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

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MedPAC is planning an analysis of whether Medicare fee-for-service payments for skilled nursing facilities and home health accurately reflect patient needs and care costs. Commissioners urged researchers to examine coding, ownership, financial incentives and access to care; the work will cover 2021–2025, with initial results expected in fall 2027.

The Medicare Payment Advisory Commission is planning a study of whether fee-for-service Medicare payments accurately reflect patient complexity and care costs in skilled nursing facilities and home health, after commissioners called for scrutiny of coding patterns, provider incentives and access to care. The analysis will examine data from 2021 through 2025, with initial findings expected in fall 2027.

At its October meeting, MedPAC discussed a research work plan covering payment accuracy in the skilled nursing facility and home health systems. Researchers plan to track coding, case mix, payment-to-cost relationships and patient selection, and consider factors including provider ownership, facility specialization and workforce pressures. MedPAC advises Congress on Medicare policy; its analyses can inform recommendations to Congress and the U.S. Department of Health and Human Services.

Commissioner Scott Sarran urged researchers to examine how ownership structures and financial incentives may affect care and coding. He described parts of the nursing home sector as involving “Byzantine ownership arrangements” and said private equity can be “somewhere in the mix.” Those comments express concerns commissioners want the research to address; they do not establish that providers have manipulated coding or admissions.

Commissioner Kenny Kan raised a separate concern that providers may use artificial intelligence to increase coding intensity or reported patient complexity. He asked researchers to identify ways to improve payment accuracy using existing claims and assessment data, rather than adding documentation or compliance work for providers. MedPAC researcher Brian Klein-Qiu said the project is designed to identify trends, not prove that payment changes caused shifts in coding or provider behavior.

Payment Accuracy and Patient Access

Medicare payment levels can affect how facilities allocate resources and which patients they admit. If payments do not reflect the costs of treating patients with complex needs, providers may face different financial pressures depending on their patient mix. The planned analysis could help policymakers assess whether payments align with care costs, and whether payment-to-cost patterns coincide with facility closures or fewer available beds.

The access question is not simply whether facilities treat different kinds of patients. A difference in admissions may reflect appropriate clinical specialization: for example, a facility with on-site dialysis may be better equipped to treat dialysis patients, while bariatric equipment can support care for patients with obesity. Researchers will need to distinguish those capabilities from choices potentially shaped by financial incentives. The findings may help inform future recommendations, but the work plan itself does not propose a payment change.

How MedPAC Will Read Provider Patterns

Researchers and commissioners have raised concerns about whether some skilled nursing facilities may be reluctant to admit patients whose care is costly. The planned work will examine whether potentially unprofitable cases are spread among facilities or concentrated in particular providers. Commissioners cautioned that patient differences alone are not evidence of improper selection: local arrangements, workforce capacity and specialized services can all affect admissions.

Commissioner Cheryl Damberg recommended comparing for-profit and nonprofit providers, citing earlier work that found differences between the groups and historically larger margins among for-profit entities. She also noted that selection patterns predate newer payment models, so the analysis should account for earlier differences in provider behavior and financial performance. Commissioners also urged examination of cost variation within payment classification groups, rather than relying only on averages.

Sarran called for results to be analyzed separately for Medicare fee-for-service and Medicare Advantage, which have different payment arrangements. He also suggested interviewing hospital discharge planners to explore whether patients with differing clinical needs have equitable access to skilled nursing care. These are suggestions raised during the commission’s discussion, not confirmed elements of every planned analysis.

““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 Study Cannot Establish Yet

The commissioners’ concerns remain questions for analysis, not findings that coding has been distorted, that AI is being used improperly, or that ownership structures have caused particular admission decisions. The study is intended to identify patterns and assess whether they appear consistent with payment incentives; it is not designed to establish causation.

It is also not yet clear how researchers will separate the effects of clinical specialization, local capacity, workforce constraints and financial incentives when comparing patient populations. The discussion did not establish whether all suggested approaches—such as separate comparisons of fee-for-service and Medicare Advantage or interviews with discharge planners—will be included in the final research methods.

Findings Expected in Fall 2027

MedPAC researchers are expected to carry out the analysis using data from 2021–2025, with initial results projected for fall 2027. The work is expected to examine coding, case mix, payments relative to costs and patient selection, while accounting for provider ownership and other factors that may explain differences between facilities.

Once results are available, MedPAC can use them in its advice to Congress and HHS on Medicare payment policy. Until then, the commission has not established that payment incentives caused coding or admission patterns, and no specific payment reform was announced at the meeting.

Key Questions

What is MedPAC planning to study?

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

Does MedPAC say nursing homes are manipulating coding?

No. Commissioners raised concerns about coding accuracy and possible financial incentives, including potential AI use, but the planned study has not established that providers have manipulated coding.

When will the analysis cover, and when are results expected?

The analysis is planned to cover 2021 through 2025. Initial results are expected in fall 2027.

How will researchers assess patient selection?

They plan to examine whether potentially unprofitable cases are distributed across facilities or concentrated in particular providers. Researchers and commissioners have cautioned that specialization, equipment, local arrangements and workforce pressures can also explain differences in admissions.

Will the study change Medicare payments?

No payment change was announced. MedPAC’s role is to analyze Medicare policy and advise Congress and HHS; any future policy action would be separate from the research plan.

Source: rss