Respiratory therapy has quietly become one of the most financially consequential services a skilled nursing facility can offer — and regulators are starting to take notice.
Industry reports now estimate that as many as half of all nursing home patients could potentially benefit from respiratory services, a figure that reflects both the clinical realities of an aging population and the significant reimbursement incentives baked into the Patient Driven Payment Model (PDPM). Under PDPM, respiratory conditions boost a resident’s payment classification in multiple categories, including nursing and non-therapy ancillaries — making it one of the higher-revenue service lines available to providers.
But that financial upside comes with real exposure. One clinical consultant quoted in industry reports put it plainly: it’s both an “opportunity and exposure” for operators who haven’t yet built systematic respiratory programs.
The Medicaid Expansion Adds Pressure
The stakes are rising as more states shift their Medicaid reimbursement systems toward PDPM-style case-mix models. That means state Medicaid auditors — not just Medicare — will soon be scrutinizing whether respiratory therapy claims are clinically justified. Facilities that have expanded respiratory services to capture PDPM revenue without proper documentation, clinical rationale, or therapist oversight may find themselves caught in a two-pronged audit exposure: federal and state.
The warning signs are already there. The Office of Inspector General recently completed its first-ever PDPM-specific audit of a nursing home and found that the facility had errors in 99% of its claim submissions. That audit triggered a $31 million Medicare recoupment demand that the provider says could shut it down — a cautionary tale that’s resonating across the industry.
What Operators Need to Get Right
Experts say the core issue isn’t whether respiratory therapy is appropriate for nursing home residents — in many cases, it clearly is. The problem is that some facilities have added respiratory services primarily as a revenue play, without building the clinical infrastructure to back it up. That means proper assessments, physician orders, treatment plans, and documented outcomes.
Facilities that do this right are well-positioned. Respiratory therapy addresses real conditions common in long-term care — COPD, pneumonia recovery, ventilator weaning, oxygen management — and PDPM was designed to reward providers who take on clinically complex patients. The issue arises when billing outpaces care.
“There’s still an opportunity to grow and align our systems [under PDPM] and Medicaid has just joined that,” one clinical expert said, according to industry sources. The message for operators: build the program correctly, document everything, and don’t wait for an audit to find out if your claims hold up.
As federal and state scrutiny both intensify, the facilities that treat respiratory therapy as a clinical priority — not just a billing line — are the ones likely to come out ahead.
