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For those not from the long-term care world, Medicare reimbursement for skilled nursing is based on a per-diem payment adjusted for the illness of the patient. These various payment levels are determined by grouping each patient into a Resource Utilization Group, or RUG.  

Most providers in the long-term care arena are aware that Medicare pays the highest amounts for patients requiring extensive therapy treatment. These patients are known as “ultra highs.” Ultra-high patients are noted with RUGs with the letter “U” as the middle character.

In December 2010, the U.S. Department of Health and Human Services Office of Inspector General (OIG) released a report on the use of ultra-high RUG’s during the years 2006 through 2008. Some notable points included the following:

  • “From 2006 to 2008, the percentage of RUGs for ultra-high therapy increased from 17 to 28 percent.”
  • “Even though SNFs significantly increased their billing for these higher-paying RUGs, beneficiaries’ ages and diagnoses at admission were largely unchanged from 2006 to 2008.”
  • “For-profit SNFs were far more likely than nonprofit or government SNFs to bill for higher-paying RUGs. In total, 32 percent of RUGs from for-profit SNFs were for ultra-high therapy, compared to 18 percent from nonprofit SNFs and 13 percent from government SNFs.”
  • “In addition, for-profit SNFs had a higher use of RUGs with high ADL scores than both for-profit and government SNFs.”
  • For-profit SNFs also had longer lengths of stay, on average, compared to those of the other types of SNFs.”
  • “Some SNFs billed much more frequently for higher-paying RUGs than (for) other SNFs. Some SNFs also had unusually long average lengths of stay compared to those of other SNFs. These billing patterns indicate that certain SNFs may be routinely placing beneficiaries into higher-paying RUGs regardless of the beneficiaries’ care and resource needs or keeping beneficiaries in Part A stays longer than necessary. We identified 348 SNFs that were in the top 1 percent for the use of ultra-high therapy, RUGs with high ADL scores, or long average lengths of stay.”

Focus on Florida

What has sparked regulatory interest is that, on a continuing basis, certain states have much greater percentages of their long-term care providers billing for ultra-high payments. 

We note that Florida continues to have the highest average ratio of ultra-high patients in the United States. How big is the variance? Based on filed and audited cost reports submitted to the Centers for Medicare & Medicaid Services (CMS) for years ending after June 30, 2009, we note that Florida nursing homes list 65.14 percent of all their Medicare patients as ultra high when billing Medicare. This is almost double the national rate of 37.54 percent. 

Here Come the ZPICs

Pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), CMS was required to use competitive measures to replace the current Medicare Fiscal Intermediaries (Part A) and Carriers (Part B) contractors with Medicare Administrative Contractors (MACs), each covering one of seven zones encompassing the entire country.  

After setting up the new MAC regions, CMS created new entities called Zone Program Integrity Contractors (ZPICs) to perform program integrity functions.  Contracts have been awarded to various contractors in each of these zones.

ZPIC Targets

ZPIC targets are selected based on the following:

  • Unusual trends or changes in utilization over time;
  • Specific schemes noted by CMS that inappropriately maximize generated reimbursement;
  • Referrals from law enforcement and other sources indicating possible fraud and abuse; and
  • High-volume or high-cost services being widely overutilized. This is important because these services do not appear as outliers and may be overlooked, when in fact they pose the greatest financial risk.

ZPIC auditors have been hitting Florida skilled nursing facilities hard on the ultra-high RUG issue. ZPIC representatives have been showing up unannounced at skilled nursing homes across the state, making demands for patient records and other financial information and giving providers only 14 days to respond – or face suspension of payments and pre-payment reviews. 

While Florida providers may try to explain to regulators that this phenomenon is a result of a larger older patient population, it opens providers up to the scrutiny of federal regulators, including ZPICs

Who is Next?

Let’s take a snapshot of states with the highest ratio of ultra-high RUGS as a percentage of total Medicare patient days, based on 2011 Medicare cost reports, to see who might be next in the ZPIC target crosshairs:


Ratio of Ultra Highs





New Hampshire






New Jersey


Rhode Island








In conclusion, it is safe to say that ZPIC enforcement efforts will continue to expand among skilled nursing providers. Stay tuned.

About the Author

Timothy Powell, CPA, is a member of the Moore Stephens long-term care group. He has more than 30 years of reimbursement experience working with the “Big 4.” He has worked in the managed care area for most of his career.

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Timothy Powell, CPA

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

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