Understanding the Resource Utilization Group

The Nursing Home Reform Act mandates that nursing facilities use a clinical assessment tool known as the Resident Assessment Instrument to identify residents’ strengths, weaknesses, preferences, and needs in key areas of functioning. The assessment is an integral part of the residents’ medical record. It is designed to help nursing facilities thoroughly evaluate residents and provides each resident with a standardized, comprehensive, and reproducible resident assessment. Upon completion of the assessment, the information guides the team to prepare individualized care plans for each resident. The minimum data set (MDS) is a component of the resident assessment which contains a standardized set of essential clinical and functional status measures.

The prospective payment system for a Medicare Part A skilled nursing facility stay was phased into nursing homes between July of 1998 and January of 1999. This has raised a new dimension of issues and concerns and changed the significance of the resident assessment. Under the prospective payment system, skilled nursing facilities are required to classify residents into one of forty-four Resource Utilization Groups (RUGs-III) based on assessment data from the resident assessment.

The RUGs flow from the MDS and drive Medicare reimbursement to nursing homes under the prospective payment system.