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MedPAC commissioners called for scrutiny of coding, ownership structures and financial incentives as the congressional advisory body plans a review of Medicare payments to skilled nursing facilities and home health providers. The analysis will cover 2021–2025, examine trends rather than establish causation, and is expected to produce initial results in fall 2027.
The Medicare Payment Advisory Commission plans to examine whether Medicare payments accurately reflect patients’ needs and care costs in skilled nursing facilities and home health care, following commissioners’ calls to investigate coding patterns, ownership structures and financial incentives. The review will analyze 2021–2025 trends, with initial results expected in fall 2027.
At its October meeting, the commission discussed a research work plan covering fee-for-service Medicare’s skilled nursing facility and home health payment systems. Researchers will assess trends in coding, case mix, payment-to-cost relationships and patient selection, and consider whether those patterns appear consistent with the incentives created by payment policies. The plan also includes broader factors such as facility specialization, ownership and workforce pressures.
Commissioners urged researchers to examine the role of for-profit providers and complex ownership arrangements, including private equity involvement. Scott Sarran, a MedPAC commissioner and chief medical officer at Harmonic Health, said care can respond to payment incentives and pointed to ongoing concerns about coding accuracy. He also cautioned that advances in medicine are increasing the need for rehabilitation and post-acute care, and said barriers to access should be part of the analysis.
Commissioner Kenny Kan raised the possibility that providers may use artificial intelligence to intensify coding or report greater patient complexity to increase revenue. He called for recommendations based on existing claims and assessment data, rather than additional provider documentation or compliance requirements. Researchers said the project is designed to identify trends, not prove that payment changes caused provider behavior.
How Payment Patterns Affect Access
The review could inform decisions about whether Medicare payment methods reflect the resources needed to care for patients with different clinical needs. If payment and cost patterns are linked to which patients facilities admit, the findings may help policymakers assess whether incentives are affecting access to skilled nursing care, as well as spending and provider finances.
Researchers and commissioners also want to examine whether high-cost or potentially unprofitable cases are concentrated in particular facilities, and whether payment-to-cost relationships are associated with facility closures or fewer available beds. Those questions matter to patients leaving hospitals who need post-acute care. The analysis will need to distinguish financial incentives from legitimate differences in expertise and equipment among facilities.
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What MedPAC Plans to Examine
MedPAC is an advisory body that analyzes Medicare payment policies and recommends changes to Congress and the U.S. Department of Health and Human Services. Its work plan focuses on whether fee-for-service payments track clinical complexity and care costs in skilled nursing and home health services.
Researchers will compare trends across providers and consider differences between for-profit and nonprofit facilities. Commissioner Cheryl Damberg said comparisons should account for earlier differences in provider behavior and financial performance, since patient selection patterns predate newer payment models. Commissioners also suggested looking at variation in costs within payment groups, rather than relying only on averages.
Patient mix alone cannot show whether a facility is selecting patients for financial reasons. A nursing home with on-site dialysis, for example, may appropriately care for more dialysis patients; a facility with bariatric equipment may be better equipped for patients with obesity. Researchers will need to account for such specialization and local arrangements when interpreting differences in admissions.
““The care responds to the incentives.””
— Scott Sarran, MedPAC commissioner and chief medical officer at Harmonic Health
What the Analysis Cannot Yet Show
The planned research has not established that providers are gaming Medicare payments, that AI is being used to inflate coding, or that financial incentives are driving patient selection. MedPAC researcher Brian Klein-Qiu said the analysis is intended to identify trends rather than establish causation.
It is also not yet clear how researchers will distinguish admission decisions driven by payment incentives from appropriate specialization, local capacity or other factors. The source material does not specify the final methodology or the precise recommendations MedPAC may make. Commissioners noted that differences in patient populations, on their own, do not prove inappropriate selection.
Findings Expected in Fall 2027
MedPAC researchers are expected to analyze claims and assessment data for 2021 through 2025, examining coding, case mix, costs, patient selection, ownership and facility conditions. Initial results are expected in fall 2027. The commission may then use its analysis to develop recommendations for Congress and HHS, but no specific policy changes have been announced.
Until the findings are available, questions about the scale of coding distortions, the effect of ownership structures and any relationship between payment incentives and access remain open. The commission has also signaled that researchers should consider whether payment pressures are associated with closures or bed reductions, while interpreting those patterns alongside local care needs and facility capabilities.
Key Questions
What is MedPAC reviewing?
MedPAC plans to study payment accuracy in Medicare fee-for-service skilled nursing facility and home health systems, including trends in coding, case mix, payment compared with costs, and patient selection.
Does the review confirm that nursing homes are upcoding?
No. Commissioners raised concerns about coding incentives and possible AI use, but the planned analysis has not confirmed inappropriate coding. Researchers say the work will identify trends, not establish that payment policies caused changes in provider behavior.
When will the results be available?
Initial results are expected in fall 2027. The analysis is planned to cover data from 2021 through 2025.
How will researchers assess patient selection?
They plan to examine whether high-cost or potentially unprofitable cases are spread across facilities or concentrated in particular providers. They will also consider specialization and equipment, since facilities may be better suited to care for specific patients.
Could the analysis lead to Medicare policy changes?
MedPAC advises Congress and HHS on Medicare payment policy, so its findings could inform future recommendations. No specific policy change has been announced as part of this work plan.
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