New study links fraud to patient deaths

By Raga Justin, Capitol Bureau Oct 15, 2024

Many nursing home operators have long been accused of prioritizing profits over patient care. A new study released this week uses millions of patient records to document a link between fraudulent activity and worsened patient safety, and revealed how widespread the practice is.

Millions of residents who have suffered from negligence at nursing homes across the country — including in New York — can trace worsening health outcomes to fraud committed by the operators of those facilities, according to a new fiscal analysis that appears to be the first study of its kind.

The research examined seven years of data to document wide-ranging fraud that has impacted the safety and care for millions of nursing home residents — and linked that fraud to worsened outcomes, including death.

Researchers at the University of Rochester and the University of Texas at Austin released their findings on Tuesday. First reported by the Times Union, the study presents a starkly unsettling picture of a health care landscape that has become increasingly dominated by private operators. And the trend is only continuing, researchers said: Nursing home systems that were most notorious for engaging in fraudulent practices also tend to rapidly acquire new facilities across the country.

It’s a particularly lucrative practice in which so-called “opportunistic systems,” or nursing home conglomerates that appear to be the industry’s worst offenders, can net thousands of dollars more for residents in their care. And those residents are nearly 10% more likely to die within the first 90 days of leaving a facility owned by one of the conglomerates, the study found.

The problem appears especially pronounced in New York, said John Griffin, a finance professor at the University of Texas at Austin who studies financial fraud and co-authored the study. He called the state “the epicenter of skilled nursing fraud” and said many of the practices used in New York facilities are now spreading outward.

The study, which pulled from massive proprietary data sets using information from the federal Centers for Medicare & Medicaid Services, found a two-pronged pattern that the industry’s worst offenders use. The first is by falsifying or exaggerating medical claims sent to Medicaid in order to reap more money for services that nursing home operators did not provide. The second is done by slashing payrolls.

“Some of these management chains are so focused on extracting every dollar possible. And how can they do that? On the front end, they do it by defrauding the government,” Griffin said. “On the back end, they’re cutting back on the amount of care they provide in the form of skilled nursing and nurse-staffing ratios. The two are inextricably linked.”

Slashing staffing rates is strongly linked to worsened patient outcomes, especially in nursing homes, where residents often need around-the-clock medical care. And as more skilled nurses leave, underpaid and under trained workers take their place.

The fallout has been detailed in numerous civil lawsuits file against individual facilities and in reporting by the Times Union, which found patients admitted to nursing homes in New York and beyond often physically and emotionally suffer from squalid living conditions, indifferent or overworked staff and steep physical declines.

Federal regulators switched the nationwide billing system for Medicaid in 2019, leading Griffin and co-author Alex Priest, a professor at the University of Rochester, to study how nursing home operators filed claims before and after the change.

Prior to 2019, the Centers for Medicaid & Medicare Services used a therapy-based system, requiring nursing home providers to bill the federal government based on the number of hours they spent working with patients. This led to what researchers called excess therapy: In the most egregious cases, or the top third of all nursing home systems that Griffin and Priest analyzed, nursing homes were often billing for hundreds of hours of intensive physical therapy per week despite little evidence that patients needed or received those services. It would be billed sometimes up until the last day of a patient’s life.

Beginning in 2019, the government switched to a new system meant to pay nursing homes for the type of services they provide based on the conditions a patient experienced, an attempt to thwart fraudulent billing practices.  As Griffin and Priest found, the very same providers who had billed the federal government for the most hours now started billing for patients with the worst possible conditions.

One analogy, Griffin said, is to think about “upcoding” patients in terms of buckets. By coding a patient in an ordinary bucket, nursing homes net a certain amount a day. But by coding them in the higher buckets — telling the government that patients need more intense medical needs — nursing homes can make hundreds of dollars more.

“It turns out, even when you do change the system, these same providers that were previously gaming the old system quickly learned how to game the new system,” Priest said.