Medicare SNF Rate Outlook
Literally fresh off of a significant rate adjustment/reduction in October (2011), Medpac (the Medicare Payment Advisory Commission) releases a recommendation for complete SNF payment overhaul. In their assessment of the SNF payment system under Medicare, Medpac concludes the following;
- Medicare payments to SNFs represent 23% of all revenues. Medicare (payer) as a share of SNF patient days averages 12%.
- Provider supply and occupancy rates remain essentially flat year-over-year (2009-2010).
- Quality as determined through survey and other indicators remains unchanged.
- Average Medicare margin is 18.5%. The average margin for for-profit SNFs is 20.7% and for non-profits, 9.5%.
The crux of the Medpac argument is that efficient providers have lower costs (about 10%) and higher quality as evidenced by higher rates of community discharges (38% higher) and lower rates of rehospitalizations (17% lower). Accordingly, Medpac believes that the current system, inclusive of recent adjustments to rates (October) is set to produce the same level of behavior and outcomes, plus account for a 14.6% average margin in 2012. The argument put forth by Medpac is that the Medicare SNF system must be re-based, principally due to the fact that margins have run consistently above 10% since 2000 and the correlation between margins and patient case-mix is non-existent. In summary, the Medpac recommendation, which will head to Congress in the upcoming months, is to revise the PPS system now and begin rebasing rates in 2014, in phases. In addition, Medpac is calling for a rehospitalization impact (negative) to rates for poor performing SNFs.
Ordinarily, Medpac recommendations such as this have more of a “frame the argument” impact than a real implementation objective. Congress has been reluctant to take steps this drastic to any Medicare provider group for fear of industry fall-out and political damage. Yet, as we have seen with the home health industry, greater movement is possible where rate cuts are concerned, particularly if the general tone is that the industry is too profitable and said profit is coming from gaming the system. Double digit margins seem to get even Congressional types’ attention.
Looking at the industry, how the rate reductions in 2011 transpired, the initial report/recommendations from Medpac, and the current public policy environment in Washington, my near term rate outlook for SNFs is as follows.
- All the evidence suggests PPS refinement is forthcoming. The system simply isn’t working adequately in terms of tying payment rates to care costs and rewarding quality. The “behavior” effect that CMS is looking for, namely a movement away from “rate ramping” focused on rehab case-mixes to rate equalization focused on a balanced book of Medicare patients (balanced case-mix) isn’t happening and apparently, isn’t properly incented in the current system.
- Rebasing isn’t far-fetched but it is aways off. CMS is prone to be exceptionally slow at devising payment systems and of course, equally inept at getting the infrastructure to work properly. If as I believe, the first step is PPS refinement, given the likely horizon of implementation, rebasing is farther away; certainly farther than 2014.
- There is no question that payments will become tied to certain quality indicators, especially rehospitalizations. This trend is foretold in the PPACA (Reform) and regardless of the law’s future (life or death or limbo), the payment tied to quality trend is here to stay.
- Politically, the will to champion what will be viewed as over-payments is far less than the will to find ways to rein in excess (or perceived excess). All this means, regardless of the upcoming political cycle and elections, is that lobbying for a system that continues to produce average margins north of 14% will fall on principally deaf ears on the Hill.
- Rates are trending down and I suspect another round of flat to modest decreases in rates forthcoming in October. The push will be system revision as opposed to just rate reductions, feeling that the best approach is to revamp the existing PPS and in so doing, create lower spending overall.
- Time tested arguments against cuts that won’t work or have run their course are as follows;
- Medicare margins are necessary to offset Medicaid losses. This one is good on its face but in reality, its tough to make the case for margins that have run in the 20% range and earnings that have been solid among the for-profit companies. The publicly traded guys need to show pain (in the form of earnings) before Congress will relent on the lack of merit for this argument (publicly traded SNFs tend to have higher MA census and higher Medicare census).
- Access will become an issue and facilities will close. Per Medpac and most industry observers, the supply today is adequate and slightly surplus so some continued shrinkage isn’t a big concern.
- Job losses will certainly occur. The latest cuts from October don’t support this argument by any magnitude. Additionally, the overall health care industry is growing so worker displacement isn’t really a grave concern – movement is easy between providers in most markets.
- Capital will be even more difficult to access with future negative rate outlooks. Again, this is a decent argument but in reality, capital access is provider specific and CMS and policy makers realize that well run, profitable providers will continue to have access to capital, even if the industry outlook is negative. A better argument is that negative industry outlooks make capital marginally more expensive and the number of outlets fewer. This is true only in the short-run however.
So in conclusion, here’s the take-away: Medicare rates are headed down in the near term and in the intermediate term. It is a virtual certainty that the present PPS system will be revised over the next three to five years. The future of the PPACA will impact this process as elements of reform shift the landscape for all providers. The debt discussions in Washington will have literally no direct impact on the future of Medicare SNF payments; the industry share of the overall spending pie is negligible enough to not be overly impacted by automatic cuts in federal spending. The future is one where providers must learn to balance their overall Medicare book/case-mix and focus on quality. Quality incentives/penalties are a certainty and there is no longer any room left to ignore outcomes such as discharges and rehospitalizations. Likewise, I believe bundled payments are forthcoming and the further development of ACOs will continue to shift SNFs to align their care and product/service offerings toward outcome oriented, bundled payments. Medicare as a payer source will remain profitable for many SNFs although not at the same margin levels seen over the past decade. Profitability ranges will trend into the high single digits or perhaps slightly more but only for providers with a well-balanced case-mix. As always however, the key to making money in this declining reimbursement environment stems from solid management, a well-balanced payer mix, and an operating infrastructure that is aligned with the incentives remaining in the industry.
Current Policy Trends to Watch
In response to a recent series of questions from multiple segments of the health care and post-acute industry plus my own experiences within the landscape of providers and policy makers, I’ve summarized a current list of policy trends “pay attention to”.
Medicare Cuts and the Super Committee: Nothing seems to loom larger or cast a bigger shadow than the prospect of outlay reductions from Medicare translating into rate cuts for providers. Here is the core everyone should focus on. First, the recurring “Doc Fix” issue that Congress has repeatedly kicked down the road time and time again. Let the current patch dissolve and voila, a big chunk of spending disappears (a 30% rate cut on January 1) - albeit with enormous likely consequences in terms of patient access, service reductions, etc. Fix the problem permanently or more likely substantially, and additional non-budgeted spending occurs – a problem. Presently “on the table” so to speak is a recommendation from MedPac to fix the problem via repeal of the Sustainable Growth Rate formula (the trigger for the current “cut” scenario) and replace the formula with a schedule of Physician Fee Schedule updates over a ten-year period. The updates would target primary care physicians at the expense of specialists who would experience a 5.9% cut across a three-year period, followed by a fee schedule freeze. Altogether, this is a fix but one that comes with new spending if no additional changes are made. Likewise, the probability of this being a workable compromise within the medical community is minimal. There remains a side problem to this whole mess and it relates to the number of other Med B services tied to the SGR such as outpatient therapies.
Back to the Super Committee and the prospect of triggered automatic cuts to Medicare. The Committee is charged via last summer’s debt ceiling deal, to arrive at a deficit reduction of $1.5 trillion to be implemented over 10 years, sourced either through spending cuts, new revenues or a combination of the two. Based on what we know today and have consistently experienced over the past year or better, Congress lacks the political will and capability to achieve a consensus on just about any subject. Given that we are also hip-deep in a political cycle with elections nearly one-year away, compromise on a plan is less and less likely. If such a plan cannot pass or isn’t available by the deadline, current law requires an automatic cut of $1.2 trillion to occur, balanced across domestic and military spending. Within the triggered cuts in domestic spending is a 2% cut to Medicare provider reimbursement. This cut would be automatically on-top of, any other current reductions or cuts to providers that occurred as a result of CMS normal-cycle rule making. For example, the 2% would be added to the 11% outlay reduction for SNFs. Interesting to note, Medicaid is unaffected by the automatic reduction trigger. Boiling this all down, here is what is likely “on the table” and could conceivably play out.
- Medicaid is likely at greater risk for some kind of spending reduction package as Medicare and Social Security have the greatest political protection. My best guess, not that this will actually occur or pass, is direct discussions with regard to block grants as an expenditure reduction, broader waivers to States to eliminate current pressure for additional federal support, slow-down of health care reform Medicaid expansion to avoid the additional up-front federal support/funding required by current law.
- Some levels of additional programmatic delays or even, defunding of the Health Care Reform act. Congress loves to think of “not funding” a future expenditure as a “cut”.
- A Medicare realignment approach will be strongly considered. Under realignment, the Commission could conceivably adopt an approach similar to pieces advocated by Paul Ryan namely, higher retirement/eligibility age, premium support for privatization of health coverage (vouchers) or even some level of excess benefit taxation on wealthier retirees (in effect, an imputation of a premium cost for certain income levels). This approach is bolder than other less invasive options.
Medicaid: Notwithstanding my comments on Medicaid in the section above on Medicare and the Super Committee, states continue to wrestle with Medicaid deficits and the real prospects of flat or possibly shrinking, federal funding support. For most states, Medicaid represents the second largest expenditure item within their budgets, just behind education spending. Federal support levels average in the 50% to 60% range. Additionally, the majority of states continue to operate on a fee-for-service platform, bearing all of the direct program and care service cost plus the administrative burden. In a flat to down economic cycle, demand for Medicaid services rises for states as eligibility rolls swell with rising levels of unemployment. At the same time, down to flat economic periods reduce state income collected via taxation; the principal source of initial, core funding for Medicaid (the FMAP provisions require states to allocate first-dollar, the source of which is predominantly taxes). The three trends to watch with Medicaid, all of which I am seeing occur regularly, are;
- A push toward privatization and managed care. States are looking at ways to better coordinate services, create some competitive bidding models, and reduce administrative burdens. Managed Medicaid programs have proven succesful in achieving these goals (some more than others).
- Increasing numbers of programmatic waiver requests to the Federal government. A major issue with the enhanced FMAP funding that came via the Stimulus Bill is that the funds came with strings attached, primarily a requirement that the enhanced funding be used for eligibility expansion, program expansion, and expanded benefits. In July of this year, the enhanced funding disappeared leaving many states with an equal or greater structural Medicaid deficit and still lacking a sufficient economic recovery to garner the necessary “state grown” revenue to sustain not just former program levels but program and benefit expansion driven by the enhanced FMAP. States are increasingly looking to the Federal government today for relief or “waivers” that undo what was put in place to garner the enhanced FMAP.
- Increased provider taxes and decreased payment levels are a given for the vast majority of states. I haven’t yet encountered a state Medicaid plan that wasn’t considering or already implementing, some form of provider tax increases and/or reduced payments to providers. Of most reductions, the target appears squarely focused on the HCBS (Home and Community-Based Services) segment, inclusive of Medicaid waiver programs for Assisted Living and Congregate Housing (Medicaid payments made for supportive, assisted care to a population at-risk of institutionalization).
Miscellaneous/Other: This is a catch-all of five separates trends or issues that in some ways, are inter-related to the Medicare and Medicaid sections and in some ways, separate. To be sure, I could have expanded this section by a magnitude of ten and still not touched on every policy issue presently at play. I opted for the five I hear discussed routinely or I encounter frequently in my work.
- Accountable Care Organizations (ACOs): The first release of draft rules from CMS in March of this year produced a non-starter response from providers. The initial draft implied a series of cumbersome and poorly defined steps for creation, sustainment, operating and quality measures (65 quality measures required for bonus payments) that chilled providers. Earlier this year when the draft was released, I wrote an analysis piece on the draft and the implications for post-acute providers ( http://wp.me/ptUlY-8H ). Clearly, my analysis paralleled the reactions that CMS received regarding the proposed rules. Just this week, CMS released a revised ACO set of rules and to a fairly large degree, softened and clarified the objectionable elements contained in the March draft. Summarized, here are the major changes. Time will tell whether these changes spur additional interest in ACO development.
- Reduction in quality measures from 65 to 33.
- Providers are not required to share in the down-side risk and will be able to access earlier, elements of revenue sharing. The initial version required all original savings returned to Medicare prior to any revenue sharing.
- Community Health Centers and Rural Clinics will be permitted within the ACO model – originally excluded.
- Providers will know up-front which patients are likely to be included within the ACO - originally, not known until after the ACO was formed – a removal or limitation on unknown adverse selection/population risk.
- Inclusion of an Advanced Payment Provision for smaller ACOs, creating initial streams of payment or capital that allows infrastructure investments needed to formulate an ACO to effectively be funded by CMS. this provision only applies to non-institutional ACOs (physician practices) of $50 million or less or rural based ACOs with Critical Access Hospitals or low Medicare volume rural hospitals.
- Removal of the mandatory anti-trust review procedure for new ACOs by the Department of Justice and the Federal Trade Commission. This was a significant gray-area issue in the March draft.
- CMS Movement to Split Provider Pharmacies from Consulting Pharmacy Duties: In an effort to combat what it believes is a conflict of interest between quality and quantity in the SNF pharmacy delivery/provision process, CMS is proposing a requirement that would prohibit the dispensing pharmacy from also being the consulting pharmacy in the SNF. In short, one entity would be required to dispense the medication and the SNF would need to contract or employ, a separate consulting pharmacist or group to review and establish, clinical pharmaceutical plans of care. CMS assumes that this change will reduce the overall number of medications provided and improve care delivery. Perhaps but unlikely. The true outcome is likely about the same level of prescription use in SNFs and higher costs for the SNF. Consulting pharmacists and pharmacists in general are in short supply. For most SNFs, finding a consulting pharmacist separate from the providing organization will be difficult and expensive. Even more problematic will be finding an independent consulting pharmacist or group with sufficient long-term care and geriatric experience to be of any benefit at all; for residents and the facility. My take here is that CMS is wary of continued consolidation of institutional pharmacy providers such as Omnicare and PharMerica and is seeking a back-door method for constraining their growth across the post-acute spectrum.
- Doc-Fix and Sustainable Growth Formula: I touched on this earlier but there is a real side issue to watch and it has nothing to do with the payment issue to physicians. The SGR and the physician payment formula also encapsulates a whole host of outpatient services tied to this element of Part B. For post-acute providers, the target to watch is outpatient or Part B therapy rules and payments. As goes the SGR debate, so goes the prospects for payments for other Part B services such as therapies. Frankly, any fix to the SGR and physician fee schedule issues needs to occur separate from the other Part B elements presently included within the SGR mess.
- Home and Community Based Services: What once was a flourishing sub-industry is soon to be no longer. I touched on this briefly in the section on Medicaid. This element is at significant risk for post-acute providers as funding is tight and most states are looking at any opportunity possible to reduce their HCBS programs, reign in eligibility growth or receive waivers from the Feds for wholesale discontinuation of certain programs. The reason? Institutional care and medical care cannot by law be cut whereas these programs are waiver programs; not presently, expressly required by Federal law.
- Tighter Regulatory Scrutiny: Somewhat parallel to the pharmacy issue above, CMS is foretelling a renewed vigilance on certain post-acute practices and relationships. I am reading and hearing all too many comments and stories regarding CMS closely watching and even planning to directly interject via probes and audits ( and perhaps rule-making), relationships between SNFs and contract therapy companies, pharmacies (see above) and SNFs, SNFs and Hospices, and ancillary medical equipment providers (wound vacs, specialized mattresses, fall prevention devices, etc) and SNFs. The tone here is that CMS believes these relationships exist to optimize profit for the parties and to capture larger elements of reimbursement, not to improve care outcomes or efficiencies.
- Increasing Demands on Physician Engagement: For most post-acute providers, physician engagement such that the same was tied directly to reimbursement was never a major issue. This trend unfortunately, is here to stay and will increase. CMS believes that in Hospice and Home Health particularly, unneccessary services were provided without established medical necessity or justification. Both home health and hospice now have face-to-face requirements for physician certification of necessity for services/care. The next phase of this, and I guarantee this will happen in the next year or two, is direct engagement and oversight of CMS in the relationships between physicians and the organizations and the content of the documentation of medical necessity or justification. Providers need to be vigilant here or face claim denials in increasing numbers.
Post-Acute Outlook Post Debt Ceiling, Post Medicare Rate Adjustments, Etc.
OK, the title is a bit wordy and trust me, I could have included more “posts” but I think I got the point across. First, I’ll admit to having a crystal ball however, the picture I see is a bit like the first (and only) television set I remember having as a kid: Not in color, lines running vertically and horizontally, snow, and an antenna that required frequent manipulation and tin foil to get any kind of reception. And of course, there were only three channels available. The same today is true about my crystal ball on health policy and what to expect in the post-acute industry.
My crystal ball’s three channels are Medicare, Medicaid and the Economy. Reviewing each, here’s the programming I see for the fall lineup or if you prefer, the period post October 1 (fiscal year 2012) through early next year.
The Economy: The debt ceiling discussion and the actions taken by S&P and the Fed in the last couple of weeks are a reminder via a cold slap, of how mired in dysfunction Washington remains and how moribund the economy truly is. While technically not in a recession, the economy is not really growing either; a growth rate of less than 2% in GDP is like treading water. For unemployment to change, consumers to return and capital to re-enter the business investment side, GDP growth needs to be above 2% and ideally north of 4% for a sustained period. Unfortunately, in order for this to occur, fiscal policy in Washington needs to develop some semblance of coherency and consistency.
What I know from my economics training and background and my last twenty-five years plus in the healthcare industry boils down to some fairly simple concepts. These concepts are I believe, a solid framework for providers to use in terms of planning for the near future and even somewhat beyond.
- The U.S. debt level is fueled to a great degree by entitlement spending, less so by discretionary spending. If the prevailing wind is about debt reduction and balance in the federal budget (or getting closer to balance), two things must occur. First, spending constraint where spending primarily occurs, namely entitlements. Second, revenue increases in some fashion, namely taxes. The devil as we know it today, is how and where on both sides of the ledger (revenue and expenses). Spending reductions alone are insufficient, unless dramatic, to significantly lower the debt level or balance the budget; particularly in a period of near zero economic growth. Dramatic spending reductions are clearly unwise and potentially, deleterious to an industry sector (healthcare) that continues to provide steady employment. Similarly, for spending reductions on entitlements to truly have a positive impact and make sense, program reform must be at the forefront of “why” less spending is needed or warranted. Program reform, ala the health care reform bill which didn’t really reform Medicare or Medicaid but added new layers of entitlements, is far from the answer. For providers, there is no immediate or for that matter, longer-range future that doesn’t entail less spending on Medicare or Medicaid. As the only “trick” in Washington’s bag or the bags contained in the statehouses is rate cuts, anticipate and plan for the same.
- A lackluster, no growth economy with high unemployment levels fuels provider competition wars over paying patients. As fewer paying patients are available and/or fewer “good” paying patients are available, providers will compete for the same market share within and across the industry levels. What this means is that providers will seek to acquire market share within industry segments (home health, hospice, SNF, etc.) and across industry levels (hospitals seeking to maintain patient days versus referring to post-acute providers). The end result is more or similar levels of M&A activity, if capital remains available, and thus, consolidation that is driven primarily by market share motives.
- According to a recent healthcare expenditure outlook released by CMS, healthcare spending is projected to reach $4.6 trillion by the end of the decade, representing nearly 20% of GDP. The primary contributor to this projected level of growth is the Affordable Care Act, principally due to the expansion of Medicaid and the requirements for private insurance coverage (Medicaid growth of 20.3%). While CMS notes that Medicare spending may slow somewhat, this assumption is predicated upon the continuation of spending cuts and a 29.4% reduction in physician payment rates required under the current Sustainable Growth Rate (SGR) formula. Assuming, as has historically occurred, Congress evacuates the cuts called for under the SGR and as has been discussed, moves to a formula tying payment to the Medicare Economic Index, Medicare spending accelerates to a 6.6% growth rate (1.7% projected for 2012 with continuation of the SGR). Summarized, health spending is the two ton gorilla in the room and it will continue to have a heavy, significant influence on economic policy discussions at the federal level and beyond. Though I don’t agree with the recent rating action taken by S&P, it is impossible to ignore the consensus opinions of allof the rating agencies: Entitlement spending, namely driven by healthcare spending, is unsustainable at its present level with the present level of income support (taxation) and as long as the status quo remains fundamentally unchanged, the U.S. economy is not fundamentally stable.
- Current economic realities and the rating agencies actions and statements foreshadow a stormy, near term future for the healthcare industry. As is always the case, there will be winners and losers or more on-point, those more directly impacted and those less so. On the post-acute side, excluding reimbursement impacts, I’ve summarized my views on what I see in terms of economic impacts for the near term (below).
- The credit rating side will remain pessimistic for most of the industry “brick and mortar” providers. Moody’s, Fitch, et.al. will continue to have negative outlooks on CCRCs, SNFs, etc. primarily due to the economic realities of the housing market, investment markets, and reimbursement outlook. Within this group of brick and mortar providers, Assisted Living Facilities will fair the best as they are the least impacted by the housing market and for all intents and purposes, minimally impacted by reimbursement issues (save the providers that choose to play in the HCBS/Medicaid-waiver arena).
- The publicly traded companies (primarily SNFs but home health and LTACHs as well) will continue to see stock price suppression due to the unfavorable outlooks and credit downgrades provided by the rating agencies. This will occur regardless of the favorable earnings posted by some of the companies. Reimbursement trends (down) are the primary driver combined with the hard reality that Medicaid is in serious financial trouble, even more so going forward as enrollment jumps due to continued healthcare reform phase-in schedules.
- Capital market access will continue to be tight to inaccessible for some providers. Reimbursement, negative rating agency outlooks, lending/banking reform, above historic levels of failures/bankruptcies, etc. all continue and will remain as an overhang to the lending environment. Problems with potential continued stable to increasing funding levels at Fannie, HUD, etc. create additional credit negativity and tighter funding flow. Capital access, when available, will continue to have a credit premium attached, in-spite of low base rates. I expect to see continued development and demand for private equity participation.
- Given the above, financially driven mergers and acquisitions will remain somewhat higher as organizations seek to use the M&A arena to create financially stable partnerships and bigger or larger platforms from which to derive credit/capital access.
Medicare: The problems with Medicare are too deep and lengthy to rehash here and thus, I’ll move to brevity. Medicare is, as I have written before, horribly inefficient, bureaucratic, and inadequately funded to remain or be, viable. As a result, only two real scenarios exist today: Cut outlays or increase revenues. Arguably, a third that involves portions of each scenario is the most probable solution. Real reform is light-years away as the current and forseeable political future foretells no scenario that includes a Ryanesque option (Paul Ryan plan from the Republican Congressional Budget and/or Roadmap for America). Viewed in this light, the Medicare outlook for post-acute providers is as follows.
- For SNFs and Home Health Agencies, reimbursement levels are on the decline. The OIG for CMS and MedPac have each weighed-in that providers are being overpaid. Profit margins as a result of Medicare payments or attributable to Medicare, are deemed too high (mid to upper teens) and as such, the prevailing wind is payment or outlay reductions. The bright-side if such exists, and as I have written before, this “cutting” trend will impact some providers far more than others. The providers that have relied heavily and primarily on certain patient types for reimbursement gains will be more negatively impacted than providers with a more “balanced” book – a more diverse clinical case mix. The movement is toward a more balanced level and thus lower level, of reimbursement theoretically closer aligned with the actual clinical care needs of patients. Providers with more diverse revenue streams and more overall case-mix balance will not be as adversely impacted although, the Medicare revenue stream will be lower or less profitable.
- Hospice has remained relatively unharmed, principally due to its lower overall outlay from the program. It remains a less-costly level of care than other institutional alternatives. A note of caution here is important. While rates have not been cut, program reform is occurring on the fringes and I suspect a wholesale re-design of the Medicare Hospice benefit is forthcoming. In such a fashion, payment reform rather than rate reform or reduction will occur. The obvious trend is to restructure payments away from a reward for lengthier stays and to require more precise determinations of terminality, tied to a tighter or imminent expectation of death. OIG and MedPac have issued a number of papers and memos regarding the relationships between Hospice and SNFs that correlate to longer stays for certain diagnoses. Summarized, payment reductions via rate are less of an issue but utilization reform is forthcoming via additional regulation designed to reduce overall payments to Hospices or as CMS would say, to more closely align payments to the real necessity of care for qualified, terminally ill patients. Without question, the largest impact (negative) going forward will be on hospices that have sizable revenue flows tied to nursing home patients.
- LTACHs are in a similar reimbursement boat as hospice; small overall outlay within the program and for the past few years, minimal expenditure growth. The industry is from a cost perspective, fundamentally flat. What will be interesting to watch is whether under certain aspects of healthcare reform, this niche’ takes on a growth spurt. Bundled payments, ACOs (Accountable Care Organizations), and shifts in SNF reimbursement away from higher acuity, rehab patients may lead toward more utilization of the LTACH product. This being said, the prevailing Medicare reimbursement profile is fundamentally flat. Given a bit more creativity on the part of the LTACH provider community, this segment may be poised for some growth, although not directly via increasing payments.
- The most uncertainty lies on the Part B provider side, particularly providers that are reimbursement “connected” to the Physician Fee Schedule (therapy for example). As of today, the required change to the fee schedule as a result of the Sustainable Growth Rate formula is a fee cut of 29.4%. It is quite possible, due to the current negative or flat growth trajectory of the economy, and sans any change in the law, for fees to be cut again in 2013, barring Congressional action. Most acutely impacted in this scenario are physicians and predominantly, primary care physicians. I have yet to see a Congress that fails to intercede and repair cuts this draconian but the political times and the budget deficit debates are markedly different than during any prior period. Critical to whether this cut or some level less than this is implemented is the issue of access, already a hot topic for physicians. Physicians, particularly primary care specialists, are already in short-supply nationally, woefully short in certain markets. If cuts of this magnitude or perhaps any magnitude roll forward, I suspect many physicians will curtail or close their practice to new Medicare patients. On the other side represented by non-physician providers, Part B cuts of this magnitude will no doubt limit service and access. Fixing the formula and the law has been difficult for Congress as the dollar implications are substantial. I foresee another round of patches, etc., occurring close to the “cut” date, especially since 2012 is an election year.
Medicaid: For as many reasons as Medicare is a mess, Medicaid is as well, though magnified by a factor of two or more. Medicaid’s biggest problem now is rapid growing enrollment, primarily due to high unemployment and upcoming federal eligibility changes mandated via the Accountable Care Act (healthcare reform). Given Medicaid’s current funding structure, this issue poses huge problems in flat to negative growth economies. States simply due not have the revenue to create a higher matching threshold or level, necessary to achieve more federal dollars. In July, the enhanced federal match provided via the Recovery Act (stimulus) sunsetted leaving states with huge structural deficits and the prospect of deficit growth due to increasing enrollment. In virtually every state, rate cuts have been discussed and in half-again as many, implemented. States continue to move to the federal government seeking relief from required or imputed service provision requirements and/or relief from eligibility requirements (waivers). The inherent difficulty with balancing Medicaid funding is that the same is directly tied to stable to growing state revenues and a clear picture of population risk or need. Changing (increasing) populations often present adverse-risk scenarios, creating higher than normative utilization. For obvious reasons, lower than market reimbursement levels, access is a big issue. Not all providers willingly and openly desire Medicaid patients and those that do are not on the increase. Without additional funding assistance at a level beyond what is called for in the Accountable Care Act, regulatory relief and an improving economy, the reimbursement prospects under Medicaid are all bleak.
- In the post-acute environment, the biggest impact of this continued ugly Medicaid scenario will fall directly on SNFs. Matching prospective or real Medicaid cuts with Medicare cuts forthcoming is a true “negative” Perfect Storm. For most SNFs, Medicaid is the largest payer source and until recent, Medicare was used as a make-up funding source for Medicaid reimbursement shortfalls. Adding fuel to an already smoldering fire, the suppressed earnings available to seniors, no growth in Social Security payments, and a stock market that presently produces only a flat return trajectory limits the pool of private paying and privately insured patients. In short, there is no additional room on the revenue side to make-up an SNFs Medicaid losses. For SNFs, only the few that have limited leverage, high occupancy, an extremely balanced payer mix, and stable staffing will weather the Medicaid near term future; a future of no rate increases or likely cuts.
- While not a huge segment of the post-acute environment, HCBs providers will feel the Medicaid pinch as well. As a result of needing to reign in Medicaid spending, states are rapidly curtailing their funding and payment levels for HCBs programs. While most states still claim that HCBs expansion would help soften their Medicaid deficit, states that bit a big bullet in this arena early on (California for one), now realize that waiver programs produce massive new levels of beneficiaries who want and need access to community support services. SNF access was already somewhat limited as the industry has truly shrunk but the demand for services in this growing eligibility pool has expanded. Funding these services is becoming a real problem for states and as such, support payments will remain flat, decline and program growth will be capped.
- Home Health will also feel a bite from declining Medicaid funding although its Medicaid utilization levels are modest at best. For Home Health, Medicare is the big dog and Medicaid a minor element. Staffing costs are on the rise for Home Health as the competition for home health aides in many markets is brutal or getting rough. Competition, even in a high unemployment environment, for certain categories of employees, raises wages and benefit costs. Staffing is the largest expense for a home health agency and as such, a scenario with rising employment costs and flat to declining reimbursement negatively impacts margins. I don’t see this scenario changing any time soon.
Concluding, this may be one of my most depressing posts, if for no other reason than the current external view is dreary and nothing foreshadows improving weather. For brick and mortar providers, capital access is critical, especially for SNFs who have as a profile, some of the oldest physical plants. SNFs are capital-intensive operations and without an ability to fluidly and reasonably, access modest cost funds, deferred maintenance (already high) will increase. With so much revenue tied to reimbursement and a reimbursement outlook that is negative, it is unlikely that capital will flood back to the post-acute industry. Critically important to the viability of this sector is an improving economy combined with regulatory reform that, if reimbursement remains flat, allows providers to become truly more efficient. In short, increased program revenues under Medicare and Medicaid due to economic growth, will ease a lot of the immediate crunch and perhaps, buy sufficient time for absolutely critical, health policy reform.
CMS Announces Medicare SNF Cuts: The Implication
On Friday, CMS released its Final Rule regarding FY 2012 SNF PPS reimbursement. The Final Rule implements a reduction or “cut” in SNF PPS payments equal to 11.1% or $3.87 billion. The 11.1% reduction is based on 2011 rates and spending/outlays. In their proposed final rule published in May, CMS alluded to the real possibility that it would seek to reduce SNF payments via some element of program/technical correction as well as rate reductions. Their reasoning stemmed from claim and resulting outlay experience that was significantly greater in dollar amounts than originally forecasted when MDS 3.0 and RUGs IV was devised and implemented. Summarized, CMS had intended the conversion from RUGs III to RUGs IV to be expenditure neutral for Medicare. Per recent figures and analysis from the OIG, expenditures under RUGs IV are running 16% higher than the “neutral” target. For more information, see my recent post on this same topic at http://wp.me/ptUlY-8Q .
Given that the text of the Final Rule won’t be published until August 8 and as of Friday, CMS was still working on recalibrating the CMIs under RUGs IV, it isn’t possible to provide direct analysis of the actual rate scenario for FY 2012. What I do know however, is that the “bark” in this case is definitely worse than the “bite”. While overall spending is set for reduction, this doesn’t necessarily correlate directly to rate. Briefly, here’s why:
- CMS has factored into their projections of lower spending levels, a series of technical corrections such as changes in how minutes are allocated among participants in group therapy. This change closes a loophole or as I have said, an area of oversight in the transition from III to IV. Going forward, group therapy minutes must be divided in equal increments among all participants (e.g., one hour of therapy provided to a group of four equals four 15 minute therapy sessions; not an hour allocated to each participant as the system presently allows). Additionally, CMS is tightening the Change of Therapy assessment requirements to more specifically, capture any changes in a patient’s therapy needs that would preclude re-classification to a different (presumably lower) RUG category. This change is separate from any Change of Condition assessment.
- Recalibration of RUGs categories via adjustment to the CMIs will occur based-off of 2011 utilization and projections. The net result is change in category payments that will remain higher than experienced under RUGs III levels. In short, the net “cut” will not be 11% across the board. SNFs need to be astute as to how the CMIs work and translate into payments under each RUG. Recalibration is designed to restore parity to the overall expenditure profile. In order for CMS to do this, it will overlay utilization trends and patterns across the CMI continuum and adjust rates within the scope of its technical corrections, to forecast an overall program expenditure target that agrees (theoretically) with its original intentions in converting to RUGs IV. In short, this doesn’t mean an 11% direct rate reduction. If CMS were to impose and 11% cut to each category, overall outlays would reduce by more than 30% – that is not the target.
- Based on what I see from most providers with a fairly balanced Medicare book of business (mix of clinical/nursing and rehab cases on par with 40% clinical, 60% therapy), the net to their per diem will be flat to a reduction of 2 to 5%. This means that a facility with an average per diem today of $450 per day will see a 2012 per diem between $425 and $450 per day. Providers that took advantage of the group therapy option to escalate or maintain their high rehab payments under IV will likely see a greater revenue shock. In virtually all cases, providers that have a fairly balanced Medicare book should see a 2012 Medicare per diem that falls 6% to 8% higher than their FY 2010 per diem.
I will have a better idea of the actual impact when I see the final CMIs and resulting RUGs IV rates. In the meantime and until the Final Rule and rates are implemented on 10/1 of this year, I don’t see much in the way of political intercession to change (positively) the rate and spending scenario. Spending at the Federal level is a toxic subject and even with a potential debt ceiling deal looming, the microscope will remain directly on all areas of federal spending. Entitlement spending (Medicare, Medicaid, and Social Security) is rising substantially faster than discretionary or military spending and logically, presents a big target for deficit hawks. Logically, it will be difficult to gain the support of any Congressional industry sympathisers to push more money back into a system that most acknowledge, was unintentionally overpaying for care. Consider FY 2011 a bit of a windfall and the changes forthcoming, pretty darn modest; all things being equal.
Medicare SNF Cuts: Fact, Fiction, Probability
In early May, CMS released its proposed rule for FY 2012 concerning Medicare PPS reimbursement for SNFs. As most followers of the industry from investors, to operators to developers know by now, CMS dropped a “bomb” to the industry indicating bluntly, a warning of a parity adjustment (reimbursement or payment reduction) of 11.3% or $3.94 billion. In typical convoluted CMS fashion, the logic behind this foreboding news is scattered; an analysis of the agency’s inability to adequately anticipate provider behavior, utilization patterns, and to appropriately create a reimbursement mechanism that ties the cost of care required by current SNF patients with the costs and delivery systems necessary to provide the care.
Initially, the interpretation from many inside the industry was that CMS was overreacting, using only one-quarter’s worth of claims data to substantiate a “sky is falling” conclusion. More recently, six month’s worth of claims data became available and analysis proved the trend correct and even a shade worse or better stated, more prevalent than originally assumed. In short, the implementation of MDS 3.0 and RUGs IV missed the budget mark (budget or expenditure neutral) by $2.1 billion or 16%.
In the last week to ten days, the OIG (Office of Inspector General) for CMS stepped into the debate, stating its opinion that the overpayments must be stopped immediately. Interpreting the OIG’s qualification of “immediately”, the timeframe at issue is next fiscal year. In essence, the core of the problem continues to be the structural flaws within the RUGs system predominantly, that disproportionately pays more for rehabilitation therapy than for other primary care modalities. A major intent of CMS during the switch from RUGs III to IV was a reallocation of the incentives (higher payments) from therapy to other resident care requirements. Suffice to state, the methodology failed. Below is a simple illustration of how on a pure rate basis, the RUGs III to IV therapy categories compare.
| Table 1: Average Amount That Medicare Pays SNFs per Diem for Each Level of Therapy, FYs 2010 and 2011 | ||||
| Level of Therapy | Number of Therapy Minutes Provided During Assessment Period | Average per Diem Payment FY 2010 | Average per Diem Payment FY 2011 | Percentage Increase From FY 2010 toFY 2011 |
| Low | 45 to 149 | $288 | $430 | 49% |
| Medium | 150 to 324 | $369 | $488 | 32% |
| High | 325 to 499 | $364 | $532 | 46% |
| Very high | 500 to 719 | $418 | $594 | 42% |
| Ultra high | 720 or more | $528 | $699 | 32% |
| Source: OIG analysis of unadjusted per diem urban rates for FYs 2010 and 2011. See 74 Fed. Reg. 40288, 40298–40299 (Aug. 11, 2009) and 75 Fed. Reg. 42886, 42894–42895 (Jul. 22, 2010). | ||||
Reviewed on-the-face, it is logical to see how CMS could miss the targeted expenditure mark by the margin it has, even in-spite of the “methodology” changes that occurred in the conversion from 2.0 to 3.0 and RUGs III to IV. Providers, being logical creatures of certain habits, moved accordingly to grab the payments at the highest attainable levels or in short, fulfilled the economic axiom of, “what gets rewarded (paid for) gets done”. The expectation on the part of CMS that utilization trends would fall-off from the higher paying therapy categories, necessitating a higher re-balanced rate to negate a revenue “shock” to the SNFs was poorly thought through.
Quickly reviewing “what” occurred to produce such a variance from assumption to actual is easy. Getting to the core takes a bit more thought and digging. In summary fashion; CMS assumed that by restructuring how therapy minutes were calculated for concurrent therapy (therapy provided to two individuals) from a two-equals one basis to an equal half, would reduce the ability of providers to meet the higher per minute category qualifications, necessitating more one to one therapy sessions (the previous concurrent therapy rules allowed providers to have two people in the same therapy session with the total session time allocated to both participants equally). Similarly, CMS assumed that ending the look-back provision to establish reference dates and care requirements would more accurately stage the resident’s acuity and care needs to the point of admission (or proximally forward from admission) to the SNF. Additional tightening of the extensive services qualifier rules would also, as assumed, reduce higher RUG scores and thus, payments. Of these changes and assumptions, only the look-back period changes combined with the changes in qualification for extensive services provided any material classification changes (lower payments) though such changes were far less in total dollars than the dollar increase CMS imputed on the corresponding RUGs III to RUGs IV therapy payments. Providers however, merely switched to the remaining “open ground”, providing more therapy on an individual basis and most noticeably, on a group basis. On a group basis, minutes are counted collectively, not split in equal parts among the participants – a provision CMS did not change from RUGs III to RUGs IV. While the modifications made to the extensive services qualifier and the look-back period provision did impact providers, CMS completely misunderstood the application and prevalence within the provider community of these two provisions under RUGs III and as played-out, found that providers could still code residents into higher payment groups/categories in spite of the changes.
To understand what might happen next, one needs to look at how this mess occurred. As I’ve typically found, the answer lies in both camps; providers and CMS. In my recent work, its clear that many providers don’t understand the transition from RUGs III to RUGs IV and as I have looked at “oodles” of Medicare claims, I dare say a large number are still frought with ”up-coding” and questionable therapy-minute counting practices. This is not to say that the whole of the industry has behaved in this fashion but arguably, and CMS understands this as do both major trade associations, providers have not totally changed their business models to reflect the changes in payment systems. One needs only to look at how claims trended under RUGs III and how they now are trending under RUGs IV. The trend is too consistent to support an assumption of SNFs; a) staffing substantially more therapy personnel to capture the minute requirements via individual treatment or, b) SNFs moved a sizable share of their Medicare case-load into group therapy. The latter, while I’m certain it has occurred on a broad basis as the OIG report suggests, is problematic from a care delivery perspective for a large range of diagnoses that truly require individual therapy sessions.
CMS continues to remain fundamentally inept at developing reimbursement systems that provide adequate payment for the care and services required by SNF residents. I have yet to see, across my 25 years in the industry, any period or any system devised by CMS that didn’t under-support or over-support, one type or category of patient versus others. It is also illogical that CMS cannot develop the audit tools and claims management infrastructure that both educates providers and pre-emptively kicks-back claims clearly evidencing up-coding. I am consistently amazed at “what” gets paid and for how long. In short, CMS is apparently willing to consistently miss the mark, make wholesale adjustments and reallocation of dollars, only to over-correct past inconsistencies while producing new ones. Such will not doubt occur with this latest blunder.
While I won’t claim to have a crystal ball in terms of forecasting “what happens” next, experience and ongoing dialogue with individuals on Capital Hill and within CMS gives me some decent insights. With debt ceiling/deficit reduction talks mired in politics, it is unlikely any substantial cuts to entitlement spending are forthcoming. Senate Democrats and the President are sufficiently dug-in on cutting Medicare spending by any measurable amount thus the target on this issue (Medicare SNF spending) has moved away from the current political fracas. The remaining Washington impetus for cutting SNF reimbursement resides within CMS. In spite of the OIG’s report, enacting cuts of the magnitude suggested is a political issue. CMS can propose all the spending cuts its desires but Congress has the final say. Rarely if ever, although given today’s climate an exception may be possible, has Congress sustained reimbursement cuts of this magnitude. Synthesized, my view of what happens next, based on what I know to date, is:
- Providers and their trade association are willing to capitulate to a modest adjustment in the therapy categories. This symbolic give-back will play well politically. Net of a market-basket/inflation update, cuts of 2% to 4% are possible in a “cut scenario”.
- In a scenario that involves no real cuts, rates will be flat. CMS will institute additional refinements and perhaps, even re-calibrate or fine tune payments by RUGs category, moving dollars within the RUGs system, without reducing payments. In this scenario, the attempt on the part of CMS to is to “patch the potholes” and let the system itself reduce payments via tightening the requirements and re-allocating dollars within the RUGs categories.
- A most probable scenario involves, as is typical, a bit of both. CMS will cut the therapy rates using some language about re-basing. At the same time, a series of corrections will be made regarding the counting of minutes for group therapy, assessment windows, etc. Overall, payments to SNFs across all RUGs IV categories will be flat or targeted as a reduction equaling 2-4%. The pull-back on the therapy RUGs rates could be as steep as 8% to 10%. Even at this level, the remaining rate will be higher than the former RUG III rate.
Accountable Care Organizations: A Post-Acute Perspective
Suffice to say, I am behind in getting this post “out”. My best intentions of a month or so ago were quickly dashed by other more pressing commitments. Nonetheless, I did read the proposed regulations as produced by the Department of Health and Human Services/CMS on April 7 and worked through a stack of research on the subject of Accountable Care Organizations; loosely coined by me, the Good, the Bad and the Ugly.
In the purest of definitions, easily lost within the DHHS/CMS proposed regulations, Accountable Care Organizations (ACO) are about improving patient care outcomes and satisfaction while reducing cost or expenditures for care. At the core of the premise about “why” and “how” an ACO would work in achieving better care, higher satisfaction and lower costs are three key assumptions or “truisms”.
- Best practices via algorithms and care pathways exist in sufficient supply, tested and proven, to reduce the variability that drives higher cost and lower satisfaction for a large and growing number of common patient care issues.
- Satisfaction is directly correlated to increased patient knowledge and communication, reduced bureaucracy at the provider level (fewer redundant steps) and better outcomes, more directly delivered and/or attained.
- Providers, properly incentivized to focus on outcomes and satisfaction will gravitate toward any and all steps and measures that improve outcomes and satisfaction and resultingly, deliver better and cheaper (less costly) care. The key is developing the right level of incentives that drive provider behavior in the desired direction.
For years, I’ve written and lectured repeatedly that bending the cost curve or lowering the overall costs of health care in the U.S. system must first begin at the core of the issue; the system of reward. A simple economic axiom defines this best; “what gets rewarded gets done”. Fundamentally, the U.S. health system has rewarded in the form of payment, procedures, pills, tests, and surgical (or surgical-like) interventions at the expense of prevention and wellness/care management. In spite of an enormous and growing body of evidence that much of the escalation of costs (steepening of the “curve”) in the U.S. is driven by chronic conditions poorly managed and lacking in early detection and prevention strategies, funding has remained skewed toward treatment practices that are technical and predominantly surgical or interventional in nature. The result is poor to minimal access for Type II diabetics (as an example) to integrated chronic care programs designed to stave-off emergency room visits, loss of limbs, peripheral vascular disease, loss of vision, etc. while access to the latest imaging technology, interventional cardiac programs and surgery ranges from good to stellar and even drastically redundant in some markets.
Knowing the above and understanding that a fluid and flourishing economy has been built around this system, the belief or premise that one can design and make work effectively, a paradigm shift such as is intended with ACOs is curious at best. Suffice to say that while I know such a premise makes sense (Accountable Care Organizations), I’m less than certain from my read of the proposed regulations and knowledge of the current system, how incentive realignment will work to first, bend the “cost” curve and second, create a necessary body of invested, at-risk stakeholders willing to place their economic futures (such that they are) in the hands of a governmental half-and-half, moving payment system. Moreover, the initial investment capital is clearly all provider capital placed at first dollar risk and the shared-savings return proposed, provides a poor return on the capital invested. This is particularly true for the post-acute elements critical in the formation of a truly functional ACO.
For an ACO at is primordial core to work (achieve the desired outcomes), hospital utilization and the most expensive clinical utilization must be diminished. Diminution of such care is achieved primarily, via three methods/interventions/actions.
- Primary care available and accessible enough to create consistent early detection and provide low-cost interventions that arrest a progressing disease-state prior to an acute event that ordinarily would cause hospitalization. In the case of Type II diabetics for example, education and monitoring of insulin levels and Ha1c to create optimal therapy and patient knowledge and disease management efficacy that delays and avoids, hospitalization and interventions on a crisis basis. By simply deferring and/or avoiding, undetected and untreated peripheral leg and foot ulcers, thousands upon thousands of days of hospitalizations for amputations and/or intravenous therapy for infections can be avoided – annually.
- Delivering care in lower-cost settings or alternative settings, non-hospital based, nets enormous savings. As payment today is skewed toward hospitalization and hospital-based care, patients disproportionately receive care, tests, procedures in hospital settings. A primary example of how skewed the system has been is the artificial and unnecessary three-day prior hospital stay qualifier in order to receive Medicare coverage in a nursing home. Equally as non-sensical are the present Part B outpatient therapy caps for any non-hospital based and provided therapy. I could literally list hundreds of payment and care provision inequities but my point is made.
- True integration and data sharing among providers must occur and each provider must bear an incremental reward benefit and/or downside risk. If providers cannot access data fluidly on a patient population and share best practices encompassing steerage to the most cost-effective, best-outcome sources for care without fear of system reprisal, holes and gaps to effective care delivery at the best price/cost will remain too plentiful.
Taking the above into account, two major obstacles still remain in terms of successful development of an ACO. The first is patients, now indoctrinated into a system where pills, brands, certain tests, and other non-proven care modalities are expected, nay demanded. Simultaneous, this same group is famous for varying elements of non-compliance born out of a belief (though untrue) that most anything has a “medical fix” component. All the best practices and lower-cost alternative settings can’t overcome patient behavior unless and until, patients are part of the risk-benefit system.
The second obstacle, touched on earlier, is the system of reward or the model of risk-benefit. The ACO core model is one of risk-sharing; gains in the form of varying levels of saving returned to the providers willing to bear “risk” in the form of higher than desired utilization, costs, etc., or outcomes including satisfaction that are below certain pre-determined and desirable levels. The inherent fallacy within this concept is multifaceted to say the least.
- As indicated, patients are a true wild-card; both in terms of behavior and health status. As the patient remains effectively detached from the risk-benefit equation, behavior is left to chance. Additionally, health status going into the population on behalf of patients is effectively unknown. In short, a “ticking coronary time-bomb” may be present (or similarly present) creating a cost and outcome explosion that defeats the opportunity of an ACO to truly deliver effective savings. The inability in the present regulations to set a path for securitizing against this risk and for truly integrating patients into the risk-reward equation (some element of cost-share broader than present) makes the attainment of long-term savings at a significant level, illusory.
- For many providers (or perhaps all) the up-front investments in terms of technology and service accessibility are steep. This is dramatically so for post-acute providers as the Federal Government refuses to offer any resources for technology investment – not the case with physicians and hospitals. This is fundamentally illogical as a major element to delivering true savings is via the full use of alternative care settings – lower cost options for care such as therapy/rehabilitation, chronic disease clinics, etc. What occurs as a result of this enormous “up front” investment is a return on investment profile that is marginal to poor; in most cases (and in all that I have analyzed) below the organization’s cost of capital. Additionally, the prospective savings return is not fluid or rapid leaving providers with a self-funding equation of producing results, subsidization of investment and cash flow, netting a return that is below any other reasonable and readily available alternatives.
- The sharing of incentives is impractically aligned such that the largest sources of current costs stand to lose the most while the post-acute elements stand to gain the least, though as the above occurs, the distribution is far from quid-pro-quo. Briefly: ACOs begin fundamentally with physician groups and hospitals. To fully achieve functionality and to meet the objective of better care provided cheaper, other providers core to the care continuum must be brought into the ACO. Hospitals primarily have invested heavily in the current system of fee-for-service reimbursement, building environments that return the most on investment when heavily utilized on an in-patient and procedural basis. It is illogical to assume that for most hospitals, voluntarily steering utilization elsewhere to lower cost settings or abating certain levels of utilization altogether in exchange for “shared savings” spread across the ACO players is a winning proposition. On a similar plane, the same is true for physician specialists. Interventional cardiologists will be hard-pressed to forego any elements of business financially and in honest reflection, Medicare-age patients are a major (if not the primary) source of patients. For post-acute providers, utilization should likely increase as their services are more cost-effective but as established, these providers are bit players in the ACO game and while perhaps the most effective element in controlling costs and utilization, not proportionately rewarded. Their participation for example, is all down-streamed through the ACO.
Forming a post-acute synopsis of the current ACO landscape is as simple as this: Play at your own risk. There is little for most post-acute providers to gain within the present ACO framework, financially. All gains are more market and patient-flow related. The investments in terms of technology are steep and unsupported via government funding. Similarly, the net margin attainable via an ACO that is at “risk” or participating in shared savings is less than adequate to support a return on capital investment scenario that justifies the up-front costs. Personally, I would treat ACO participation at this stage as exploratory only; a devotion of only a small investment on-par and an expectation that minimal financial gain will occur, if any.
It stands to reason that some provider elements within the post-acute industry will stand to benefit better than others if for no other reason that they are already aligned from a business perspective to do so. LTACHs could reap significant market share if they can pose as legitimate first-admit options to an acute hospital. SNFs that are and have been, operating as true transitional care providers with in-house, integrated services could become major partner players within the ACO landscape. Key however to an SNF’s viability is some reform from three-day prior hospitalization requirements and relaxation/elimination of the Part B therapy caps. Home health agencies that already have an infrastructure for electronic charting, referrals and a strong physician partnerships and hospital referral/discharge relationships are the most logical post-acute, ACO partners. The ability of a home health agency to manage a more complicated patient directly discharged from a hospital as well as bring into the home, core chronic disease management services adjunct to physician care is an ACO necessity. As today and for the foreseeable future, ACO realization or not, Hospice will remain only a bit player, if that. While Hospice is an effective alternative to more costly inpatient care when continued inpatient care and/or other procedural steps are unwarranted, getting patients, their families/significant others, and the physician community in general to openly embrace Hospice early and frequently is not going to occur simply because of an ACO. Hospice, as I have written before, is a niche’ in the post-acute continuum and nothing within current trends suggest to me that the U.S. health system and patient expectations are moving to a deeper appreciation for or understanding of, the role hospice can and should play.
MedPac Report to Congress: 2012 Recommendations
MedPac (Medicare Payment Advisory Commission) just released its March report to the Congress on Medicare program and rate recommendations for the FY 2012 (beginning October 1, 2011). The full report is available in PDF form on the Reports and Other Documents page on this site. Below I’ve provided a summary of the key recommendations contained in the report.
Important to note about this year’s report and the recommendations contained therein is the political context in which this report will be received. Congress has often been politically unmotivated to take MedPac’s recommendations fully to heart as the same often involves program and payment reform following a path of curtailed spending. As MedPac was officially created/established as part of the Balanced Budget Act of 1997, a critical element of its charge is to monitor payment adequacy in light of Medicare’s beneficiary’s access to care and the quality of care delivered. Most notably, MedPac has gradually evolved to an organization that advocates for more aggressive programmatic reforms combined with rate reduction and/or spending reduction. For routine readers of the annual payment reports (issued in March), the opening tone within the Executive Summary section has grown more pointed regarding Medicare’s solvency issues (lack of sustainability) and the Commission’s view of Medicare and the broader economic impact it has on the global U.S. economy. Today (presently) within a House that is demonstrably pushing spending reforms and reductions and an overall Congressional environment stuck in debate regarding fiscal reforms that include entitlement reform, MedPac’s report certainly will receive more review and deliberation than in other years. Similarly, health care is a front burner issue given the politics (anti-reform) that surround the recently passed PPACA, effectively producing a wholesale shift in political power in Washington. Wrap the Washington political issues with a moribund economy that hasn’t yet established its recovery footing, significant Medicaid deficits across the States, and local political wars focused on labor unions, contracts and unfunded and/or expensive benefit packages (including health care). Summarized: The ancient Chinese proverb applies, “It is better to be a dog in a peaceful time than to be a man in a chaotic period”.
Opening, MedPac provides a quick context for their recommendations noting that Medicare’s share of the total GDP is expected to rise from 3.5% to 5.5% by 2035. More important and a point too often missed by economists and analysts is that Medicare’s cost growth is not separate from the larger health care economy as it is directly linked to other cost drivers within the health care system that today, are rising far faster than GDP growth (especially given the current and recent pace of GDP growth). Overall, including the payroll tax funded Part A, Medicare consumes 18 percent of all income tax revenue. The CMS Office of the Actuary, taking into account the purported Medicare spending reductions contained in the PPACA (see my last post on the Unraveling of the PPACA for more on Medicare and the PPACA) forecast a slower rate of spending growth – 6% vs. 9% under current law. Critical to this assumption is the realization of spending reductions totaling $575 billion as well as a more stabilized, normative GDP growth pattern combined with historic levels of employment.
Key to this year’s payment recommendations (FY 2012) is MedPac’s philosophy and charge of balancing equitable payments that maintain or improve access, redistribute payments within a particular PPS sector to improve equity among providers and/or adjust for biases in patient selection and service (the term “cherry picking” applies), correct unusual patterns of utilization (over incentivizing) and to attempt to tie payments to quality outcomes and efficient practices (pay-for-performance). The report covers 10 PPS sectors of which, I follow and work within 6 primarily. As a result, I won’t summarize or comment on MedPac’s recommendations for hospital inpatient, hospital outpatient, ambulatory surgery centers, and outpatient dialysis. Readers with interest in these sectors can download the report from my site page titled “Reports and Other Documents”.
- Physicians and Other Health Professional Services: MedPac dances through this topic without adding any substantive input regarding physician fees, let alone any other allied health professions with fees tied to the physician fee schedule (outpatient therapy for example). Primarily the avoidance is due to the political “hot potato” that is the SGR (Sustainable Growth Rate) issue. Per MedPac’s analysis, overall beneficiary access to physician care is good, physicians continue to accept Medicare patients, service volume continues to grow, quality is stable, and payments for service run at 80% of the typical PPO payment for similar care (unchanged from last year). MedPac does note however that some regional problems in terms of access to primary care are present, attributable to moderately low levels of reimbursement (in some cases, half as much as payments to specialists) and the inherent flaws of the SGR. MedPac comments on the need to reform this reimbursement mechanism but offers no insight into what it may propose, merely that projected fee cuts of 25% in 2012 are untenable and as a result, MedPac will continue to work on developing alternative SGR approaches along with other formulaic options for the fee-schedule. Their overall rate recommendation is a 1% increase in fee-schedule service related payments.
- Skilled Nursing Facilities: Per MedPac, Medicare spent $26.4 bilion on SNF reimbursement in 2010 and per their analysis, the majority of indicators examined showed payment adequacy. Prefacing their rate recommendations, the reports notes that the average Medicare margin for a free-standing SNF was 18% in 2009. Specifically, MedPac notes that facilities with wider Medicare margins have aggregated more days into higher paying PPS groups, particularly rehab focused groups as opposed to the medically complex groups. Additionally, provider costs remained relatively stable while rate increases paced above cost inflation. Per MedPac, successful facilities have found ways to have costs well below industry averages, high quality and corresponding high Medicare margins. As a result of these conclusions, MedPac is recommending no rate adjustment for SNFs for 2012 while recommending continued categorical revisions within the PPS to move payment focus away from rehab to clinical care – more focused on patient care needs. Additionally, they are recommending quality of care modifiers, providing incentives for high quality providers and creating rate reductions (disincentives) for sub-standard quality such as “avoidable” re-hospitalization. As required under the PPACA, MedPac is also charged with reporting on Medicaid utilization. Interestingly, their comments are boiled down substantially, indicating that total Medicaid certified beds have decreased while utilization and spending has increased. They note that Medicaid margins are negative and fundamentally, that all non-Medicare margins are negative but total margins for the industry are positive.
- Home Health Services: As it has in prior reports, MedPac continues to advise that access is adequate (90% of beneficiaries live within a zip code containing a certified agency), the number of agencies continues to grow dominated by for-profit entities within a limited geography, the volume of episodes of care continue to increase (25% over the period 2002 to 2009), quality measures are fundamentally unchanged from previous years, and the major for-profit organizations have sufficient access to capital. As in the most recent prior year reports, MedPac notes that the PPS system continues to produce high margins for providers (17%), principally because payments exceed costs and growth in cost per episode remains below the assumptions used in the market basket update. Using these conclusions combined with a cautionary statement regarding discovered fraud in the industry, MedPac recommends that the Secretary be charged with re-basing home health rates over a two year period, starting in 2013 (October of 2012). Re-basing of rates would target a reduction in the therapy “incentive”, modulating more rate toward medical care while incorporating a revised case-mix system. Additionally, MedPac recommends the development of a cost-share for home health, thereby instituting a beneficiary payment for services. MedPac believes, like in other Medicare post-acute payments, that imposition of a cost-share will charge the beneficiary with more consumer awareness of the benefit and the utilization thereof. Finally, MedPac recommends that the Secretary charge the Office of Inspector General with enforcement responsibility in areas/regions where fraud has been evident, removing payments, reducing enrollment and de-certifying agencies engaged in fraudulent activity.
- Inpatient Rehab Facilities: Although a relatively small segment in the post-acute continuum ($6 billion), MedPac is recommending a zero percent increase in IRF rates. They conclude that access is adequate, quality as supported by improvement at discharge is stable to improving, and as most facilities are hospital based, access to capital is not an issue. They note that the average margin for IRFs is 8.4%.
- Long-term Care Hospitals (LTACH): As with IRFs, this segment is relatively small – $4.9 billion. MedPac notes that in spite of the limited moratorium placed on new LTACH and additional beds in existing facilities (July 07 to December 2012), the number of facilities increased by 6.6%; worked through the exceptions provided within the moratorium. LTACHs are not required to submit quality data to CMS though MedPac reports, based on claim reviews, that readmissions and deaths within 30 days of discharge are stable or marginally declining compared to prior years. Per MedPac, payments between 2008 and 2009 increased 6.4% despite costs increases of 2%. The average Medicare margin in 2009 was 5.7%. Within the PPACA, LTACHs are subject by 2014 to a pay-for-reporting program, though “reporting of what” is yet defined. MedPac also believes that a pay-for-performance element should be introduced. The recommendation for a rate increase or update for 2012 is zero.
- Hospice: Per MedPac, hospice services received $12 billion in Medicare reimbursement 2009. In the same year, hospice use increased across virtually all demographic areas and across beneficiary characteristics. Between 2000 and 2009, the supply of hospices increased by 50% with for-profit organizations accounting for virtually the entire amount of growth. During the same period (2000-2009), the use of hospice increased from 23% of all decedents to 42% of all decedents with average length of stay increasing from 54 days to 86 days. In 2012, CMS is required to publish quality measures and in 2014, hospices are required to report on these quality measures or receive a 2 percentage point reduction in payment. For 2012, MedPac recommends a 1% rate update. As in previous reports, MedPac recommends that the hospice PPS be altered to create higher payments for days early in the stay and late (near death) in the stay with lower payments applicable during the middle of the stay. As stays continue to move slightly longer, this payment system is supposed to reflect more accurately, the intensity and cost of services provided to the typical hospice patient. MedPac also recommends that the Secretary of HHS investigate the relationships between hospices and nursing homes and the differences in patterns of referrals between nursing homes and hospices. MedPac also calls for an investigation into agency enrollment practices where lengths of stay are unusually long as well as an investigation into the marketing and referral development practices of these agencies, particularly as they pertain to length of stay. This recommendation is unchanged from last year.
The Unraveling of the PPACA
OK readers and requesters, I haven’t gone, as Robert Frost wrote, into the “woods lovely, dark and deep” but I have been preoccupied by work and things familial. Sadly, energy wanes as one focuses intently on the delicate balance that is juggling a frenetic work schedule, a mile of other professional commitments, travel, and family. Returning slowly to regularity in life will allow me to re-connect and be once again, more “informationally” fluid.
A major emphasis of my work has been translating health policy into actionable strategies for clients. Some efforts are rather profound and deep and others are rather functional and tactile. The latter was the case with the Medicare RUGs III, MDS 3.0, RUGs Hybrid, RUGs IV debacle, partially created by the PPACA and partially due to the lack of foresight on the part of Congress. In the end, this mess evolved to where it should have been all along – a grouper and an assessment tool that actually matched. Today, we are simply left gazing forward at what might be once CMS figures out how the RUGs IV payments are flowing and whether providers are using the system correctly. I fully expect CMS, as they historically have, to go through a series of gyrations to fine tune the payment categories, equating the new system to that which was originally intended – something that is expense neutral (or close to) for the Medicare program. History being what it is (a reasonably good predictor of future behavior), we saw and lived through a similar dance with previous PPS system versions.
Turning to the title of this post and topically, a question(s) I am asked all too often: What can we expect or not expect to happen next under the current phase-in process of the PPACA? Following the law as written would provide an answer but clearly, the law as written is unraveling as we move seemingly, day by day. Consider the following events of recent weeks/months.
- A power-shift in Congress overloaded the House with Republicans and structurally, fiscal conservatives that swept into the majority on a platform of “anti-health care reform and anti-deficit spending”. As the House fundamentally controls the majority of appropriations and budget policy, funding barriers to continue the roll-out of the PPACA are certain.
- Over 1,000 waivers to certain elements of the PPACA have been granted, with more forthcoming, principally targeted at giving insurers, major corporations (multi-state businesses) and recently, labor unions relief from the mandated coverage limits imposed under the law. Secondarily, states have sought relief from various Medicaid provisions that came part and parcel with the enhanced FMAP provided under the Stimulus bill (corollary to additional elements required under th PPACA). From some vantage points, Medicaid may be the 10 ton gorilla in the room when all is said and done regarding the future of the PPACA.
- A series of court cases and resulting decisions have established the framework of a constitutional challenge to the law. Opinions/decisions affirming constitutionality were rendered by Democratic judicial appointees and opinions/decisions affirming unconstitutionally rendered by Republican judicial appointees. Clearly, the matter of constitutionality of the key requirement of universal insurance purchase/participation for every American will be settled only by the Supreme Court. The remaining question is “when”. If the key provision of universal (everyone must) purchase/participation is found unconstitutional, the PPACA is functionally dead.
- Within the past week or so, Secretary Sebelius of HHS publicly went on the “record” in Congressional committee testimony that the financing of the PPACA included effective double-use (double counting) of the projected $500 billion in Medicare savings that is projected within the law. This, while newsworthy, is not news to anyone who read the CBO scoring, read earlier testimony from Medicare’s Chief Actuary, or fundamentally, could follow basic arithmetic logic and principles. The Medicare savings argument was flawed when first proffered on so many levels. First, the savings was phantom money in so much that it required Congress to sustain actual rate cuts while relying on finding and stopping “fraud and abuse” thereby creating savings. If in fact, the fraud and abuse savings were or are known, a 2,000 page piece of legislation surely wasn’t necessary to end the fraudulent and abusive practices (the same being already illegal) and render the savings. Similarly, Congress has no known history of sustaining meaningful spending controls on entitlements, particularly Medicare. Finally, the physician fee-schedule fix was never incorporated into the PPACA or its financial projections regarding Medicare spending – this tally alone evaporates all if not the majority of the projected savings. Suffice to say, in order to net $500 billion in Medicare savings as foretold by the PPACA and its proponents, a perfect storm unlike any ever seen in Washington would need to occur, not to mention a real current spending reduction of close to $900 billion (adding in the Medicare physician fee schedule “fix” costs of approximately $400 billion as unaccounted spending, netted against the savings to achieve a net savings of $500 billion). For those who would argue that the physician fee schedule fix won’t cost $400 billion, I humbly reply “do the math”. Congress continues to avoid this issue in real time by creating temporary patches as the real numbers inclusive of a formulaic change in the law (change away from the sustainable growth algorithm) that prevents significant fee schedule cuts for physicians will require approximately $300 billion in “new” spending. Add another $100 billion or so for the programs such as outpatient therapies that are tied to the fee schedule and $400 billion is conservatively, a solid figure. The double-counting occurs as a result of creating the phony $500 billion and using the “dollars” to create new benefits and expanded eligibility levels and programs within the PPACA (primarily Medicaid expansion). The costs of these new benefits greatly exceeds $500 billion in reality and thus, no savings will occur.
- President Obama during a speech at the National Governor’s Association publicly announced his willingness to offer states greater flexibility and an accelerated date to file alternative plans to meet the PPACA requirements pertaining to exchanges and Medicaid expansion. In effect, President Obama stated that the law was still a “work in progress” and states could devise their own alternatives, provided the alternatives were as comprehensive and provided the same level of benefits as required under the PPACA. Until this revelation, states were operating under the premise that PPACA requirements dictating how Medicaid expansion would work, the exchange plan mandates for coverages, etc. were immovable objects, at least until 2014 by when, each state would have incurred enormous costs associated with implementation. The conclusion: More unraveling about to occur.
- Arizona became the first state in what promises to be a growing list, to apply to the federal government for a waiver allowing 300,000 people to be removed from its Medicaid program (disenrolled). Arizona, like multiple states, saw its Medicaid enrollment explode due to the economic recession and provisions within the Stimulus Bill which provided enhanced Medicaid matches conditioned upon the creation of certain new programs of benefits and coverages under Medicaid. The “rub” today is the sunset date of June 30 which ends the enhanced Medicaid funding. By law, the money goes away but the programs and benefits it funded must be maintained by the state; hence, the need for a waiver. The evaporating Medicaid enhancement exposes the enormity of state Medicaid and other budget deficits – in Arizona, $1.1 billion total deficit and potential savings of $541 million if the waiver is granted (fully half of the state’s deficit). From a PPACA perspective, the next move in Washington regarding a request such as that from Arizona will be fascinating. A core element within reform used to achieve the coverage objectives is an expansion of Medicaid. A waiver granted to Arizona is a virtual submission on the part of Washington that state Medicaid plans and budgets are incapable of meeting the financial requirements concurrent with expansion, absent significant cash infusions from Washington (not wholly provided with the PPACA). For those of us who closely follow health policy, we’ve warned loudly and frequently that Medicaid as presently configured, is the worst vehicle to use to expand coverage. The PPACA did nothing to alter the maniacal constructs of Medicaid, its funding, and its bureaucratic programmatic tenets. It further did nothing to allocate sufficient resources to the states to support expansion thus leaving states to bear an enormous primarily unfunded mandate within their existing and growing, bankrupt Medicaid programs. Aside from a Supreme Court ruling finding the PPACA universal participation/purchase requirements unconstitutional, the Medicaid issues are a strong and close second that could cause the PPACA to completely unravel.
The above notwithstanding, the PPACA gives us a glimpse into the future of health policy and ultimately, health care financing and delivery in the U.S. Regardless of whether the law survives in whole or in part, certain elements I believe, are new realities and I have counseled clients to begin to plan accordingly.
- Money is an issue and the goal of the PPACA while inherently flawed in the form finished, was to slow the growth of entitlement spending and “bend the cost curve”. This need or goal is pressing for the U.S. as entitlement spending cannot be sustained at is present level. This simply means that Medicare and Medicaid are fundamentally and completely exhausted (financially and programmatically). Regardless of form and resultant policy, reimbursement levels will remain fundamentally flat to trending down – no other way for them to go unless new tax revenues are allocated to each program (not feasible). Kicking the issue down the road as Washington and states have done is no longer an option as the “road” has ended or its end is clearly in sight. The best providers can hope for is flat reimbursement with a recognition on the part of legislators that greater flexibility from overbearing regulations is needed to help offset the revenue loss (if I can’t pay you more I can at least make it cheaper for you to operate).
- Greater emphasis will be placed on finding and eliminating waste and fraud – already happening but ramped up to an even higher level. Realize that Medicaid and Medicare are self-wasting disasters by design in terms of how modern health care is delivered and financed but vigilance and enforcement is feel-good activity; results often are minimal in comparison to costs to obtain the results. Providers thus will contend with more questions, more rules for disclosure, more reporting, more probes and more audits. Clearly, the costs borne by providers to monitor and justify their billing practices to Medicare and Medicaid will rise.
- Infrastructure investments in terms of technology will rise as providers will need to justify more directly, their care vs. their bills. Simultaneous (or at least proximal), PPACA provisions and other federal provisions regarding privacy, electronic billing, health information exchanges, etc., will not evaporate entirely. Providers will need to be able to communicate across functions and across related and unrelated provider organizations, patient information, quality measures, and care information (treatments plans, history, orders, etc.).
- Terms and concepts brought forth under the PPACA such as Accountable Care Organizations, Competitive Bidding and Bundled Payments are here to stay, regardless of the life or death of the PPACA. They make too much sense intuitively even if the same translates poorly in federal policy. Organizations that take the “conceptual elements and goals” of things like Accountable Care Organizations and begin to develop programs and structural changes in “how” they do business will be far better off than those who believe that these concepts will die as the PPACA continues to unravel. A future where reimbursement is more closely tied to outcomes and penalties for events such as avoidable re-hospitalization, repeat hospitalizations, avoidable institutional infections, etc. is virtually certain.
- A renewed focus on primary and community based medical care, prevention, and chronic care management is forthcoming – soon. Philosophically, although wrongly implemented and structured, the PPACA was Washington’s politicized attempt to create this focus. There is solid logic behind such a focus as diminution in each of these areas (or in some cases, failure to fully launch) directly correlate to rapidly rising health costs (and correspondingly high rates of expensive, preventable chronic illness such as diabetes, obesity, heart disease, etc.). Even Washington knows that ultimately, funding and enhanced payment for better primary, community and chronic disease care is necessary and smart. The problem is, as has always been the case with policy elements measured in the billions or trillions of expenditures, politics gets in the way of functionality – hence the PPACA.
RUGs IV Here to Stay!
The news we all hoped for came forth this afternoon, wrapped with a big bow just in time for the Holiday season – RUGs IV is here to stay. The House this afternoon passed a companion version of the bill passed in the Senate yesterday. President Obama is expected to sign the bill into law shortly.
The legislation calls for $19.2 billion in appropriations to make RUGs IV effective retroactively to October 1, 2010. In addition, the legislation extends the Medicare Part B therapy cap exception provision presently in place, until the end of 2011. Without such an extension to the exception process, the Part B therapy caps were set to be automatically reinstated with no exception on January 1, 2011. As part of the extension of therapy cap exception process, the legislation also staves off pending cuts of approximately 25% in Medicare payments to physicians required by the current sustainable growth formula which drives the physician fee schedule (and related Part B services such as outpatient therapies) under Part B. Without such a correction to the physician fee schedule, physician fees were set for the significant reduction on December 18 (Congress had already moved the date back to the 18th from the 1st of December).
The implementation of RUGs IV back to October 1 solves significant headaches for SNFs and CMS. As difficult as it has been for providers to get up to speed on MDS 3.0 and RUGs IV, the process was significantly complicated by the unknown of how the planned RUGs Hybrid would work and whether CMS would seek to recoup potential overpayments from providers as a result of RUGs IV being used temporarily. Many providers sought to establish liability accounts on their balance sheets for just such an event, even though estimating the liability was somewhat complex due to the lack of solid information regarding the Hybrid groups coming from CMS.
Having spoken to a number of people within CMS, the implementation of RUGs IV back to October 1 is a true gift. There were consistent difficulties in getting the Hybrid grouper to function in conjunction with MDS 3.0 and as such, a growing number of inquiries from the industry bombarded the agency expecting more information. Even more troubling was the prospect of having to deal with payment recapture; a procedural boondoggle CMS was hoping to avoid. In the end, I am confident that a number of people at CMS are rejoicing this evening.
On a final note, I wish to offer my personal congratulations to my industry colleagues and the trade associations who lobbied for this victory and to my readers, clients and business partners who required that I kept them informed and in many cases, helped me with additional information and of course, thoughtful inquiries that made me stay on top of this important issue. This policy victory was long overdue but as the saying goes, “better late than never”.
House Passes Jobs Bill Containing Enhanced FMAP
On a party line vote, the House of Representatives passed legislation euphemistically coined the “jobs bill”. The $26 billion dollar legislation includes a $10 billion appropriation for state school budgets and $16 billion to continued the enhanced FMAP (Medicaid match) provided under the ARRA (Stimulus bill), set to expire on December 31. The vote was 247 to 161. The appropriation for continuation of the enhanced FMAP extends the additional Stimulus funding through June 30, 2011.
Key supporters of passage of the bill were teacher’s union and other municipal unions who claimed that without the additional funding ($10 billion), job losses via layoffs were certain. Detractors of the bill claim that the $10 billion, once divided among 50 states, is hardly adequate to offer much financial relief. In fact, the original version of the bill provided for more than double the funding but deficit hawks in both houses offered sufficient resistance to carve the amount to $10 billion. Interesting as well is the fact that some $30 billion provided under the ARRA remains unspent for education support.
Supporter of continuation of the enhanced FMAP included SNF and long-term care trade associations as well as the National Governor’s Association. Their claim is that without continuation of additional Medicaid match funding, state Medicaid budgets, already structurally broke, would reel instantaneously, causing necessary cuts in benefits and provider reimbursements. Detractors point out that the economy is unlikely to recover fast enough and certainly, not sufficient by mid-year 2011 to avoid the need for either additional federal funding support or substantial budget cuts.
The President is expected to sign the bill quickly, using the ceremony to reinforce the Administration’s claim that the funding was necessary to preserve key governmental infrastructure jobs. Republican detractors will no doubt continue to rail against the bill’s passage claiming that is another de facto bail-out and the bill’s tax increases will hurt the already flagging economic recovery.
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