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Olga Melnichenko
Revenue Cycle Manager

With President Biden’s nursing home reforms in full swing, long-term care and skilled nursing facilities are set to face a raft of new compliance and staffing requirements.

The objective of these changes—to improve nursing home care for elderly Americans—is a worthy aim. However, there is no doubt that these reforms will place additional financial pressure on an already struggling nursing home system.

As the sector continues to grapple with pain points like high staff turnover, ongoing staff shortages, increased staffing costs, and declining reimbursement, many providers are wondering where the money to comply with the new minimum nursing home staffing requirements is going to come from.

The answer will vary for each provider. But one thing that’s for certain, is that in difficult financial times, effective nursing home billing is more important than ever. 

As one of the leading providers of business process outsourcing services for nursing homes and long-term care facilities, Pharmbills knows what it takes to achieve improved financial outcomes through better billing practices.

In this article, we’ll provide a comprehensive overview of the nursing home billing guidelines to help your organization stay profitable and competitive in the current challenging environment. 

Key Billing Codes Explained

Medical billing and coding are inherently complex processes. 

At a very broad level, codes are used to describe the services provided while a resident is in care. Then, these codes are used by the facility to bill Medicare or a private insurer for services rendered.

Where things get complex with skilled nursing facility billing, is that there are several different types of codes used to capture the charge for a patient’s care. Therefore, for a nursing home to get paid, it is usually required that billing codes from several different categories are compiled and then submitted.

Below are the 4 main categories of codes used in nursing home billing.

Please Note: We have not included any example codes in this article. This is because medical codes are updated regularly and can change. Furthermore, medical coding and billing are highly specialized skills that should only be handled by an appropriately trained professional. You can access more in-depth information about current specific codes via the Medicare Learning Network’s Skilled Nursing Facility Billing Reference.

ICD-10 Codes

All entities covered by HIPAA in the US, including nursing homes, use International Classification of Disease (ICD) codes. ICC-10 is the most current version of this classification.

The ICD-10 provides nursing homes with a consistent method of recording and communicating data about the diagnoses assigned to individual residents. These codes are used in billing to ensure a common “language” between providers and payers.

CPT Codes 

Similar to ICD-10 codes, current procedural terminology (CPT) codes provide shared terminology for providers and payers. However, unlike ICD-10 codes, CPT codes describe medical procedures and services.

In long-term care billing, a CPT code can be assigned to each service provided to a patient. So, for example, a physician review or administering intravenous fluids would each have a unique code. Recording these codes accurately is essential for nursing home billing best practices, as it ensures the facility is paid accurately for the care delivered.

Revenue Codes

While ICD-10 and CPT codes describe treatment, revenue codes ensure that the correct cost center is charged when the bill is submitted. 

To give an example, the Health Insurance Prospective Payment System (HIPPS) covers skilled nursing facilities, home health services, and inpatient rehabilitation facilities. When a nursing home submits a bill for payment, they must use a specific revenue code to ensure the cost is allocated to the correct payment area. 

HPCS Codes

Finally, the Healthcare Common Procedure Coding System (HCPCS) is a collection of standardized codes to facilitate the processing of claims by Medicare and other insurers.

Level 1 HCPCS includes CPT codes. While level 2 codes are used for products and services that are not identified by CPT. Nursing homes need to be vigilant about including level 2 HCPCS codes in claims. Otherwise, there is a risk that reimbursement will not cover the full cost of care provided.

Tying It All Together

The simple answer to the question, “How do nursing homes get paid for their services?” Is that they submit a bill to a payer (Medicare, Medicaid, or private insurer) to be reimbursed for the care that has been delivered.

Accurate reimbursement relies on the skillful use of ICD-10 codes, CPT codes, revenue codes, and HPCS codes. When this process is completed correctly, the skilled nursing or long-term care facility is reimbursed a sufficient amount to cover their costs. 

However, as you might have guessed, nursing home billing is a complicated process that many providers struggle with. 

In the remainder of this article, we will detail guidelines that facilities can use to maximize their financial health and remain resilient in the current challenging operating environment.

If you would like assistance with any aspect of medical billing and healthcare budgeting, Pharmbills can provide affordable and efficient business process outsourcing solutions—at a fraction of the cost of hiring local talent. Contact us today to discuss getting started.

Understanding Insurance Coverage and Claims

Medicare and Medicaid both cover many (and often all) of the services provided in nursing homes. Although, there are specific rules about what can and can’t be claimed at specific times. 

Many of these rules can be understood by looking at the eligibility criteria for Medicare Part A and Medicare Part B benefit periods.

Medicare Part A covers the initial 20 days after a person is admitted to a nursing home in full. After this initial 20 days, Part A covers 80 days more, but coinsurance applies for each day. After 100 days Medicare Part A is exhausted.

Medicare Part B applies when a person has been in a nursing home for 100 days or more. Some limited services are covered by Medicare Part B. However, in general, the resident pays for all care at this stage.

Private insurance may cover long-term care and skilled nursing facility expenses from day 21 onward. These may be called “Medigap” plans or long-term care insurance. Coverage and eligibility can vary significantly between plans. Therefore, it is wise for providers to always be clear about long-term billing guidelines for patients who intend to use private insurance.

The Billing Cycle: From Admission to Discharge

In many ways, skilled nursing facility billing mirrors the typical revenue cycle in traditional healthcare settings. However, there are a few nuances to be aware of along the way.

Key points in the nursing home billing cycle include:

Intake and Assessment. Perhaps the most crucial task at this stage is determining the patient’s eligibility for Medicare Part A services. To qualify for a Medicare-funded stay, the person must have had a qualifying hospital stay and require skilled nursing care. The rationale for skilled nursing care must clearly be documented by suitably qualified clinicians in the patient’s electronic health record

Provision of Nursing and/or Rehabilitation Services. Once eligibility has been determined (or the patient has agreed to self-pay), you can begin providing the care required. It’s best practice to do this according to a detailed individual care plan, with an outline of the services required and goals of admission.

Monthly Billing. Medicare billing for nursing homes operates on a monthly cycle. Providers submit what is called a consolidated bill, which must detail all the care each resident has received for each billing cycle. This might also be referred to as bundled services, referencing the fact that the provider groups all services together in one complete claim. Billing for separate services (called “unbundling”) is not permitted.

Discharge Planning. Time in care is one of the most influential factors regarding what can a nursing home take for payment. Therefore, it’s essential to engage in high-quality discharge planning as early as possible into an admission. Remember, many aspects of discharge planning can be billed for, so don’t forget to utilize the appropriate codes and include this on the consolidated bill.

Discharge and Follow-Up. The last step in managing nursing home accounts is the submission of a final Medicare claim, referred to as the discharge claim. There are several different ways a patient may be discharged (eg. discharged home, no longer requires skilled nursing, admitted as an inpatient to hospital), each of which utilizes a different code.

If your facility is having financial challenges, one of the most effective ways to address this is through a revenue cycle audit. During this process, each aspect of the billing cycle will be examined. A good audit will provide detailed advice on nursing home billing guidelines that can maximize revenue.

Useful Tips for Nursing Home Billing

5 practical tips that providers can implement to improve financial management in long-term care include:

  1. Ensure staff are adequately trained to produce high-quality documentation and submit accurate claims
  2. Utilize a well-designed, nursing home-specific electronic health record to reduce the administrative burden involved in charge capture and billing
  3. Streamline intake, assessment, and discharge processes (these are where most errors and lost revenue opportunities occur)
  4. Be proactive about reconciling accounts and promptly addressing any discrepancies between care provided and reimbursement
  5. Hire specialized medical coding and billing staff to optimize claiming and revenue

If you need additional resources to undertake the tasks involved in nursing home billing, the staff augmentation model available through Pharmbills is the ideal low-cost, outsourced solution to enhance revenue.  

Common Billing Challenges and Solutions

The most common problems encountered in nursing home billing are:

  • Claim denials
  • Delayed reimbursement
  • Undercoding and overcoding
  • High administrative and compliance costs

Claim denials and delayed reimbursement are usually due to coding and billing errors on behalf of the provider. To address these problems, it is necessary to identify the source of errors (eg. poor documentation, incorrect demographic data, unbundling of services), then implement processes to improve accuracy.

Undercoding (claiming for less than the actual care provided) and overcoding (claiming in excess of services delivered) generally occur because medical coders are not well integrated with clinical teams. Accurate coding for nursing home payment processing relies on good two-way communication between clinical staff and coders. So, if this is an issue, managers may have to address the problem through team-building exercises or implementing new collaborative working arrangements.

Finally, there are occasions when the sheer cost of the administrative and compliance requirements of long-term care billing negatively impacts revenue. Where this occurs, the solution may lie in utilizing technology to streamline billing procedures. Or, exploring lower-cost staffing models, like business process outsourcing (BPO) services.

Technology in Nursing Home Billing

The thoughtful use of smart electronic health records and integrated medical billing software can be an effective revenue cycle optimization strategy for nursing homes.

In particular, skilled nursing facility software can:

  • Streamline and automate intake processes
  • Improve the accuracy of documentation
  • Make charge creation and coding more efficient
  • Automate bill submission and payment tracking
  • Provide advanced capabilities to analyze financial data

When implemented correctly with nursing home billing best practices, technology can both increase revenue and decrease administrative staffing costs.

Legal Considerations in Nursing Home Billing

Legal considerations regarding billing in nursing homes largely center around 2 key themes: Billing transparency and compliance with federal requirements.

Billing Transparency

Billing transparency refers to providing ample clarity to all stakeholders about the services that are delivered and charged for. At face value, this might seem as simple as generating a detailed bill with accurate coding and a layman’s term explanation for patients. However, transparency in nursing home billing goes much deeper than that.

True billing transparency requires that the clinical records for each nursing home resident be completely in line with monthly consolidated bills. At any point in time, an auditor should be able to examine a patient’s records and the bill for care, with no discrepancies evident. This is a vital point because where a discrepancy is uncovered, the provider could face legal repercussions under anti-fraud regulations.

Compliance with Federal Requirements

To maintain licensing and certification with Medicaid, skilled nursing facilities must provide a comprehensive set of core services. These include things like nursing-related services, medically-related social services, emergency dental services, and professionally directed activities tailored to the interests and needs of residents.

Crucially, nursing homes can not charge residents (who meet Medicare Part A criteria) for the provision of these services. Either not making these services accessible to residents, or even mistakenly charging for their provision can place nursing homes at risk of legal sanctions.

With surveys and auditing of nursing homes set to increase from 2024 and beyond, all nursing homes must remain vigilant about compliance with federal (and state) requirements to avoid potential financial and legal penalties.

Case Studies: Effective Billing Practices

Research from qualitative case studies on financial management in long-term care and skilled nursing facilities identifies the following 3 characteristics as being key to effective billing practices:

  1. Develop knowledgeable staff
  2. Enhance communication with residents and staff
  3. Promote innovation for continuous quality improvement

Interestingly, these points are more about patient experience and a collaborative, positive working environment, than they are about tips or tricks to undertake billing in the fastest way possible.

The key takeaway is that the most effective nursing home billing guidelines are those that are sustainable and promote high-quality care. In this environment, staff are supported to do their best work to support organizational goals. Patients also receive high-quality care that results in the rating and reputation of the facility improving.

With the increased scrutiny nursing homes are being placed under, such an approach is arguably the only reliable way for nursing homes to achieve good revenue growth while complying with regulatory guidelines.

Future Trends in Nursing Home Billing

Future trends with Medicare billing for nursing homes that we predict will continue to grow are the increasing integration of technology and value-based care models.

Integration of technology has been steadily occurring with both administrative tasks and clinical care delivery. We’ve already covered how software can streamline and automate administrative tasks (like record keeping, billing, and managing nursing home accounts). On the clinical side, we are also seeing a trend of increasing virtual care to continue growing in nursing homes.

Historically, digital health services like telehealth have not been widespread in nursing homes due to fears that elderly residents would have difficulty engaging virtually. However, COVID demonstrated that services like telehealth and virtual consultations can be effective in aged care settings. 

Furthermore, there are many digital health products, such as falls detectors, remote monitoring devices, and even 3D food printing (for residents with swallowing difficulties) that are expected to become more widespread throughout nursing homes in the coming years.

Value-based care models are already in place in the American aged care sector. We expect this trend to continue to grow, to the point that it significantly impacts how does a nursing home get paid.

At present, the Skilled Nursing Facility Value-Based Purchasing Program (SNF VBP) involves the awarding of incentive payments to nursing homes that meet specified indicators of high-quality care. This currently is capped at 2% of all Part A Medicare payments, but it is very possible this number could increase significantly in the future.


With increased regulation and oversight—along with a slow and inconsistent recovery from COVID—many nursing homes across the United States are struggling financially.

In such a challenging operating environment, one of the best ways a facility can stay financially viable is by reviewing and optimizing nursing home billing guidelines.

This is because when staff from all levels understand how nursing home billing works, organizations can set up the necessary processes to deliver high-quality care to residents, while also being reimbursed at an appropriate level.

If you would like assistance with skilled nursing facility or long-term care billing—Pharmbills can help. 

Our business process outsourcing solutions provide experienced staff to handle many of the time-consuming administrative tasks related to coding and billing, at a fraction of the cost of local talent.

Please contact one of our friendly team members to find out how to get started today.

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Mariia Treibitch
Reuven Kogan
Sia Malyshenko
Customer Success Manager
Peter Druchkov
Onboarding Specialist

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