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MedPAC plans to examine whether fee-for-service Medicare payments for skilled nursing facilities and home health accurately reflect patients’ clinical needs and care costs. The review will explore coding trends, patient selection and provider finances, but researchers say it is designed to identify patterns, not prove that payment policy caused them. Initial results are expected in fall 2027.
The Medicare Payment Advisory Commission plans to examine whether fee-for-service Medicare payments accurately reflect patients’ clinical complexity and care costs in skilled nursing facilities and home health. At its October meeting, commissioners urged researchers to scrutinize coding accuracy, patient selection and provider financial incentives, while cautioning that differences between facilities do not by themselves establish improper behavior.
The planned analysis will cover data from 2021 through 2025 and assess trends in coding, case mix, payment-to-cost relationships and patient selection. Researchers will consider whether observed patterns appear consistent with payment incentives, alongside factors such as facility specialization, ownership and workforce pressures. MedPAC expects initial results in fall 2027.
Commissioners raised concerns that financial arrangements, including private equity involvement, could affect provider behavior. Scott Sarran, a MedPAC commissioner and health care executive, described some nursing home ownership structures as “Byzantine” and said financial incentives may influence care. He also warned that advances in medicine are increasing the need for rehabilitation and post-acute services, making it important to examine whether patients can access appropriate care.
Commissioner Kenny Kan raised a separate concern: providers may use AI tools to increase coding intensity or reported patient complexity to improve revenue. Kan said the research should look for ways to improve payment accuracy using existing claims and assessment data, rather than creating additional documentation or compliance burdens for providers. These comments identify issues for study; they do not establish that AI-related upcoding or other improper practices have occurred.
Payment Accuracy and Patient Access
The review could help inform future Medicare payment recommendations by showing whether payments track the clinical needs and costs of patients treated in skilled nursing and home health. If payments and costs diverge, the findings may help policymakers assess whether current methods distribute resources as intended. MedPAC advises Congress and the Department of Health and Human Services on Medicare policy, but it does not itself set payment rates.
The inquiry also bears on access to skilled nursing care. Researchers have heard concerns that facilities may be reluctant to admit some high-cost patients. If particular types of patients are concentrated in certain facilities—or if payment-to-cost pressures are linked to closures or fewer beds—the findings could help clarify where access concerns warrant further attention. The analysis must distinguish financial selection from legitimate differences in facilities’ capacity to provide specialized care.
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How MedPAC Will Read the Data
MedPAC’s work plan is an assessment of payment accuracy in fee-for-service Medicare’s skilled nursing facility and home health systems. Researchers will review claims and assessment information to examine changes in patient complexity, coding and costs. The commission’s discussion also highlighted the value of separating findings for fee-for-service Medicare and Medicare Advantage, since payment incentives and patient selection may differ between the programs.
Commissioners urged researchers to compare for-profit and nonprofit providers, and to examine variation in costs within payment classification groups rather than relying only on averages. Cheryl Damberg said comparisons should account for historical differences in provider behavior and financial performance, including patterns that predate newer payment models. Researchers are also considering whether potentially unprofitable cases are spread across facilities or concentrated in particular providers.
Patient mix alone cannot establish that a facility is selecting patients for financial reasons. A nursing home with on-site dialysis may appropriately treat more dialysis patients; a facility with bariatric equipment may be better positioned to care for patients with obesity. Researchers will need to account for specialized capabilities and local arrangements when interpreting distribution patterns.
““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.””
— Scott Sarran, MedPAC commissioner
Patterns Do Not Prove Misconduct
The research is intended to identify trends, not establish causation. Researcher Brian Klein-Qiu said the analysis will not determine that payment reforms caused changes in coding, patient selection or provider conduct. Even a difference in patient populations or payment-to-cost ratios could reflect facility specialization, local provider relationships or other factors.
It is not yet clear whether the data will show coding distortions, inappropriate patient selection, a relationship between payment pressures and facility closures, or measurable effects from AI use. The source material reports concerns raised by commissioners and researchers, not findings that those practices are widespread or confirmed. The scope and conclusions of the eventual analysis remain pending.
Findings Due in Fall 2027
MedPAC researchers will carry out the analysis of 2021–2025 data, examining coding, case mix, costs, provider ownership and patient distribution. The work is also expected to consider access, including whether high-cost cases are concentrated and whether payment-to-cost relationships coincide with nursing home closures or reduced bed availability.
Initial results are expected in fall 2027. MedPAC can then use its analysis to develop recommendations for Congress and HHS. Until the findings are published, the concerns discussed at the October meeting should be treated as research questions rather than conclusions about providers or payment policy.
Key Questions
What is MedPAC examining?
MedPAC plans to assess whether fee-for-service Medicare payments for skilled nursing facilities and home health reflect patients’ clinical complexity and care costs, including trends in coding and patient selection.
Does the review show that nursing homes are improperly coding patients?
No. Commissioners raised coding accuracy as an issue for study, but the review has not reported findings proving improper coding or showing how common it may be.
Will the analysis cover Medicare Advantage?
Sarran recommended comparing findings separately for fee-for-service Medicare and Medicare Advantage to help assess differences in incentives and patient selection. The described work plan focuses on fee-for-service payment systems; the precise scope of any Medicare Advantage comparison is not clear from the meeting account.
When are results expected?
MedPAC expects initial results in fall 2027. The analysis will cover data from 2021 through 2025.
Could differences in patient populations reflect appropriate care?
Yes. A facility’s capabilities—such as on-site dialysis services or bariatric equipment—may explain why it treats particular patients. Researchers say they must account for specialization and other local factors before interpreting differences as financial selection.
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