ObjectiveTo determine whether RUG reimbursement categories accurately predict requirements for care in nursing homes.DesignProspective descriptive study of residents in lower reimbursement categories according to RUG.SettingThree nursing homes in New York City.ParticipantsConvenience sample of 173 residents who agreed to participate, not significantly different from 201 who did not agree to participate.Main MeasuresChart review; assessment of residents' cognitive and functional abilities; nursing assistants' ratings of residents' functional abilities, behavioral problems, the amount of effort required in care; and time‐motion studies of staff‐resident interactions.ResultsBoth the residents' RUG classification (P<0.01) and the level of ADL independence (P<0.001) had significant impacts on the staff effort required in their care, with more dependent residents requiring greater effort. The residents' level of cognitive impairment also had a significant impact on the staff effort, with the severely impaired requiring greater effort (P<0.05). The time‐motion analysis indicated that residents within the same RUG category differed in the number of staff‐resident interactions based on their level of cognitive impairment.ConclusionsCognitive impairment is a significant morbidity (or co‐morbidity) in determining the quantity of staff effort required by the resident, and behavioral interventions are an important care component. There is marked heterogeneity within lower (RUG) reimbursement categories which translates into strikingly different care req