SNF Therapy Billing Fraud: When the Billing Target Became the Treatment Plan

SNF therapy billing fraud involves charging Medicare for unnecessary therapy, treatment that never happened, or more skilled treatment than a resident received. Under the historical Resource Utilization Group payment system, known as RUG, the target could come first and the treatment plan follow it. Managers told therapists how many minutes to deliver and tracked the reimbursement category. Residents could remain on therapy after their clinicians recommended discharge. The cases reach both nursing-home operators and the contractors supplying their therapists. The harm reached residents put through unnecessary treatment and taxpayers paying for it.

How RUG Minutes Turned Treatment Into a Payment Target

Under RUG payment, recorded therapy minutes helped determine a skilled nursing facility’s daily Medicare Part A rate. The Minimum Data Set, the resident assessment known as the MDS, placed the resident into a Resource Utilization Group. Higher therapy categories generally paid more.

A therapist pressured to reach 720 minutes when treatment was not needed was being pushed toward the historical Ultra High category. That threshold applied over a seven-day assessment period. Discipline and treatment-day requirements also mattered: Ultra High required at least two disciplines, one provided on at least five days and another on at least three.

The assessment captured a period of treatment and supported payment for covered days beyond that observation period. That gap gave managers a reason to concentrate therapy when its minutes would count toward the rate.

The Office of Inspector General’s payment study found that facilities increasingly billed the highest therapy level while key resident characteristics remained largely unchanged. It estimated $1.1 billion in additional Medicare payments in fiscal years 2012 and 2013 from shifts toward higher-paying categories. A separate medical review of 2009 claims estimated $1.5 billion in inappropriate payments, largely from therapy billed above what residents received or needed.

What Is an Example of Fraud in Nursing?

One example of SNF therapy billing fraud is providing unnecessary therapy to satisfy a reimbursement target. Life Care Centers of America agreed to a $145 million settlement in 2016 over allegations that it pursued Ultra High billing and prolonged treatment after therapists believed it should end. Former employees brought the qui tam cases. The settlement covered therapy from January 1, 2006 through February 28, 2013.

SNF Therapy Minutes Increased Only During the Assessment Reference Period

SNF therapy minutes that increased only during the assessment reference period can show how a payment target shaped the schedule. The government’s Life Care complaint alleged a rise and fall without a corresponding change in clinical need:

The same complaint described a rehabilitation manager directing staff not to reduce minutes already planned in the PPS therapy schedule book because they had been set to reach a particular category by a particular date. Another government filing alleged that rehabilitation managers overruled MDS coordinators and chose assessment dates that would produce the highest payment. The calendar was doing work the clinical assessment should have done.

What Changed in October 2011?

The October 1, 2011 changes revised assessment windows and required change-of-therapy reassessments on seven-day observation cycles when the existing classification no longer fit. An end-of-therapy assessment followed three consecutive days without therapy.

The pressure adapted. In the government’s complaint against Kindred Healthcare and RehabCare, program directors allegedly scheduled extraordinary amounts of therapy near the end of weekly measurement periods after the change. Patients had received less therapy earlier in the week, and their clinical needs had not suddenly changed. The extra treatment preserved the payment category.

Which Is an Example of Billing Fraud?

SNF therapy billing fraud includes recording treatment that never occurred or knowingly counting evaluation time as treatment. Both give Medicare a false account of the services supporting the bill. The cases also describe real activity that managers allegedly relabeled as skilled therapy.

Therapy Evaluation Time Billed as Treatment

Therapy evaluation time billed as treatment in a nursing home adds treatment minutes without adding treatment. The government’s RehabCare complaint alleged that supervisors limited the time therapists could report for an initial evaluation and directed them to enter the balance as therapy. An evaluation could take longer than the allowance. The extra time changed labels in the record.

The complaint also alleged that managers encouraged staff to count palliative care, progress-note writing and activity unrelated to the patient as skilled therapy. Its examples included rubbing a sleeping patient’s back and holding the hand of someone near death.

A program director’s email made the clinical mismatch explicit. The government alleged that RehabCare continued placing new residents into Ultra High treatment even when the director described them as medically compromised or at a hospice-type level and acknowledged that the intensity was clinically inappropriate. Nursing-home therapy targets had reached residents whose clinicians were questioning whether they could tolerate the plan.

Rounded Minutes and Treatment Recorded After Refusal

A nursing home that rounds therapy minutes up to the next billing threshold changes the treatment represented to Medicare. In the Health Concepts case, the government alleged that contracted therapy reports included rounded minutes and evaluation time counted as treatment.

When RUG therapy is recorded after a resident refused treatment, refusal notes and the eventual treatment entry tell different stories. Signature HealthCARE settled allegations that staff faced pressure to complete target minutes when residents were sick or refused. Separately, its whistleblowers alleged that a manager retroactively added sessions that never occurred to reach a resident’s RUG target. They also alleged that the company reduced scheduled therapy once a resident had reached the highest category.

The target could demand extra treatment before the threshold and less treatment after it. The resident’s need was supposed to determine the schedule.

Group Therapy Recorded as Individual Minutes

Group therapy recorded as individual minutes in a nursing home can overstate the time credited to each resident. Under RUG-IV, concurrent minutes were divided between residents beginning in fiscal year 2011. From October 2011, time in a four-person group was divided by four for classification.

The Centers for Medicare & Medicaid Services described what happened between those changes in its payment-reform rule: concurrent therapy fell after allocation began, while group therapy rose. Group minutes had not yet been subject to the same division. The payment treatment of the session influenced which kind of session facilities supplied.

Encore Rehabilitation Services settled allegations involving group or concurrent treatment recorded as individual therapy at Michigan facilities. One whistleblower described an hour spent treating two residents together. Concurrent reporting would credit half an hour to each. Individual reporting credited an hour to each. The complaint alleged that Encore directed therapists to use the individual-care entry in Optima even though the system offered a concurrent-care option.

The Contractor’s Target Reached the Facility’s Claim

A therapy contractor’s decisions could shape claims submitted by the nursing facility. The Kindred/RehabCare settlement required a $125 million payment from the contractor group. Separate settlements reached nursing-home customers that allegedly failed to prevent unnecessary or improperly reported treatment.

The alleged business model rewarded enough minutes to reach the category and a limit on labor after it got there. The government’s complaint quoted a RehabCare executive explaining the incentive:

Encore’s whistleblowers described another connection between revenue and working conditions: raises depended on meeting therapy-category quotas and productivity requirements. One complaint alleged that managers assigned minutes without medical records or therapist evaluations. The quota had arrived before the clinical information.

The Diversicare settlement addressed allegations from 2010 through 2015 involving Ultra High quotas, unskilled exercises, inappropriate co-treatment, prolonged stays and nonexistent services. The pattern crossed the organization: a corporate target, a therapy schedule, a record of supposed skilled care and a claim for payment.

When the Therapist Recommended Discharge

A nursing-home discharge delayed after a therapist said goals were met could preserve additional reimbursable days. The Life Care complaint alleged that therapy continued until a resident exhausted the 100-day Medicare benefit, despite repeated notes that he had reached his maximum benefit and a recommendation to discharge him from skilled therapy.

Medicare also covers skilled services needed to maintain function or prevent deterioration. A treatment plan and a revenue target answer different questions.

The whistleblower complaint against Select Medical described a resident whom a nursing review found independent in all activities, with no nursing documentation supporting skilled therapy. According to the complaint, a director chose a Monday therapy discharge over Sunday to preserve another Medicare day and an assessment at the higher RUG level. Moving the date changed the payment without supplying a new clinical reason for treatment.

The Grand Health Care System agreed to a $21.3 million settlement. It accepted responsibility for specified conduct in its agreement, including targets for highest-rate residents and length of stay, a direction to discharge no more than three patients per facility each week, and retrospective alteration of therapy minutes. Discharge had become a corporate quota. The Justice Department announced about $4 million for the whistleblowers.

October 2019 Changed What Determined the Rate

The Patient Driven Payment Model replaced RUG-IV for Medicare Part A SNF payment on October 1, 2019. Resident characteristics and clinical needs replaced therapy-minute categories as the basis for classification. Diagnoses, function, nursing needs and nontherapy ancillary conditions became central payment inputs.

The Grand’s settlement was announced in July 2024, but its Medicare and TRICARE therapy period ended September 30, 2019.

Under PDPM, the MDS still feeds the payment code used on the claim. The useful comparison follows the resident’s actual condition and services into the assessment and resulting payment classification. Section GG function entries, swallowing problems and conditions requiring nontherapy services can affect the payment classification. We review those health care records with you to see whether the daily therapy and nursing notes support what the assessment says.

The Office of Inspector General’s Pinnacle Multicare audit found unsupported payment codes in 95 of 100 sampled claims from 2020-2021. Examples included an unsupported active aphasia diagnosis and unsupported need for intravenous medication. Pinnacle disputed the findings. Those are concrete assessment questions for an insider who knows what care the resident actually needed.

The Records That Connect a Therapy Target to Medicare

Therapy notes, MDS versions and claims connect what happened with what the facility billed. The assessment reference dates show which treatment days counted toward a historical RUG. Orders, refusal notes, tolerance observations and discharge recommendations explain the clinical decisions behind those minutes.

We compare schedules, payroll and time records with the treatment entries. Signature’s whistleblowers alleged that a manager recorded treatment during time they had observed her in meetings and away at lunch. We work with you to connect those observations to what Medicare was billed.

Contract terms and management instructions identify who controlled the therapy program. The certified provider’s claims show who requested the payment. An insider may know why an evaluation changed labels, why a missed session reappeared or why a discharge recommendation went nowhere. We connect that knowledge to the clinical and billing records with you.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

Your Knowledge Can Build the Case

If you are a therapist, MDS professional, contractor or facility employee who knows how billing targets reached the treatment record, speak to our whistleblower experts about why the minutes changed. We work beside you throughout the case and bring in healthcare fraud whistleblower lawyers who know nursing-home therapy billing. Together, we turn your knowledge of the treatment floor into the strongest case we can build.