Academic journal article Health Care Financing Review

Creating a MEDPAR Analog to the RUG-III Classification System

Academic journal article Health Care Financing Review

Creating a MEDPAR Analog to the RUG-III Classification System

Article excerpt


Policy interest in the clinical characteristics of nursing home residents and their variation across facilities has stimulated research resulting in an extensive body of knowledge about this group. Most of this prior research has focused on Medicaid nursing home residents; some nursing homes have been found to have more severe or complex caseloads, and therefore higher costs, than others. States sought ways to measure this complexity (called case mix) in order to reimburse nursing homes accordingly. In contrast, analysis of Medicare SNF residents has been limited, principally, to specialized studies involving relatively few nursing homes.

As demand for nursing home services increases, so does interest in reforming the payment system for the Medicare SNF benefit Measures of Medicare SNF case mix are essential to relating payment to the care requirements of the residents, so that Medicare Part A payments to SNFs with different caseloads are distributed equitably. Two recent studies have offered advances in this area. The first is the development of RUG-III, a case-mix classification system designed to adequately capture the resource use of nursing home residents and provide an improved method of tracking the quality of their care (Fries et al., 1994). RUG-III was developed to serve as the basis for the Multistate Medicare/Medicaid Payment Indexes ([M.sup.3]PI) used in the Nursing Home Case Mix and Quality (NHCMQ) demonstration project. The design phase of the demonstration included nursing homes in seven States. Unlik prior nursing home payment demonstrations, however, this study included case mix in the payment calculations for Medicare as well as Medicaid residents.

In the second study, HCFA and the Urban Institute applied the RUG-III classification system to data from the Medicare provider analysis and review (MEDPAR) data base. MEDPAR is an analytical file created from Medicare hospital and SNF claims and maintained by HCFA. These claims are the basis of the interim payments made by fiscal intermediaries. This file contains information on SNF stays paid for by Part A nationwide. Although Medicare claims information does not include all data necessary to classify SNF residents exactly as they are in RUG-III, it does contain sufficient information to assign Medicare SNF residents to RUG-III categories at the most general level. The value of the MEDPAR analog is that it provides a means to use nationally available data to examine the case mix of Medicare SNF residents.

The MEDPAR analog has come into increasingly wider use since its development. In connection with the NHCMQ demonstration, it has been used to examine the characteristics of nursing home residents, methods of payment, and the quality of resident care. It is also being used as a proxy case-mix measure by the Urban Institute to analyze trends in Medicare SNF use and costs. The purpose of this article is to document the development of the MEDPAR case-mix proxy and discuss its uses and limitations. The following sections describe the relationship between RUG-III and MEDPAR, present case-mix statistics from the 1992 MEDPAR SNF file, and discuss the implications and limitations of the proxy measure.(1)


SNF services are a Part A (hospital insurance) benefit under Medicare. The benefit is available only to patients who require continued skilled nursing care and/or skilled rehabilitation services on a daily basis following a hospital stay of at least 3 days. Medicare covers a maximum of 100 days in an SNF per episode of illness, defined by 60-day periods of health (in terms of an absence of Medicare institutional charges) before and after the period of illness. A daily copayment ($81.50 in 1992)(2) takes effect after 20 days of SNF care. For some facilities, this copayment is greater than the daily cost of SNF care, and many residents switch to alternate coverage after the 20th day, ending their Medicare-covered stay and therefore exiting the MEDPAR file. …

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