What Is SNF Billing and How Does It Work?

Skilled Nursing Facilities (SNFs) provide a range of services for individuals needing medical care and rehabilitation, often following a hospital stay. These facilities offer short-term or long-term skilled nursing care, along with rehabilitation services. Understanding the billing processes within SNFs is important for facilities and patients given the various payers and regulations.

Foundations of SNF Billing

Skilled Nursing Facilities offer comprehensive care. They provide 24-hour medical support for patients requiring transitional care after a hospital stay due to illness, injury, or surgery. Services can include medication management, wound care, assistance with daily living activities, and various therapies like physical, occupational, and speech therapy.

The payer influences billing rules, documentation, and payment methodologies.

Medicare Part A

Medicare Part A is a primary payer for short-term, skilled nursing or rehabilitation stays. To be eligible for Medicare Part A coverage in an SNF, a patient must have had a qualifying inpatient hospital stay of at least three consecutive days, not including observation days. The admission to the SNF must occur within 30 days of hospital discharge, and the care must be for a condition related to the hospital stay or a new condition that arose during the SNF stay. Medicare Part A covers the full cost for the first 20 days of a covered SNF stay; however, from day 21 to day 100, a daily co-insurance amount applies. After 100 days, Medicare Part A coverage ceases.

Medicaid

Medicaid serves as a significant payer for long-term custodial care for eligible individuals. While Medicare focuses on short-term skilled needs, Medicaid often covers care for those who require ongoing assistance with daily activities and have limited financial resources. Each state administers its own Medicaid program, leading to variations in coverage specifics and eligibility criteria. Facilities must adhere to state-specific regulations to ensure proper reimbursement for Medicaid residents.

Private Health Insurance and Self-Pay

Private health insurance plans may also cover SNF stays, often with their own benefit limits, deductibles, co-payments, and prior authorization requirements. Coverage terms vary widely depending on the individual’s policy. Facilities must verify each patient’s private insurance benefits and obtain any necessary authorizations before providing services. In situations where other payers do not cover services or when individuals choose not to use insurance, self-pay arrangements are possible, meaning individuals or their families directly cover the cost of SNF services.

Data and Systems for Billing

Accurate billing relies on comprehensive data collection and specific payment methodologies.

Minimum Data Set (MDS)

The Minimum Data Set (MDS) is a standardized assessment tool used to gather extensive clinical and functional information about all residents in Medicare- and Medicaid-certified nursing homes. This assessment is central to developing care plans and, for billing purposes, is instrumental in determining a resident’s payment classification, particularly for Medicare Part A. The MDS captures details about a resident’s physical, mental, and psychosocial well-being, which directly impacts the calculation of reimbursement rates.

Patient Driven Payment Model (PDPM)

The Patient Driven Payment Model (PDPM) is the current Medicare Part A payment system for SNFs, implemented to replace previous volume-based models. PDPM utilizes resident assessment data from the MDS to classify residents into payment groups. This classification is based on clinical characteristics, functional abilities, and comorbidities, aiming to align reimbursement with the needs of the patient. The model features five primary components that contribute to the daily per diem rate:
Physical Therapy (PT)
Occupational Therapy (OT)
Speech-Language Pathology (SLP)
Nursing
Non-Therapy Ancillaries (NTA)

A non-case-mix component also contributes to the daily rate. Each of the five case-mix adjusted components has its own case-mix index and base rate, which are used to calculate the per diem payment. For example, the PT and OT components use the clinical reason for the SNF stay and the resident’s functional status to assign a case-mix group. The NTA component, covering costs like certain medications and medical supplies, adjusts for the initial days of a stay, reflecting higher initial resource utilization. The final per diem payment is a sum of the rates from these components, wage-adjusted based on the facility’s location.

Standardized Coding Systems

Standardized coding systems are integral to SNF billing. ICD-10-CM codes are used to report diagnoses, translating a resident’s medical conditions into billable data. For ancillary services or procedures that may be billed separately, CPT (Current Procedural Terminology) codes and HCPCS (Healthcare Common Procedure System) codes are applied. These codes provide a universal language for communicating services and conditions to payers, ensuring consistency and facilitating claim processing.

Clinical Documentation

Accurate, complete, and timely clinical documentation forms the basis for billing. Physician orders, nursing notes, therapy logs, and admission assessments must support the services rendered and the resident’s condition. This documentation justifies the billed charges and demonstrates medical necessity. Without supporting documentation, claims can be denied, leading to revenue loss for the facility.

Navigating the Billing Cycle

Once patient information, assessment data, and service details have been gathered, claims are prepared and submitted. This involves compiling the MDS data, diagnoses, services rendered, and payer information onto the appropriate claim form. For Skilled Nursing Facilities, the standard institutional claim form is the UB-04, also known as the CMS-1450.

Claim Preparation

The UB-04 form requires specific information in designated fields. This includes patient demographics, payer details, dates of service, and various revenue codes that categorize services provided, such as room and board, or rehabilitation therapy. Diagnosis codes (ICD-10-CM) and charges for services are also entered.

Claim Submission

Claim submission has largely transitioned to electronic methods, known as Electronic Data Interchange (EDI), due to efficiency and speed. Facilities often use clearinghouses to transmit claims electronically to various payers. While electronic submission is predominant, paper claims may be used in limited circumstances.

Claim Adjudication

After submission, claims undergo adjudication, where the payer reviews them to determine payment responsibility. This review checks for completeness, accuracy, medical necessity, and adherence to billing rules. Adjudication can involve automated system checks for common errors and, if flagged, manual review by a claims examiner.

Payment and Denials

The outcome of claim adjudication leads to either payment, reduction, or denial. When a claim is paid, the facility receives payment from the payer, accompanied by a Remittance Advice (RA) or, for the patient, an Explanation of Benefits (EOB). The RA is a document sent to the provider that itemizes payments, adjustments, and any denied services. Similarly, an EOB is sent to the patient, explaining what medical treatments and services were paid for on their behalf, detailing the cost, the amount paid by the insurer, and any patient responsibility.

Claims can be denied for various reasons, such as coding errors, a lack of documented medical necessity, or insufficient supporting documentation. When a denial occurs, facilities can initiate an appeals process. This involves identifying the reason for the denial, correcting errors, and submitting an appeal with additional supporting documentation. While denials can delay reimbursement, the appeals process provides an avenue for facilities to challenge unfavorable payment decisions.