh therapy category. Therapy reported on the MDS helped determine the RUG payment group, so additional reported minutes could mean a higher daily payment.

Life Care Centers of America later agreed to a $145 million settlement in 2016. The Justice Department alleged that corporate targets pushed residents toward the highest therapy category and prolonged treatment after therapists believed it should end. The alleged pressure ran from a revenue target to the treatment decision and then to the claim.

Under the October 2025 assessment manual, the financially sensitive information includes the resident’s diagnoses, usual function and nursing needs. An old therapy-minute settlement explains an old incentive. A current assessment concern calls for the clinical observations behind today’s payment classification.

What the Pinnacle Audit Found Behind the Payment Codes

The November 2025 Pinnacle audit found unsupported payment codes, services for residents who did not require skilled care and missing documentation. The review covered skilled nursing claims from 2020 and 2021 at Pinnacle Multicare Nursing and Rehabilitation Center. The Office of Inspector General found that 99 of 100 randomly sampled claims failed Medicare requirements.

One example put a clinical difference behind the billing code. Reviewers found that a resident’s payment classification used osteoarthritis as the primary reason for skilled care, while the medical records supported major depressive disorder. The diagnosis reaching the claim changed what Medicare paid.

The inspector general estimated $35,713,836 in overpayments and recommended a refund of $31,227,884. Pinnacle disputed the findings, the coding review and how the sample results were projected across its claims.

The Three-Day Stay Audit Asked Another Question

The qualifying hospital stay is another payment checkpoint. Medicare ordinarily requires at least three consecutive inpatient days before covered skilled nursing care, and observation time does not count toward that requirement.

An OIG audit of claims from 2013 through 2015 estimated $84,202,593 in improper payments within its defined claims population. That study tested eligibility for the stay. The hospital admission record answers a different question from the therapy log or the diagnosis supporting a payment code.

Where the Money Goes After the Facility Gets Paid

A facility’s reported margin describes one part of the business. Rent, management fees and payments to therapy or staffing vendors can carry money into other accounts, including businesses under shared ownership.

For 2024, the Medicare Payment Advisory Commission reported an aggregate Medicare fee-for-service margin of 24.4% for freestanding skilled nursing facilities and an all-payer total margin of 2.1%. The first measures Medicare against allocated costs. The second brings other payers and business income into the facility account.

The accountant’s view reaches further. A lease or management agreement can show where a facility expense became another business’s revenue. Ownership records and consolidated accounts show whether the money left the overall business or moved within it. In a cost-report case, the service, price, relationship and disclosure connect that money movement to what the government was told.

This is why a facility’s thin margin can leave the most useful financial question unanswered. The person handling the invoices may know which business actually kept the money.

What Civil Enforcement Adds to the Picture

Civil healthcare settlements put a price on particular allegations against companies. They also show how management decisions reached the claim.

The contractor and the facility can both appear in the same payment story. In the 2016 Kindred and RehabCare resolution, the therapy-provider settlement was $125 million, with separate settlements for four nursing-facility customers. The government alleged inflated therapy, reporting of services never delivered and customer failures to prevent those practices.

RehabCare’s separate 2014 settlement concerned allegedly buying access to nursing-home therapy contracts through an upfront payment and continuing compensation. That case followed the referral money, rather than counting therapy minutes.

Plaza Rehab and Nursing Center and Citadel illustrate another incentive. In their 2022 resolution, they admitted conduct involving changes from Medicare Advantage to Original Medicare, often without resident or representative consent. The government’s case concerned obtaining higher reimbursement by changing coverage. A total of therapy errors would miss that mechanism entirely.

What Is the Most Common Medicare Fraud?

Unnecessary therapy, false treatment records and paid referrals recur in skilled nursing facility enforcement. These cases do not establish a Medicare-wide ranking. They show insiders how health care businesses allegedly turned treatment decisions and contracts into false claims.

What State Has the Highest Medicare Fraud?

These figures cannot rank states by actual Medicare fraud. A chain’s headquarters, the court hearing its case, the facility providing care and the state Medicaid program paying a claim can be in different places. An insider’s account follows the facility, the decisions and the payer.

What Are the Documentation Requirements for Skilled Nursing Facilities?

The records need to support the resident’s condition, skilled need, services and payment classification, with the applicable orders and certifications. For a whistleblower concern, the important connection is how those records became the claim and who directed the decisions.

The whistleblower complaint against Select Medical makes that connection unusually concrete. It alleged that an assessment date moved so additional therapy could qualify a resident for the highest payment category:

The alleged manipulation concerned when the facility measured the therapy, as well as how much it reported. An assessment calendar, an earlier MDS version and a manager’s instructions could explain what a final claim alone would conceal.

The teaching paper Pressure to Commit Fraud in the Workplace: Two Teaching Cases Addressing Fraud and Whistleblower Protection, published in the Journal of Forensic & Investigative Accounting in 2018, draws on surveys connecting financial targets and management pressure to fraud, the same pressure the Select Medical complaint describes at the assessment desk.

Clinical notes, MDS versions, payroll and staffing submissions, cost reports, leases and authorization records each preserve a different part of the transaction. An insider who understands the handoffs can connect them. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Number Got There

If you know why an assessment changed, why treatment continued or where the facility’s money went, speak with our whistleblower experts about what happened inside the business. We work with you to build your strongest nursing home whistleblower case, bringing in skilled nursing facility fraud whistleblower lawyers who understand the payment system and standing beside you throughout the case.