Senate Sets Roadblock on Jobs Bill: Impact is Felt for Doc Fix and Medicaid Funding
Yesterday the Senate, via a procedural vote, set a roadblock on the continued track toward passage for the American Jobs and Closing Tax Loopholes Act. The original version, re-crafted by the House to lower the price tag and then sent to the Senate, found limited traction on Wednesday. Oddly enough, the House version effectively trimmed the original Senate version and yet, even when fiscally re-shaped, it could not garner support in the Senate, the source from which it originated. My read is that Senators, since the shaping of the original bill, have watched political winds shifting away from support for government bailouts, subsidies, and deficit spending initiatives.
What happened is a bit confusing for people unfamiliar with the parliamentarian rules and procedural machinations of the Senate. In order for the Bill to come to the floor for a vote, sufficient votes (60) are required to close debate on the legislation. Without the 60 vote total, debate can continue endlessly and lead into filibuster, effectively killing the Bill as it stands. Yesterday’s vote showed a suprising lack of support among key Democrats such as Wisconsin Senators Feingold and Kohl. Republicans were effectively unified in opposition. As of late yesterday, Senate Democrats scrambled to re-craft yet another, scaled down version that at a minimum, would contain an extension of unemployment benefits and certain key tax measures.
Analyzing the issues, the Bill in its present shape has significant fiscal problems. First, the diversity of the issues and spending priorities within the legislation create a lack of transparency which today, is politically repugnant to voters. Second, much of the Bill appears politically as a continuation of federal bail-out spending. Third, health care reform remains unpopular politically and Senators, wary of the “doc fix” price tag and its ties to an unresolved health care reform matter, don’t want to get any more negative fall-out regarding the costs of health care reform.
The implications for health care at this point are a bit unnerving. Many states have already laid budgets assuming a continuation of the Medicaid stimulus support, set to end December 31. Without continuation of the expanded Medicaid match, many states will need to recast budgets, integrating major spending reductions. Second, the “doc fix” issue also impacts a number of other health care services such as Part B therapy rates which are tied to the physician fee schedule. (See my related posts regarding Part B cuts and the American Jobs and Closing Tax Loopholes Act). Without a fix or another delay of the pending cut (21%), physician fees and other Part B services such as therapy will be cut.
My impression is that Congress will scramble for the next week, attempting to unravel the bill and take on certain issues ala carte. For example, I believe that unemployment benefits will get extended as in Washington, especially for Democrats and their union supporters, failing to do so is political suicide. I believe Medicaid and the states will get their extended match but perhaps, more incrementally, maybe with an initial extension end date of March 30, 2011. Finally, I think the “doc fix” issue will get delayed once again; another temporary stay of execution. The doc fix may be the most politically difficult issue to deal with as its price tag is large and nearly every policy analyst and health care economist point to the need to address the underlying problem of the sustainable growth formula versus the current approach of pushing the inevitable to future dates via current infusions of new deficit dollars.
RUGS-IV Still In Limbo
As the Senate is set this week to take a vote on the American Jobs and Closing Tax Loopholes Act (see my related posts), a key provision within the legislation having to do with implementation of the SNF payment system known as RUGs-IV remains in limbo. The PPACA (health care reform bill) required implementation of a new standard resident assessment instrument known as MDS 3.0, effective October 1. Under Medicare, the resident assessment triggers the PPS payment category corollary to Resource Utilization Group or RUG for short. A provision within the American Jobs and Closing Tax Loopholes Act would require CMS to implement an updated PPS payment system, RUGs-IV concurrent with the changeover to the new assessment instrument, effective October 1.
The difficulty that occurs without simultaneous implementation of RUGs-IV is that CMS has to create a “bridge” payment methodology, ultimately phasing-in the new payment system. This bridge payment system effectively changes in certain provisions unique to RUGs-IV such as concurrent therapy and look-back periods to model a hybrid payment for MDS 3.0. As the Senate has not yet acted on the Jobs and Closing Tax Loopholes Act, CMS is preparing for an interim period and thus, a bridge payment strategy. The full-phase in of RUGs-IV would not occur potentially until October of 2011. During the interim year under the bridge payment, CMS will use modified payments and then, re-process claims once RUGs-IV is implemented. The modified payments are effectively RUGs-IV payments that are processed using the RUGs-III system, as modified under the PPACA. Of course the peril for SNFs during this interim period lies in the possibility of carrying a receivable to Medicare (payments are less than what they actually would be under RUGs-IV) that ultimately is re-processed correctly, without interest. Alternatively, a facility could have a balance due once re-processing occurred but this situation is less likely.
At this point, the “ball” is in the court of the House and the Senate. CMS has indicated that it might take as long as six months to establish a hybrid payment system that correlates RUGs-IV categories to an interim payment system suitable for use under MDS 3.0. The alternative of course is to have Congress legislate the full implementation of RUGs-IV by October 1. Oddly enough, it was Congress that caused this confusion by delaying the implementation of RUGs-IV for a full year under the PPACA.
CMS is holding a series of three national conference calls regarding MDS 3.0 transitions and the RUGs-IV/RUGs-III interim payment issues. The first is set for June 24th at 1:30 P.M. Eastern time. Feel free to e-mail me for registration information.
American Jobs and Closing Tax Loopholes Update
Prior to the Memorial Day recess (holiday), the House passed its re-shaped version of the bill. The re-shaping primarily involved spending constraints; reaction to wide-spread criticism (public) of current (and recent) Congressional deficit spending binges as well as a realization that fall elections draw ever closer. Specifically, what the House did was:
- Abandoned any additional extension of the added FMAP (Medicaid match) from the Stimulus Bill – deadline remains December 31, 2010.
- Took up the “doc-fix” issue separately, passing a two-year fix to the pending cuts (still set for June 1 as the Senate has yet to reconvene and address this issue).
- Made the effective date of the RUGs IV implementation October 1, 2010.
What now occurs is the revised legislation heads to the Senate for review, modification, approval, etc. As the Senate is not set to reconvene until June 7 (another week), the issue (once again) of physician fee schedule cuts and corresponding Part B cuts in therapy, etc. heads into limbo. Congress has taken repeated temporary measures to stave-off these cuts while it works to a more permanent fix and it is likely, another emergency, temporary “stay” to the cuts will be forthcoming (I doubt the Senate and House will come to agreement on final legislation during the ensuing two to four-week period). As in the last go around on a “cuts deadline”, CMS has instructed its intermediaries to hold claims open for the first ten days of the month in anticipation of some direction from Congress.
Regardless of the legislative machinations yet to occur between the House and the Senate, real fiscal issues are at play. The states are in desperate need of continued financial assistance for their Medicaid programs albeit, even a six-month extension of the FMAP will only result in a bandage change applied to a gaping flesh wound. State budgets are predominantly in a horrible stay of disarray, awash in deficits and limited in their options for additional revenue via taxation. The slow recovering economy does not foretell an anytime soon switch in fortunes for the states; revenues will continue to lag until jobs and thus, corporate and personal income fortunes reverse. Medicaid, as I have written before, is an awful shell game. To garner additional FMAP that the states desperately need requires additional program expansion and spending – funding that the states cannot afford to continue without more federal dollars. At some point, with the national deficit now over $13 trillion and rising, the Feds will need to pull the plug on all of the deficit spending, “bail-out” programs that are unsustainable (like added FMAP) and the recipients will have to “face the concessionary music”.
The “doc-fix” is and has been, a major policy issue and boondoggle. The problem is the underlying sustainable growth formula that is used to set physician (and other Part B) reimbursement rates. Fixing the formulaic issue is what needs to occur but for the time being, adrift in a sea of health policy debacles courtesy of a misguided reform bill that is now law, Congress is effectively hamstrung. The political peril of allowing physician fees to plummet by 21% is balanced opposite the political peril of additional deficit spending, especially on health care, immediately prior to a fall election cycle. Health care today is a major political issue and front and center in this issue are claims made that the PPACA (reform bill) would reduce the deficit, primarily by making Medicare more efficient (cuts). Adding back new monies to physicians and other providers under Part B is fuel for certain economists, deficit hawks, etc., who all publicly denounced the PPACA deficit reduction claims as unattainable, unrealistic (Congress won’t have the nerve to sustain the cuts), and of course, based on funky math (counting savings from cuts while creating new entitlements).
I believe this may be the shining example of a “political pickle” for Congress…
American Jobs and Closing Tax Loopholes Act – HR 4213
Funny title that is rather misleading given the gravity of the health care/post-acute care provisions that are included in this bill. As is the case in Washington, especially these days, important health care provisions not addressed in the PPACA are coming forward in other bills; particularly bills involving unemployment benefits and COBRA benefits, etc. Such is the case in this rather large expenditure bill which by title, is aimed at extending unemployment benefits, creating tax deductibility for COBRA premiums and removing a host of tax loopholes or tax deductions as some may call them.
Imbedded within the bill are a series of important health care related provisions. Briefly summarized, the provisions are;
- A six month extension of the additional federal Medicaid match originally provided under the Stimulus bill. The current added match is set to expire on December 31. The extension provided under this bill would continue the match through June 30 of next year. Fundamentally the issue here is the feds trying to provide a softer cushion or landing area for the states given the ramp-up in Medicaid spending that is coming under the PPACA, the current economies of most states (poor) and the harbinger of pending Medicaid cuts most states will require to keep their programs afloat. While this match is likely a good thing in the interim, recall that it is in effect like giving a crack addict more crack. Under Medicaid, the additional match comes only with additional state spending; spending that most states cannot afford without the additional federal money. Unless the federal money is continually extended in some shape or form, the states will likely face the prospect of cutting their Medicaid budgets at some point, regardless of any economic recovery.
- A provision that staves off any cuts to the physician fee schedule until 2014. This doc-fix element includes increases in 2010 (for the balance of year) and 2011 with no increase specifically factored for 2012 and 2013 although, if spending on physician care remains (during this period) within Medicare spending limits, an increase may occur. In 2014, the physician fee schedule would return to the current law based on the sustainable growth formula (per CBO, a cut in 2014 of 30%). In addition, since Part B therapy rates are tied to the physician fee schedule, the rate cuts that are pending would be automatically fixed (in concert with the doc-fix) and in actuality, increases in rates would be forthcoming. Physician fee-schedule cuts and the issue of physician fees being tied to the antiquated sustainable growth formula was a matter of contention during health care reform debate. The House had passed a broad, permanent fix but the Senate failed to act. The Senate desired something more temporary and less costly. The final legislation as passed (PPACA) didn’t address the matter at all with the exception of counting the savings from the projected cuts as part of the financing elements that produced the “budget deficit reduction” effect. In other words, Congress used the projected savings from the cuts as means of creating a positive financial projection from the CBO. Most policy analysts and economists have claimed all along that one of the significant “risks” with the PPACA positive projections lied with the fortitude of Congress to sustain the significant Medicare cuts contained in the bill. This measure is likely to create renewed calls that Congress is incapable of sustaining the Medicare cuts and in actuality, and as I have written multiple times before, the PPACA is nowhere close to deficit reducing.
- The bill also contains a provision requiring CMS to implement RUGs IV by October 1, in concert with the roll-out and implementation of MDS 3.0. This is a good thing for SNFs. Without RUGS IV going hand-in-hand with MDS 3.0, there would be no case-mix payment system that matched the new assessment tool. RUGs III is correlated to MDS 2.0. The end result would likely be comedic and tragic all at the same time as SNFs would have to complete the new MDS and try to correlate payment back to a case-mix system that didn’t match the new assessment tool. I, and others, envisioned payment snafus abundant and the work to sort it out come RUGs IV roll-out in 2011, the responsibility of the SNF.
The Apex Healthcare E-Newsletter (my organization’s newsletter) for May was just released and posted yesterday and in this issue you can find additional information regarding this topic (the physician fee schedule fix and RUGs IV) http://apexhealthcareconsultants.info/category/may-news-2010/
Five Things Every Administrator Should Focus On
I had a phone conversation earlier today with a friend and colleague (he’s part owner of a rehab consulting and management company) and as we talked, the conversation reminded me about the host of issues facing health care administrators. Our conversation flowed to long-term care and specifically, SNFs (he spends a lot of his time with SNFs) and the work his firm is involved with. We kicked around some ideas and as our conversation concluded (hopefully with a golf date soon to be set), I did some thinking.
My friend always tries to get me to do “more” speaking engagements, particularly at conferences and trade association meetings and in this case, he was trying to convince me that the discussion we had was great information that “everyone should know”. Oddly enough, I agree but as time doesn’t always permit me to head out on the speaker’s circuit, it made sense to “boil down” our conversation into a quick written summary.
Health care administration, like any leadership discipline, should be (about) one-third current operations focused and two-thirds future operations focused. I realize, having done the job myself for over twenty years, that some days or even weeks bend this ratio but over the long-haul, in order for an Administrator to lead (regardless of title), he/she must be willing to step a good distance forward to lay the ground work and strategies for “what will be”. In other words, effective administration is about understanding what is going on in the industry, how events or policies, etc. not yet in effect will alter the business, and developing plans and strategies to move the “current” toward the “future’. In simpler language: Effective health care administration is principally about planning. Effective leaders have a running gap analysis in their heads; inherently understanding the current status of operations and matching that with what is yet to transpire. Leaders with tenure have a bit of advantage as they should innately understand historically, how change roles out with new government policies, changes to reimbursement, etc. The experience of having been through numerous changes in the business can’t help, if matched with effective planning abilities, but provide a clearer understanding of how to migrate current operations to the next required level of operations.
Synthesizing from my view, what has and is happening in health care today and what I see and hear about long-term care administration and the organizations in the industry, I hashed out five things (issues, concepts, etc.) that every Administrator (senior leader, etc.) should focus on. Obviously, the list could be expanded but in reality, focus on the key or critical five below will produce the kind of results administrators desire and organizations require.
- Medicare and Reimbursement: Regardless of any white-noise concerning possible delays or advances in the implementation of RUGs IV, MDS 3.0, etc., the path is laid and the dates will occur sooner rather than later. Getting clinical and billing functions up-to-speed, educated, and ready to roll is an absolute necessity. During this process, I’d analyze a whole series of issues and begin to lay the ground-work for any related changes to the present course of business, such as;
- What is the potential impact on my Medicare revenues?
- How is the revenue impact related to my current case-mix?
- Should I begin to adjust my case-mix via different marketing strategies or the implementation of some new clinical programs?
- Does my software/IT systems support new forms, new charting/documentation requirements, assessments, and billing documentation? If not, what is my vendor doing to get us there and when will they be ready?
- Big changes are about to occur in therapies particularly and what, if I am using an outside vendor for therapy, are they doing to be ready? Does this impact our contract and our overall care delivery in any way? Is now a time to consider transitioning to an in-house therapy service?
- Are we, as an organization, actively engaged in communicating what is happening to outside vendors, referral sources, etc.?
- Do we have a fully integrate project plan, budget for change implementation (training, software, etc., costs), and a methodology in-place to review, change and update policies, procedures, forms, etc.? (Names need to be involved, dates set, milestones identified, time set aside for review, time set aside for meetings, etc.)
- Compliance: This is a huge issue today and it continues to grow as health care reform upped the ante once again. There are at least a dozen or more key concerns every organization should have in this area and very recent policy and legislative activities have added to the list. Below is a sample of what should be at the forefront of every administrator’s compliance focus.
- Billing compliance, particularly Medicare. Health care reform and the focus on the part of Medicare to save money via reduction of fraud, waste, and overpayment is a hot topic now. I routinely encounter way too many administrators and organizations that have pushed the revenue per diem issue far too much under Medicare, leaving enormous areas of exposure for recovery actions to occur. In other words, I’ve seen way too much routine high level rehab coding, length of stay elongation, etc. than what the clinical documentation supports. Too often, I encounter MDS coding to substantiate rates of payment and then when the resident’s chart/record is reviewed, the documentation is far different than what appears on the MDS. Administrators need to be wary, even though the revenue numbers look good (perhaps too good), of questionable billing activity under Medicare.
- To the point above and addressed in a recent post here, all organizations should have a compliance plan and now, under health care reform, SNFs are required to have one in place this fall. Compliance is about not just being “compliant” with survey and certification rules but also with other federal laws such as Stark and the False Claims Act. There is no reason that any organization participating in Medicare and Medicaid today does not have a fully developed compliance program and a process for routine audits to preemptively identify,correct, and disclose potentially illegal activity – the ramifications under the law for providers are far too severe. For more information, see my post titled “Stark, Health Care Reform, and Updated Compliance Requirements”.
- There are new privacy and security requirements under HIPAA that organizations need to have in-place. For more information, see my post titled “New HIPAA Provision Now in Effect”.
- Survey and certification requirements such as the QIS are here and the government is in the process of revamping the Five Star rating system. As much as I think the survey and certification process is onerous and unrelated to true care quality, administrators need to understand the peril of poor performance and sub-standard quality. Keeping an up-to-date and clean survey history is vitally important in order to avoid fines, public relations problems, rising liability insurance costs and potential litigation problems.
- Patient/Resident satisfaction is an area that too many administrators believe is unrelated to compliance activity; think again. I see way too many facilities that end-up in compliance problems as a result of resident and family complaints. Dealing with satisfaction across the board is an “ounce of prevention” compared to the “ten pounds of cure” that are required when unsatisfied customers complain to the regulatory authorities.
- Transparency and disclosure are two new buzz words that every administrator should incorporate into operations. In today’s arena, disclosure of ownership, governance, staffing, etc. are the new rules of the road and there is no reason any longer not to publicly embrace a plan of transparency and disclosure of all this information and more.
- Labor Relations: The largest allocation of resources in health care is for staff via wages and benefits, etc. yet I still see too many antiquated labor relations approaches that produce high levels of turnover and poor productivity. To me, it is time for health care to adopt labor relations strategies found in other industries and in companies that have world-class employee productivity, retention, and commitment. Administrators can immediately and positively impact the bottom-line by simply focusing on improving retention, hiring practices (avoiding panic hiring and using better matching strategies), improving supervisor training, removing antiquated pay structures and reward systems, and adopting programs and policies that incorporate employees into the overall strategy and direction of the organization. Stable staff equals better compliance, higher customer satisfaction, higher productivity and lower labor costs (less turnover, less recruiting costs, etc.).
- Risk Management: Leading an organization forward is about identifying “risks” that are inherent in the business and developing plans, strategies and processes to mitigate the impact of risk on the organization’s performance. Though of another way and using a phrase I like and used to use frequently, it is about avoiding the expenditure of “stupid money”. Stupid money is money spent unnecessarily on litigation defense, turnover, higher levels of insurance costs such as liability and worker’s compensation, on agency staff or outside pool staff, on fines and forfeitures, etc. These are all expenses associated with identifiable and known risks and risks that can and should be mitigated by appropriate planning and system implementation. Extremely effective risk management tools and practices don’t require large amounts of investment or even, elaborate policies and procedures.
- The best defense is knowledge – knowledgeable and well-trained staff, active and capable management. Risk management is practice best by management being where the “risk” is, not tucked in an office or tied up in too many meetings with limited purpose, no real agenda, and no specific outcome.
- Using patient/resident satisfaction systems is simple and highly effective at identifying areas of potential problems or risks.
- Using benchmarks available from various industry sources to review facility or organization specific indicators against industry norms.
- Using programs of “gain-sharing” and other incentive compensation practices, tied to compliance, tied to satisfaction, tied to workplace accidents, absenteeism, etc.
- Keeping employees informed regarding organizational policies, standards, plans, etc. Employees involvement and input is a very simple and effective way to mitigate a whole series of risks.
- Using periodic audits to check documentation against billing, patient results and outcomes against set standards (infections, wounds, falls, etc.) and compliance with company policies and procedures.
- Education which can occur via very cost-effective means such as webinars, books, staff to staff training, trade association meetings, etc.
- Purposeful Activity: The famed educational philosopher John Dewey wrote a great deal about “purposeful activity” or the time spent engaged in seeking a desired outcome. For Dewey, this involved the application of the scientific method; the search for answers and insights via a systematic and “purposeful” approach. Health care is a bureaucracy and I watch administrators create additional bureaucracy within their own organizations either in defense of the existing bureaucracy or as a symptom of the bigger bureaucratic problem. I’ve never frankly, understood why health care is so fond of so many committees and meetings that accomplish virtually nothing and consume layers of management staff ad nauseum. Purposeful activity for an administrator is about simplifying as much of the operations and business processes as possible and sticking to some real tried and true managerial and leadership approaches.
- Every meeting must have a purpose, an outcome including a “next step”. No meetings or committees should ever be held or created without a purpose and an outcome and the outcome is never to “meet again”.
- Every manager must have enough authority and be charged with making and held accountable for decisions. Managers that are not accountable for “things” and don’t make decisions are enormous wastes of money and enormous sources of risk. Organizations that allow managers the cover of committees and meetings are wasting enormous amounts of productive energy and time.
- Formal meetings and committees should be entirely focused on two things and only two things; compliance (required reporting and information sharing) and addressing what is “new” or going to be “new”. The latter is about change and developing new strategies or learning, etc.
- Meetings must be brief and have requirements for preparation prior to the meeting and work or tasks to accomplish post the meeting. Discussions don’t require a “meeting”.
- Limit communication via voice mail and e-mail and require people to present their issues in person. Voice mail and e-mail have become the bane of office productivity as they produce “cover”, allowing people not to address what needed or needs to be done. (The famous, “I sent you an e-mail on that”).
- For an administrator, the most purposeful activity is planning and strategizing; taking in information, developing plans and strategies, and assessing the same in light of current operations. All activity, or at least as much as possible, should be focused on improving what exists today, matching future industry trends and requirements with current operations and a strategy to address the future requirements, and communicating what is happening via plans, performance indicators, etc. The test is whether the staff under the administrator can answer, “what happens next and why”.
Health Reform Implications for Institutional Providers
My last post covered CMS’ proposed rule affecting LTAcHs in fiscal year 2011 (October 1, 2010). In this post I noted that CMS’ proposed rule included a disclaimer that any impacts related to the PPACA (health reform) were not included and as a result, CMS would from time to time, release updates providing additional guidance. Late yesterday, the government released additional technical guidance on the provisions contained in the PPACA that impact institutional providers, effective April 1, 2010. Below is a summary of the information and respective implications.
Note: The following provisions are found in sections 3401 and 3137 of the Patient Protection and Affordable Care Act (PPACA). CMS is at work to implement these provisions and the expectation is that payment modifications will occur in late April/early May.
- Inpatient Acute Care Hospitals: A .25% reduction in the PPS (inpatient) market basket for FY 2010 applied to discharges on or after April 1, 2010. The reduction will affect PPS rates for discharges occurring between April 1 and up to September 30, 2010.
- Long Term Acute Hospitals: A .25% reduction to the hospital’s market basket for FY 2010 applied to discharges on or after April 1, 2010. The reduction will affect LTAcH rates for discharges occurring between April 1 and up to September 30, 2010.
- Inpatient Rehab Facilities: A .25% reduction to the Inpatient Rehab Facility market basket for FY 2010 applied to discharges on or after April 1,, 2010. The reduction will also result in changes to the standard payment conversion factor, payment rates, and the outlier threshold amount.
- Extension of Section 508 Hospital Reclassifications: Extends section 508 and special exception hospital reclassifications from October 1, 2009 to September 30, 2010. Effective April 1, 2010 section 508 and individual special exception wage data is removed from the calculation of the reclassified wage index if doing so raises the reclassified wage index. Any hospitals affected by this provision will be assigned an individual specific wage index effective April 1, 2010. If the hospital’s section 508 or individual specific wage index for the period October 1, 2009 to September 30, 2010 is lower than for the period after April 1, 2010 through September 30, 2010, the hospital will receive an additional amount to make up for the difference. This provision applies for inpatient and outpatient payments.
CMS Proposed Policy and Rate Changes for LTAcHs
Yesterday, the Centers for Medicare and Medicaid Services (CMS) released its proposed rule for rates and other policy changes for FY 2011 (October 1, 2010) as applicable to Medicare inpatient stays within long-term acute care hospitals (LTAcH). The entire rule can be found at http://www.federalregister.gov/inspection.aspx#special.
In their release, CMS noted that the proposed rule does not address provisions that are applicable to inpatient hospitals under the PPACA (Patient Protection and Affordable Care Act) or the Reconciliation Act. The expectation is for CMS to provide additional guidance to providers on PPACA implications for 2010 and 2011 in the near future. Below I have summarized the key provisions found in CMS’ proposed rule.
- A rate update for 2011 of 2.4%
- An offset or adjustment to the update of (negative) 2.5% to reflect an estimated increase in spending in FYs 08 and 09 due to documentation and coding that did not accurately reflect an increase in patient acuity or severity of illness (CMS stating that they essentially over-paid for a presumed higher level of care that did not occur). CMS also notes that it is holding off on a negative 3.9% adjustment to rates; an amount required by law for a full recoupment of funds paid-out due to documentation and coding. This amount may be phased-in for future years or taken all at once.
- Since the net effect of the rate update and the negative adjustment for recoupment is a negative .1%, CMS proposes to increase the outlier threshold to $18,692 (last year’s was 7.5% or .5% below the target maximum of 8% of projected PPS payments)
- The proposed rule calls for a partial freeze to any code updates for ICD-9 and ICD – 10 (set to go into effect October 1, 2013). The freeze is intended to eliminate problems associated with coding software updates. Any new updates that are applied would occur after October 1, 2011 to reflect only new technologies or diseases.
- CMS is estimating that the net effect of the above rate changes is an increase in payment to LTAcHs of .8% or $41 million.
Stark, Health Care Reform and Updated Compliance Requirements
When the Patient Protection and Affordable Care Act (PPACA) became law, a provision within adds a new dimension to the rules on self-referral and refund requirements of overpayment (Medicare) contained within the Stark Law. Specifically, the PPACA requires the Secretary of HHS to develop a new self-disclosure protocol whereby health care providers can disclose known (or found) violations of the Stark Law. The PPACA also gives new authority to HHS to settle claims on a “compromise” basis, creating more reasonable terms and conditions when violations occur and are disclosed.
Stark was created to prohibit a physician from referring patients to entities with which the physician (or physician’s family members) had a financial relationship. Broadly, Stark sought to control business relationships between referring physicians and other providers furnishing services (inpatient and outpatient hospitals, etc.) when such relationships involved financial gains applicable to the referral for the physician or, when compensation associated with such a relationship for the physician was beyond the normal and customary payment the physician would receive within his/her primary practice. Over time, Stark’s realm has expanded to include the OIG’s interpretation of applicability with the Anti-Kickback Act (prohibits payments made in exchange for referrals or recommending the purchase of supplies or services reimburseable under a government health program) where provisions exist in strikingly similar context to the language and intents found in Stark. The OIG at least realized the problems facing providers and allowed for (actually encouraged) self-disclosure under its Self Disclosure Protocol. While disclosure to the OIG did not relieve providers of the burden of Medicare refunds, it did provide for a methodology to avoid the imposition of Civil Money Penalties and exclusion from continued participation in the Medicare program.
Adding an additional complication to the provisions for disclosure under Stark is the interpretation on the part of CMS of its obligation to collect 100% of all Medicare payments made in conjunction with the disclosed violation. According to CMS, it is limited in its authority to compromise the government’s right to full recovery of any and all payments made in conjunction with a Stark violation. Prior to the passage of the PPACA, CMS claimed that the Federal Claims Collection Act provided that an executive agency may only compromise collection of claims that do not exceed $100,000. Claims in excess of $100,000 could only be compromised by the Justice Department. Inserting the provisions found in the False Claims Act and the matter of recovery becomes even more complex. Under interpretations of the False Claims Act, the government and certain courts, state that it is a violation of the Act for a provider not to disclose Medicare overpayments. Briefly, the logic is as follows. It is a violation of the act for any person who “knowingly and improperly avoids or decreases an obligation to pay or transmit money to the Government”. The penalty for such a violation is triple damages. In effect, a violation of Stark creates a potential violation of the False Claims Act and as such, a de facto requirement that any Medicare payments be refunded. A False Claims Act violation, if determined as a result of a Stark disclosure, carries the imposition of signficant damages due to the treble damages provision. The risk therefore, to a provider that reports a Stark violation, is the determination that a violation of the False Claims Act also occurred bringing forth not only the obligation to reimburse the Government for all related Medicare payments but the imposition of the higher damages provided for under the False Claims Act; totals which could be extreme. Medicare participating providers have always faced the risk that any illegal act involving self-referral or unwarranted excess compensation or benefits could trigger a circumstance where the activity nullifies the right of the provider to receive Medicare reimbursement (Medicare is legally bound to not pay for services provided when the provision of such service is connected to a violation or is a violation, of federal law).
With the passage of the PPACA, providers receive some additional potential relief while remaining subject to many of the same risks and obligations associated with reporting a Stark violation (as discussed above). For example, the PPACA requires the Secretary along with the OIG, to establish a new self-disclosure protocol. The purpose of this new protocol is to assist providers and suppliers with disclosure of an actual or potential Stark violation. Establishment of the protocol is to occur within six months of passage of the PPACA (late-September 2010) and identify a specific official or office where disclosures are directed. The PPACA also provides the Secretary with an exception to the False Claims Collection Act, allowing the Secretary to take into account certain factors such as the nature of the illegal practice, the duration of the practice, the timeliness of disclosure, etc., when determining the government’s claim. Providers should note however that the PPACA also requires potential or known disclosures to occur within sixty (60) days of discovery of the violation. Failure to disclose within 60 days correlates to a False Claims Act violation and as such, the remedies available under the False Claim Act are triggered.
In application, providers today should consider the following.
- The predominant cause for a violation is sloppy administration of contractual relationships between a providers and physicians. Examples include discounted office space, leases for space that are not at fair-market value, leases that are not signed by the parties, provisions for physicians to use free staff resources, overpayments for services under Medical Director agreements, Medical Director agreements that aren’t signed, etc. Each of these examples is a potential Stark violation requiring disclosure.
- In light of the point above and the requirements in the PPACA for disclosure of actual or potential violations within 60 days, providers should be fully engaged in routine QA activities to identify, correct and disclose any violations. Ideally, implementation of solid education, preventative QA activity, and effective use of counsel is already in-place, mitigating the occurence of a violation or at the worst, mitigating the extent of a violation.
- Providers should not wait for the completion of the new disclosure protocol as doing so creates undue peril that a violation extends beyond the 60 day disclosure requirement in the PPACA and results in a False Claims Act violation. Providers can and should continue to disclose actual or potential violations to CMS even though it is likely that CMS will not resolve any disclosures until implementation of the Secretary’s new protocol. The best case is that CMS will allow providers to update disclosures made prior to the implementation of the protocol and avail themselves of the new claims resolution system created by CMS and the OIG (an updated disclosure providing more detail sufficient to reduce the liability due to the government).
Part B Therapy Cuts Delayed to June 1
As a follow-up to a post from last week regarding pending cuts in Part B therapy rates, last evening the House passed a bill that the Senate had passed earlier in the day, included within is a provision to delay the pending cuts to the physician fee schedule until June 1. The provision is tucked within a broader bill that extends COBRA subsidies and unemployment benefits to long-term unemployed individuals. The provision covers the period from April 1 to June 1. A prior measure, tucked into a jobs bill, delayed the cuts until April 1. Congress was on recess for the Easter Holiday, returning this week. It was expected that upon return, Congress would institute another temporary fix, pushing the reduction out for at least another month; in this case, two months.
The rates for Part B therapy are tied to the physician fee schedule which is targeted by law, for a 21% reduction. The fee schedule formula is a sore issue for Congress and physicians both, at times for opposite reasons. In periods of economic expansion, the annual inflation mechanism built into the formula can adjust the fee schedule dramatically upward, in excess of consumer inflation. In periods of economic contraction, the formula produces dramatic cuts, such as the case set for 2010. (1) Congress has sought for years to amend the economically contrived formula that produces such wild swings but has failed to find a middle ground approach that physicians can agree upon. During the debate over health care reform legislation, fixes to the fee schedule problem were imbedded within inital legislation passed by the House as a permanent solution and manipulated by the Senate in a more limited method in its version. The real crux of the issue boiled down to the costs associated with a permanent solution, estimated at $250 billion or more. With little price-tag wiggle room as reform became final in the Patient Protection and Affordable Care Act, the fixes to the physician fee schedule dilemma moved to a side issue. Given that the Part B therapy rates are mired within the fee schedule issue, the same fate of potential cuts also remained unaddressed at the time the President signed the final reform legislation into law.
The temporary delay in cuts, now set to sunset on May 31 only moves forward the same damning set of political issues. Congress and the President are trying to commit to a reform mantra that is “savings” driven. As the political landscape is clearly divided and mid-term elections loom closer, additional unfunded spending is the last element any “up for re-election” politician wants to come close to. Congressional Democrats have crafted a middle-ground approach that would delay the cuts to October 1 (the start of the new federal fiscal year) or perhaps out into 2015, freezing Medicare rates for the duration. Physicians, preferring a complete revision to the formula and deficit hawks, preferring to let the reductions occur in large part, oppose the Democrats approach.
Tackling the funding and the fee schedule/Part B issue separately as a single new piece of legislation, in my estimation, won’t occur this year. What I believe is likely to happen is that a longer term fix, perhaps until the end of the year, will get tucked into another broader spending bill, delaying once again, the core problems associated with the fee schedule and Part B.
(1) The physician fee schedule increases are tied to an economic sustainability formula that applies the Medicare Economic Index to a target called the Sustainable Growth Rate. Essentially, the Index is a measure of inflation designed to reflect the costs physicians face with respect to their practice and to wage levels. The Growth Rate is calculated based on medical inflation, the projected growth in the economy and the projected growth in the number of Medicare fee-for-service beneficiaries plus any changes in rules, laws or regulations as applicable. Congress has tinkered with the application of this formula, freezing the implementation of cuts at 0% , most recently through March 31, 2010.
Health Care Reform and Assisted Living
In a bit of an indirect manner, Assisted Living got a boost from health care reform, albeit in a typical governmental fashion. With the Feds willing to use Medicaid as the vehicle for expanded coverage programs for underinsured (those within 150% of the poverty limit with high-deductible plans) and the uninsured, coupled with additional funding for Home and Community Based Services, an expanded source of potential residents for AL providers comes forth. Of course, this new source of residents is not wholly unfamiliar to some providers and as the providers already working within Medicaid waiver programs will attest, not without problems.
Over the past decade, the movement to deinstitutionalize certain at-risk seniors and the chronically disabled has continued to gain momentum initially at the state level, then through the federal level. The first concerted efforts back in the late eighties and early nineties focused on moving the developmentally disabled and mentally ill from institutional settings to community based settings, typically group homes and residential facilities. The dominant majority of this group was (and remains) Medicaid eligible and thus, the shift from an institutional focus for care to a community-based focus tied directly to savings for Medicaid. Without question, tangible benefits in terms of quality of life were also achieved for the resident population.
Fast-forward through the nineties and up to 2009, the transitional movement of deinstitutionalization gained momentum. The focus continued to be on Medicaid eligible individuals and dual-eligible individuals (Medicaid and Medicare) with moderate to minimal care needs placing them “at risk” of institutionalization (generally SNFs or Intermediate Care Facilities). The “at risk” element wasn’t related to their care needs but to the benefit structure of Medicaid which without permissive changes made by the applicable state and the federal government, could only pay for care delivered in a federally certified care center (SNF or ICF). As the Feds became more open to allowing states to “waive” the core requirements for benefit and service eligibility contained within state plans and still receive FMAP (Federal Medicaid matching dollars), the migration of seniors from institutional care to community-based options (principally Assisted Living) picked-up pace. During this period, the popularity of Medicaid waiver programs increased as more Assisted Living providers became willing to accept this source of residents, states enjoyed the benefit of reduced institutional care utilization (a savings) and various advocacy groups touted the quality of life improvements afforded to seniors living in residential care environments as opposed to nursing homes/institutional care centers.
Looking reflectively however, illustrates that this transitional period and the gain in popularity of Medicaid waiver and home and community based care options wasn’t without a series of problems. First, states were often ill-equipped to care manage the targeted group of seniors. As a result, systems for access, payment and ongoing certification of eligibility were often fragmented and ineffective. Second, states and the Feds, under-estimated the demand for residential care. Third, costs associated with these programs soared and providers, while still phasing in to accepting Medicaid waiver residents, encountered (in some cases) rate cuts, mounting paperwork, slow payments and in some cases, no payment. Other problems also occurred such as access issues in various communities (insufficient services to meet the demand), spousal impoverishment qualifications under Medicaid that the Feds had not addressed, and insufficient additional federal funding to grow the waiver programs to meet the rising demand.
Understandably, the Federal government during the creation of health care reform legislation, sought to address some of the more pressing issues that the states encounter within Medicaid waiver programs and in delivering an expanded array of home and community based care options. The result of the recent passage of the Patient Protection and Affordable Care Act is that to a reasonable extent, the issues noted above were addressed. Like all major Federal social policy initiatives, the legislation also has flaws. The benefit potential for Assisted Living providers and home health providers is fairly plain; at least for those provider groups that wish to continue to care for Medicaid waiver residents and/or are targeting an increase in their existing programs. There are also potential opportunities for new service and care programs integrated within senior housing and affordable senior housing projects. Below is a summary of the “pluses” I pulled from the legislation.
- Community First Choice: Allows states to cover the cost of attendant (non-skilled, non-CNA) services for a Medicaid beneficiary if doing so would prevent the individual from being hospitalized or residing in a nursing home.
- Allow states to cover more home and community based services via a plan (state Medicaid) amendment as opposed to a waiver.
- Extends the Money Follows the Person demonstration under Medicaid until 2016 (pays for more home and community based and residential services as needed by the individual rather than a payment targeted toward a specific provider care level such as SNF).
- As of 2014, requires states to provide the same spousal impoverishment protection to a spouses receiving home and community based services (no longer limited only to SNF residents).
- Provides an increased federal match to states that presently spend less than 50% of their Medicaid budget on non-institutional care alternatives provided the states submit plans to rebalance their Medicaid spending, increasing the resources provided to non-institutional care.
- Eliminates the cost-share under Medicare D for dual eligible individuals receiving home and community based services (dual eligibles in a nursing home are already exempt from the cost share).
- Funds the extended Medicaid match (FMAP) that was created under the ARRA (Stimulus Bill). Beginning in 2014 and through 2016, provides 100% federal funding for additional Medicaid costs incurred as a result of expanded Medicaid coverage provisions for lower-income individuals
As I indicated earlier, the legislation does have its share of flaws or imperfections. Below are some of the obvious issues.
- Creation of the CLASS Program (Community Living Assistance Services and Support) which is touted as a voluntary form of taxpayer-funded long-term care insurance that provides payments to individuals to pay for necessary home and community based support and care upon evidence of a disability or disabilities. Unlike traditional long-term care insurance plans, CLASS would cover a very broad array of formal and informal assistance, even on a non-licensed basis. Benefit amounts are self-selected upon enrollment ranging from $50 to $100 per day. The problems with CLASS are many including the fact that upon enrollment, an individual must pay into the program for five years prior to receiving any benefit. Second, the benefit levels are rather paltry, especially at the $50 per day level. Finally, and very unreported within the analysis of the reform bill to date, the premium levels are likely too low for the levels of benefits. In other words, CLASS is actuarially, out of the gate, underfunded and necessarily, premiums will rise. In fact, CMS estimates that premiums, once utilization begins to steadily occur and enrollment levels-off, could rise as high as $180 per month. Since it is in fact, a voluntary plan, it is likely that few will enroll and among those that do enroll, they are likely to already have some level of existing disability or a trend toward early disability - a problem of adverse selection. CMS predicts that the CLASS participants will use benefits at an “exceedingly higher” level than a typical individual purchasing a long-term disability or long-term care plan.
- The legislation maintains the existing Medicaid funding system which already is a convoluted and an economically unsustainable mess. In as much as the Feds are ponying up some additional money and relaxing the bureaucracy on states to expand their Medicaid plans to offer more home and community based care support and options, they are doing so within the same idiotic paradigm that presently has state Medicaid budgets swimming in red ink. In other words, the Fed’s money comes only after states commit to spending and thus funding, the expanded services. Garnering additional FMAP is akin to getting five Big Macs after buying the first one, then being required to continue to buy the additional five to keep the match coming, etc. On the back-end of course, having gorged on all the Big Macs, you now have to pay for the diet and the by-pass surgery. States simply cannot sustain the level of expansion that the Fed is promoting (California is the classic example).
- No one is quite certain how much of a burden the additional level of newly insureds will be under an expanded Medicaid program. Dozens of states are already suing the Federal government over the expansion, primarily because of my point above but also from the perspective that they (the states) will get stuck with an enormous additional Medicaid cost item. As the expanded Medicaid program will contain fairly lavish and generous benefits, including expanded home and community based care options, the risk of adverse selection is enormous (the risk that people with pent-up demand and existing uncared-for disability will now use the system and the benefits at a level far greater than was initially anticipated). Personally, I believe the adverse selection risk is enormous and terribly misrepresented within the legislation.
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