Post-Acute Issues Worth Watching
In my recent work and across recent discussions, phone conferences, etc., I’ve encountered a thematic trend; a circle of issues or as in reference to geese, perhaps a gaggle. Doing a bit of research and sifting through notes written over the past few weeks, here is what is trending.
Pharmacy: In October of last year, CMS issued a proposed rule with a provision inserted which, if published within a final rule, would prohibit consulting pharmacists in SNFs to be employed by or contracted with, the dispensing pharmacy. The theory is that when consultations are performed by pharmacists employed by or affiliated with, the dispensing pharmacy, there exists a greater potential for SNF residents to have as part of their medication regime, higher levels of anti-psychotic drugs, psychoactive drugs, and an increased level of unnecessary or unwarranted drugs. Of concern to most of us working in the post-acute/healthcare arena is that CMS can point to no specific data or research to support this theory, save a well-known fact (historically) that seniors in SNFs use far more anti-psychotic and psychoactive medications that seniors in non-instiutional settings. Drawing a bright-line conclusion that consulting pharmacists related to dispensing pharmacies are the cause is boneheaded to say the least.
Despite this flawed view on the part of CMS and the comments generated during the comment period, my sources inside the D.C. beltway are saying that CMS will publish a final rule soon including a provision requiring SNFs to use independent consultant pharmacists, effective January 1, 2013. Assuming this does occur as I am hearing, SNFs today should begin to work to develop a plan to source possible options ASAP. The inherent difficulty of course is;
- Insufficient supplies of pharmacists, particularly those that have current clinical consulting experience.
- In light of the point above, pharmacists with access to clinical consultation software applications.
- Knowledge - Geriatrics and chronic disease is a specialized field.
- Time and efficiency – getting to know the residents and their respective drug regimens will take a non-affiliated consultant longer.
- Cost – finding a source will not come cheap.
Some options do exist for SNFs in the right market areas. My best advice is to approach hospital systems, work with universities with pharmacy schools, band together with other SNFs, and start now to build a consultant’s package with your current consulting pharmacist, assuming he/she is working with your dispensing pharmacy. It is likely the dispensing pharmacy will work with its SNF clients to a great degree, trying as best possible not to lose the current dispensing business as a result of being a barrier in a transition period.
Hospice and Fraud: Most people who are close to the hospice industry either foresaw or should have seen, the current investigative and crack-down activity from OIG and CMS. The industry in terms of providers and benefit utilization, grew substantially over the past decade, despite overall health care utilization remaining on a relatively slow-growth to no-growth plane. For people like me who watch the industry closely, it was illogical to assume that a growth of terminally ill individuals suddenly sprouted and maintained the growth rate recently evident. The same logic concerns were expressed by Medpac and the OIG with the OIG specifically warning of forthcoming investigations where the bulk of a hospice’s patient encounters arose from nursing home contracts. Just last July, the HHS OIG indicated that it found that hundreds of hospice agencies relied on nursing homes for over two-thirds of their case load. Other reports from Medpac and the OIG found that literally half if not more of these proto-typical nursing home patients under the hospice benefit, did not meet one or more of the qualifying criteria for coverage/certification.
While the large agencies, predominantly investor-owned will be on the radar, even smaller and regional agencies are coming under scrutiny. CMS reports, and I have encountered this first-hand, that claim denials are up, particularly at re-cert periods. Diagnoses are being scrutinized carefully, with CMS looking at re-certs and probing for some evidence of deterioration or movement toward death. CMS knows that certain diagnoses and patient locations correlate to longer stays and as such, the audit focus is squarely on this relationship.
For hospices, the direction is clear – be wary and cautious of certain patient types and the “nursing home/assisted living” patient flow. Nursing homes and assisted living facilities are not necessarily gold-mines of potential referrals, In fact, the true number of organically terminal patients that would/will fit the hospice benefit criteria is not much greater from an overall ratio perspective, than the number found in the general population. While the business relationships between a hospice and a SNF or assisted living facility appear attractive, it is the attractiveness that also makes the same perilous today unless smartly coordinated and managed.
For the past couple of years or so, the hospice growth trend in terms of referrals has been slow to flat. Nothing regarding the recent fraud cases in the industry suggests this trend to arrest. If anything, I expect to see the trend marginally down for a period with the industry actually contracting in terms of the number of providers. Some will simply call it quits while others will sell or merge. Either way, expect fewer total providers and a stable to decreasing referral pattern shift.
Qui Tam, Me Too: The latest round of major fraud actions and False Claims Act identified violations arose out of Qui Tam actions or more commonly, Whistleblower actions. While the Federal government is clearly targeting certain post-acute segments (see OIG 2012 workplan), equally as profound an impact on the industry is the proliferation of former employees and/or contractors willing to disclose less than scrupulous provider behavior. While this element of the law always existed (enforcement and recovery via a private citizen for a portion of the recovery settlement), it has clearly grown to a new level in recent years. The reasons? First, down economies bring forth certain behaviors on the part of businesses pressured to generate earnings and revenue growth. If no organic growth exists within the business sector or market(s) a business occupies, it is incumbent upon the business to find new ways to mine potential market niches. This is very apparent within the hospice sector and in the Medicare component of the SNF industry. The pressure to build revenues in non-growth periods inherently leads to some corner-cutting or machinations that run afoul of the False Claims Act. Shrinking or saving to a profit while a short-run strategy, is nearly impossible to maintain over a longer term horizon without shedding fixed costs as well; very difficult.
The problem inherent with manipulation of Medicare coding, billing, referral requirements, etc., is that what seems good or plausible at a 20,000 foot level must also seem good and plausible at the ten foot level; a level where multiple people must buy-in to the same structural arguments, beliefs and incentives. As the folks existing at the ten foot level rarely see the same level of incentive nor have perhaps, the same level of “skin” in the game, any level of apprehension arising on their part or disgruntlement can be quickly structured into a Qui Tam action. Mix equal parts news coverage with employees disgruntled by certain practices with a growing element of the bar (lawyers) seeking Qui Tam actions with a government willing to pursue these actions and you have a fairly fertile tract of ground for more Qui Tam events.
The moral of this story is that organizations need to be very vigilant concerning their compliance activity, removing any incentives tied to new revenue growth without some counter-balance of audit and scrutiny. Too many times I have heard providers tout abnormally good results in segments or sectors that are flat to under-performing. This is a red flag simply from the standpoint of “why you and not everyone else” logic. If for example, an SNF has an inordinately strong, high paying rehab case-mix and therapy productivity, my counsel is always around “red flag”. Any facility’s profile should match close to the national case-mix distribution and when it doesn’t, either abnormally low or high, its time to delve deeper. The same is true with hospice growth, nursing home days, length of stay and percentage of continuous care designations. Remember the age-old economic axiom – “what gets rewarded or paid for, gets done”. Incentives perversely aligned within the boundaries of False Claims Act risk areas are ripe for peril and thus, someone within the organization or tangentially connected to this process, to cry foul with today, the expectation of a decent future pay-day.
Revenue and Earnings Cautions: In light of some of my comments regarding Qui Tam above, certain post-acute sectors are seeing revenue reductions and thus, earnings shortfalls resulting from Medicare payment reductions and fraud/probe activity. Hospice is a segment that I predict will continue to under-perform as growth is truly non-existent and where growth was attainable via SNF relationships, clearly constrained by federal oversight. Additionally, the SNF industry will suffer as well. Kindred’s recent earnings announcement showed this quite clearly. Medicare cuts impacting therapy RUGs primarily will impact SNF organizations that relied on “mining” certain RUG categories for revenue and margin. Without a more streamlined and balanced revenue model, the Medicare reduction comes faster than the trailing operational improvements possible via rebalancing the business enterprise. Kindred announced as much as it intends to shrink its facility holdings via non-lease renewals and concentrate on building a more efficient revenue/expense equation. Remember, fixed costs are the most difficult to shed and variable costs, tough to align in tight labor markets and markets where patient populations flux daily. In short, only so much can be gained via trimming variable expenses and typically, the amounts are less than adequate to offset revenue reductions and protect margin.
Quality or Quit: The final issue and one that has been lurking in the shadows and unfortunately, ignored by too many providers, is the issue building around “quality”. The frank reality is that from all my sources in Washington and around the various policy arenas is that quality is what matters. There is a prevailing and growing belief that payment must be tied to quality and that government must do everything within its power, regulatory and otherwise, to push providers to deliver better outcomes, more efficiently. This is the genesis of the ACO movement. I have heard directly from important policy and political figures, directed at provider organizations and industry segments, produce “Quality or Quit” the business. Providers have longed believed that quality was the furthest thing linked directly to payment, even though lip service was given to the subject. For post-acute providers and industry segments, the recent release of proposed outcome measures by the National Quality Forum (anyone wishing a copy, e-mail me and I will forward) is a good place to start grasping what is coming, and in a big hurry. Providers across the post-acute spectrum that are not presently, directly and seriously engaged in measuring key care outcomes, need to get up to speed quickly. Reimbursement will be tied to quality measures and more important, providers that are not jointly participating up-stream and down-stream in quality improvement across industry segments, will not see the level or quality of referrals necessary to stay in business.
Medicare, Fraud and Why: Perspectives on the Post-Acute Industry
What never ceases to amaze me is the amount of post-news discussion that occurs when certain issues rise to the front-page (or near the front page). Seemingly, industry side-liners awaken and look in disbelief that one major provider organization or another is again, embroiled in some OIG investigation, lawsuit or official inquiry concerning their Medicare billing and/or care provided to Medicare patients. The word “fraud” is tossed out quickly; the shock value of vulgarity at a cocktail party in polite company is expected. Statistics from qualified and unqualified sources burst forth claiming, some correct, that approximately 20 to 30% of care paid for by Medicare is inappropriate, unwarranted, unnecessary or down-right fraudulent. Truth be told, the unwarranted, inappropriate, and unnecessary talk is like Monday morning quarterbacking; an easy sport to engage in when all the facts are visible and the outcomes known. The real question that is rarely, if ever addressed, is “why” do these issues consistently arise and most often, among the same provider organizations.
The simplest answer as to “why” the issues of fraud and inappropriate care and billing arise (routinely) is Medicare itself. Any payment system that rewards via higher payment, greater or increasing levels of acuity and utilization is ripe for provider organizations to chase the greater reward, even if doing so stretches the limit on necessary or warranted care. Think pro sports. Higher dollars go to players that hit more home runs than singles or for average. In fact, less than a few years ago, the prize for the “long ball” was so good that players opted to cheat with chemistry as their true ability alone would not produce the highest return or largest pay days. In economic terms the old axiom of “what gets rewarded gets done” applies. Medicare has a long history of over-valuing certain types of patients, services, etc. while under-valuing others and thus, it is by its own rate and payment methodology, inducing a certain amount of “fraud”. When the rearview mirror test is applied or the hindsight test (that which is 20/20), its fairly easy to look at groupings of payments, diagnostic codes and outcomes and find structural flaws suggesting inappropriate or unnecessary care was provided. The remaining question then revolves around how to pre-examine each event or group of events to a level to assure that no inappropriate care or unnecessary care is rendered. Truth be told, I’m not sure that this question is completely solvable.
In some cases or circumstances notable of late, the word fraud is attached or overtly implied, to events that likely aren’t fraudulent; more indicative of gaming the system. For example, the Senate investigation of Amedysis, Gentiva, Almost Family, etc. was principally tied to an investigation completed by the Wall Street Journal involving therapy visits. At the core, the implication was that these companies “maxed” the number of visits to trigger the highest level of payment. Important to note is that the practice of “clustering” visits around the higher paying thresholds began when Congress created the higher paying threshold out of concern that “therapy” was being limited to home care patients. Of additional interest is the role MedPac played in this event, reporting average profit margins for these organizations approaching the upper teens to twenty percent range.
In the example above, the issue front and center is Medicare profit vs. appropriate level of profit (whatever level this is). With hindsight being 20/20, it is easy to see that perhaps, some therapy was over-provided or in some cases, some patients were selected intentionally because of their therapy or rehab potential. Did the agencies referenced intentionally seek to align their referral development practices and marketing approaches to attract certain patient types? Of course and doesn’t every business do the same? Personally, I have run organizations that did this and provided guidance to others on how to do this. The reality is that some patients are better paying than others and regardless of whether an organization is non-profit or for-profit, the goal of any business is to attract paying customers and preferably, the customers that pay the best. When the incentive is laid forth by Medicare that certain types of care and services come with higher rates of reimbursement, it is only logical that providers will seek to develop business models and systems that garner the highest rate of reimbursement. If unnecessary care was the sole issue of whether these agencies did wrong, I won’t attempt to defend them but alternatively offer the whole health care industry as an example of unnecessary care provided across the spectrum. By our nature and culture, we have come to believe that more is better. An analysis of “unnecessary” in any area from drugs to surgeries to diagnostic tests to hospital stays and physician visits, many of which are/were paid for by Medicare, would clearly show this to a be a systemic problem and as categorized by CMS/OIG and the Senate, fraud and violations of the FCA (False Claims Act).
There isn’t a segment of the post-acute industry that I follow that remains honestly non-participative with regard to Medicare billing impropriety. There also isn’t a segment that isn’t constantly lobbying Congress to continue to shovel more money into Medicare and generally, skewed toward certain categories, diagnoses or patient-types where allegations of fraud routinely arise. Recently, CMS announced a rebasing of RUGs rates for SNFs, primarily targeted at certain therapy categories. A huge cry of doom erupted from the industry and the industry tag alongs, principally therapy companies. I read for days, prognostications of SNF margins turning negative, stock prices falling, layoffs, etc. What was the real issue? Medicare is being used by the industry to routinely subsidize revenue shortfalls that occur via Medicaid. In reality, as Medicare is a bit payer in the SNF world (less than 20% of all days of care), the admission that Medicare is subsidizing other shortfalls is the same as stating that Medicare is overpaying SNFs. For CMS, the issue was about another “miss” in the ongoing game of trying to tie reimbursement to care needs to patient populations. The industry was, as has always been the case, one step ahead in moving its practices to where the money is. No different than the home health industry events, the SNF industry targeted certain types of patients and unquestionably, a portion of the therapy provided may fit the hind-sight definition of “unnecessary” either by level coded or visits actually provided. Stretching the diagnosis, seeking certain referrals, building relationships that are economically advantageous to various parties, etc., is as common in the SNF industry as it is in hospice, home health, and hospitals.
The latest hospice industry news event concerning Vitas and inappropriate referrals of non-terminal patients is indicative of a twist on an old theme, nothing more. While this instance is truly creative by definition, involving an insurer and a provider, both potentially culpable in a scheme to shift costs and maximize reimbursement, it still only rises to the level of “old news”. For years, the hospice industry has been rife with a similar dance played between hospices and SNFs. Caught or most recently on display doing this dance is Aseracare. In this dance, hospices circulate among SNFs with high Medicaid census and patient profiles marked by long-term dementia and debility; custodial care by definition. The hospice, in need of additional patients, tells the SNF that it can qualify many of these types of patients for the Medicare hospice benefit and in exchange, the SNF will continue to keep the Medicaid daily rate but the hospice will assume drug costs, supply costs, even DME costs plus augment the staffing. As a kicker, the transition of the patient to the care of the hospice provides some regulatory relief to the SNF as now the overall care of this patient shifts to the hospice and documentation, assessments, and other paperwork otherwise required by the SNF no longer apply. As expected, a win-win of sorts appears. The hospice gets daily rate from Medicare, the SNF the daily rate from Medicaid, the hospice census improves, the SNF census remains the same, etc. The real winner here however is the hospice as an SNF patient is fairly inexpensive to care for as the SNF provides much of the care infrastructure. Visits to SNF patients are typically fewer than a comparable home-bound/community patient and by the nature of many of the patients qualified in this scenario, the length of stay on hospice is considerably longer – a nice stable, revenue stream. Using the 20/20 hindsight view however, shows that a preponderance of these SNF patients don’t fit much of the Medicare hospice criteria and in the acid test category of likely terminal in six months or less, a plausible argument can’t be made.
In the quest for higher reimbursement in an environment facing Medicare spending minimization, control and cuts. behaviors and tactics become irrational and by their very nature, borderline or outright fraudulent. The most rampant that I see is upcoding or creating phantom diagnoses and need where none truly exists. The hospice illustration above is one such example. Others that are common include “stretch-rugging” by therapy companies and SNFs, discharging dually-eligible Medicare SNF patients to hospitals when the medical needs (and supposed costs) increase, and back-dating orders. In some cases, the activity is subtle such as SNFs that are willing to take below fee-schedule discounts for laboratory and radiology services for Medicare residents, even though doing so could lead to a Stark violation for the SNF. The whole chase is about trying to maximize the net revenue under Medicare, either by increasing the volume or minimizing the costs associated with caring for these patients.
Still, the question begs as to “why” this level of fraudulent or inappropriate activity persists and, in-spite of well published examples of providers getting caught. As I wrote earlier, a portion is due to the fundamental flaws inherent with Medicare, how it pays and the program benefit structure. Chalking it all up however, to Medicare while easy, is like solving half of a crossword puzzle and calling it done. In my follow-up post, I’ll provide a bit more clarity as to what I see, are the reasons “why”.
A Rare Post
As much as I have focused on keeping this site free from any of my personal agenda, I have encountered a circumstance that bears a one-time exception to my rule. Please bear with me as this will be brief.
I have a colleague and true friend who was recently downsized from a deteriorating health system due to their financial and operational mismanagement. This gentleman was in charge of Marketing and P.R. for this organization. In spite of his best efforts and gifts, he was hamstrung by the financial condition and continued deterioration of the organization, literally unable to do his job due to the reputation and care problems, staff turnover, poor community reputation and consistent resource shortage. He became a victim of circumstances beyond his control.
As I said earlier, I rarely attest for anyone and never in writing of this sort. This is a first. The reason? This gentleman is gifted, a true professional and a consummate, stand-up guy. He became a victim of circumstances because he was too principled to walk when he should have, even in spite of my counsel. He finishes what he starts, even if not given the tools or support to do so.
This all said, here’s the inside information. His name is Steve (I’ll withhold further unless requested). He has thirty years of health care marketing and P.R. executive experience within hospital systems (one being the largest in the state) and in the post-acute environment (seniors housing, assisted living, SNFs, hospice, etc.). He comes from a journalism background originally; television principally. He knows media, public and community relations and can market and sell health care. He is a gifted writer and has worked all angles of health care P.R. and Marketing from spokesperson to damage control to mergers and acquisitions and new product launches. He’s even overseen philanthropy and fund development. Aside from me, his references are impeccable and he’s well-known in the health care community in his market areas. I have recruited him in past positions and would without reservation, hire him again.
To the point, he’s networking and available, including possible relocation. I know of few other health care marketing people with his breadth of experience and track record of success. To my readers, all of whom I appreciate, and my professional colleagues whom I equally appreciate, your leads or insights on Steve’s behalf would be deeply appreciated. If you have any ideas or interests you would like to share and/or learn more about Steve (resume, etc.) or talk directly with him, drop me an e-mail and I will make it happen. My e-mail is Hislop3@msn.com.
Thanks for indulging my deviation in content and again to all, thanks for reading!
Hospice Census: Where’s It At?
A common question I am fielding has to do with the current “no growth” pattern of hospice census; in some cases, decline is more operative of the pattern. Briefly, there are a number of factors at play, some recurring themes and some driven by more aggressive CMS intervention.
- The biggest culprit in the current no-growth situation is the economy. I’ve written about this issue before but it clearly bears repeating. In a down economy, paying patients are more scarce than in a healthy(ier) economy. Assuming as has been the case, provider growth or supply hasn’t declined substantially (if at all) during the recession to current level of stagnation; the same number of providers are chasing a lesser number of “paying” patients. The reality is such that each provider seeks patients that can pay and ranks or grades patient value by payer source; some patients are worth more than others. As hospice is primarily a “down stream” referral, generally coming from an acute environment, the base of referrals starts with the supply of paying patients within the hospital. For most if not all hospitals, patients with good private insurance are the most prized. Medicare comes next and Medicaid next and everything else well below. For hospice, the bulk of referrals are Medicare followed by Medicaid and private insurance to a far lesser degree. When the supply of patients with private insurance declines due to economic malaise for a prolonged period (as current with high unemployment) and the level of elective procedures dies rapidly, all other paying patients become more prized by the hospital; their value increases. As the value of these other patients rises and isn’t replaced quickly with private insureds, the realization of keeping Medicare and Medicaid patients within the system and the hospital as an economic necessity (paying the bills) trumps the value of referring down stream. In short, the demand from a supply of private insureds for beds and services isn’t great enough today to push these other patients out of the acute system. Economically speaking, if I am a hospital, I will maximize whatever revenue source is available to me such that doing so is better than nothing as no immediate alternative or replacement is available.
- While overall census hasn’t grown much over the last few years (if at all), CMS’ concern regarding the composition of hospice census has. The primary focal point is around nursing home patients on hospice and their proclivity as a sub-group to account for longer lengths of stay. Not surprising, as the sources for non-nursing home patients have remained stagnant or declined, hospice activity in nursing homes has steadily increased. What CMS is concerned about today is the growth of the longest stays, principally where these stays occur and what diagnoses correlate to these stays. A notable aside and one that cannot be ignored is the type of hospice ownership that seems to drive the majority of long-length stays. The facts below combined with an OIG workplan emphasis that is focused on reviewing the business relationships between hospices and skilled nursing facilities correlates directly to a softer environment for census gains derived via nursing homes. If the term Hawthorne Effect (behavior modification that occurs as a result of being watched or monitored) comes to mind, I’ve made my point.
- The longest stays occur on average, in nursing homes and assisted living environments.
- The average length of stay in-service for a for-profit hospice is 30 days longer or 33% longer compared to a non-profit hospice.
- The bulk of industry growth in terms of organizations providing hospice has been for-profit, free-standing hospices. The rest of the industry growth has remained essentially flat.
- For-profit margins of free-standing hospices average 10 to 11% compared to non-profit margins of 3%.
- A recent OIG report on hospice care provided in nursing homes found that 82% of the cases reviewed did not meet Medicare coverage requirements.
- In the grand universe of all health care options, hospice care remains a decided niche’. For non-health care people, its tough to wrap your head around a care approach that by its nature, offers no “curative” option. For all too many individual patients and their families, this option is too often viewed as “giving up”.
- Marketing has caused some erosion but marketing on behalf of non-hospice providers. Cancer remains the primary cause of a hospice referral yet for every hospice advertisement I encounter, I encounter a literal ten to one (if not more) advertisements for hospital-based cancer treatment programs or distinct hospitals (think Cancer Treatment Centers of America). While I know the overall survival numbers, costs, logistics, etc. as well as any one, the general patient and their family does not. The treatment approaches are phenomenally positive and reassuring regarding themes of “hope”, “cure”, etc., even for the most desperate of diagnoses. The hospice message is frankly trumped quickly as to the unitiated, it is still about death. The result: Referrals that should have come sooner perhaps are not coming at all or coming closer to the final days.
Taken the above into account and CMS data regarding a projected growth in outlays for FY 2012 of 2.8% (Medicare), an amount that is almost entirely rate driven, expect continued stagnation on the census side. Until the economy improves and more certainty is forward on the future of health care reform, growth in terms of new volume is not soon to arrive.
Post-Payment Reductions: Build a Revenue Model for Success
Not too long ago I wrote a post for SNFs regarding “what to do” in preparation for October 1 rate reductions. Since then, I’ve fielded inquiries galore from all kinds of providers looking into a future that likely includes Medicare and certainly, Medicaid rate/payment reductions. In most cases, the answer that I provide is clearly more confusing and complex than many want to hear. In an attempt to provide additional clarity across the board, regardless of provider type (SNF, Hospice, Home Health, etc.), I decided to write what I hope, is a simplified approach to creating a level of revenue stability in a tight to declining environment.
The typical reaction from most providers I work with is a quick turn to expense reduction as a means of combatting reducing revenues. Often times, the immediate actions taken provide only a short-term respite to margin erosion followed closely by a steady erosion of margin. The reason? The most apparent and easiest places to cut such as staffing reduce service and quality. Consistent reductions in care are followed by consistent erosion in revenue via occupancy or alternatively, higher expenses in the form of staff turnover, compliance problems, etc. The plain fact of health care life and frankly, business life in general is that a company cannot save itself to a consistent profit.
The alternative approach that I recommend providers adapt is a more fundamental, less variable expense focused model; certainly one that doesn’t quibble with incrementalism as a means of dealing with margin via expense reductions. The start of this approach focuses on three key axioms.
- Price = Fixed Cost + Variable Cost + Margin. In this case, price isn’t truly at the control of the provider. Substitute Per Diem Net Revenue for price.
- Net Per Diem Revenue is driven up by productivity, especially billable productivity and case mix. If the equation doesn’t work to produce the margin desired, focus more on productivity and issues such as occupancy and case-mix before attempting to drive down variable costs, unless the variable cost reductions consist of “low hanging fruit” (e.g., too much overtime, agency use, supply and food waste, etc.). Most providers believe wrongly that a Medicare expenditure reduction translates equally for all providers in the form of rate. The reality is that some providers, even in spite of rate or expenditure reductions, can make wholesale gains in their Net Per Diem by improving their productivity and case-mix. Simply put, improving case-mix to higher paying categories, even those impacted by rate cuts, can improve per diem revenue. While Medicare and Medicaid may provide uniformity in the form of rate reductions, providers and their patient mix are far from uniform. The proof is in the impact initially to per diem revenue and then what changes can be implemented from a revenue enhancement strategy that still, even with cuts, increases net per diem revenue.
- Begin to think of expenses as an investment in revenue or sales, not compartmentalized as a separate unrelated item. From this view, room may exist to make “investments” that drive more revenue and thus, in proportion, more margin. Commonly put, this is an ROI approach.
Building a revenue model is fundamentally about maximizing the elements of the business that are tied to sales and tied to payments. It is less about the concept of “more is better” and all about the concept that “better is better”. For example, and employing a bit of algebra, the equation in point one above affords me the opportunity to eliminate any of the four item variables and determine what “each” unknown variable should be. Typically, that means that I start with Fixed Costs as by their nature, they are known and fixed. I equate these to a per diem. From this point, I will add-in a margin and my current or anticipated Price expressed as my Net Per Diem Revenue (this number should approximate very closely, a cash value per diem, before expenses). For example, assuming a fixed cost per diem of $75.00, a net per diem revenue number of $400 and a desired margin (I prefer operating margin, removing non-cash expenses from the calculation) of 20% or $80.00, my variable expenses per diem can equal no more than $245.00.
Using the above example, if my current variable expenses are running higher than $245.00, I will look first, and directly, at ways that I can improve the net per diem revenue number, not at cutting the variable expenses to achieve my margin. Why? The simplest answer is that my variable expenses at a certain volume become somewhat fixed and cutting can become an indiscriminate process that is less tied to revenue and margin and more tied to “ease” that ultimately, erodes revenue and margin. Specifically, I’ll look at five elements that directly correlate to net revenue.
- Occupancy or Census – how productive are my variable expenses? In certain instances, improving net revenue involves right-sizing operations to the proper level. In this view, the focus is less about cutting variable expenses but more about making sure that my expense levels are tied to the actual volume that the business organically generates.
- Marketing/Sales – can I increase my volume, occupancy, census, etc via a more effective marketing/sales effort? In this case, I will likely make investments but I will match my investments against an expected return that is substantially greater than the outlay, accretive to my net revenue.
- Case-Mix Productivity/Payer Mix – do my current level of variable expenses support a higher acuity or a greater level of case-mix acuity? Productivity is not just about everyone being busy. It is also about the core competency of the staff and the ability of the organization to do more with the same level of staff. I recognize that incremental expenses in terms of supplies, drugs, etc. will likely increase but as long as the increase is less than the net revenue increase at the desired margin level (net revenue increase minus incremental expense increase = desired margin), it is worth the investment.
- Investment in Variable Expenses – can I improve my staff levels, hire additional people, to increase volume or case-mix acuity? At certain points, the best answer isn’t reducing variable expenses but actually increasing them if doing so improves my organization’s ability to handle more volume or a different, better paying volume. I have seen all too many organizations shy away from taking certain, better paying cases simply because the investment in different, more expensive staff seemed out of the question from a budgetary standpoint. In reality, if a market exists such that the investment can be productive and the volume sustained, the ROI calculation may in fact, support the investment. Again, as long as the net incremental increase in revenue is greater than the net incremental increase in variable expenses at a level equal to or greater than the desire margin, the investment is worth it.
- Investment in Fixed Costs – can I make a plant, property or equipment investment that improves my marketing, my positioning, or increases my productivity and volume/census? Fixed cost investments can sometimes be the most obvious and the easiest to justify. Their impact on the per diem side is typically nominal unless the investment was tied to debt and a major project. Likewise, the ROI is easier to calculate as it can be two-sided; improve revenue or improve efficiency by reducing other expenses or improving productivity.
While I can’t use current or former work examples with specifics without violating certain privacy expectations, the following are three simple “real world” cases or scenarios that I worked through with organizations that illustrate the principles above.
- For a home care/hospice organization that consistently missed referral opportunities and experienced fairly large case-mix and volume fluctuations, we simply added two staff positions that served as “intake coordinators” (not the actual titles). The primary responsibility of these positions was being in the hospitals, nursing homes, etc. where the referrals came from. Being proactive and working directly with discharge planners, physicians, etc. allowed the organization to develop a more stable pipeline of referrals, better case-mix, and frankly, better care and service. The return on this investment in short-order was a significantly greater revenue multiple.
- For an SNF that was traditionally in the mid-ninety percent occupied, we looked at the complement of payers and the allocation of rooms from a revenue perspective. The room mix was approximately two-third private and one-third semi-private. To stay full and meet occupancy targets, the SNF relied on poorer quality payers (Medicaid primarily and some hospice) to keep the semi-privates full. The solution was simple: Right size the room mix to all private which could be occupied by a higher paying mix while increasing slightly, acuity and re-organizing staff. The fixed-cost investment was fairly minimal as turning the semi-private rooms to privates involved initially, removing a bed, rearranging furniture, and centering the over-bed light into a single position. The building became more efficient, stayed full with a waiting list, and the overall revenue per room and the net revenue per diem jumped by 30%.
- For another SNF that was traditionally mid-ninety percent occupied, primarily with private pay and Medicare (virtually no Medicaid), the issue was all about low acuity and insufficient staff capability and infrastructure to support a stronger payer mix. In this instance, we worked to bring therapy in-house from a contract provider, increased RN staffing and decreased CMA and CNA staffing, expanded therapy services to six days, started taking admissions six days per week and increased acuity and thus, even with pending/current Medicare rate cuts, we were able to jump per diem from less than $400 per day to nearly $450 per day, increasing overall Medicare census and improving staff productivity. We also jumped Med B utilization which was non-existent and moved the overall revenue level current and pro forma (forward), up by nearly 20%. The additional expense in new staffing, etc. increase variable expenses per diem by 11%. The overall change was a positive increase in margin of just shy of 9% which when added to the current margin (cash margin) of 13%, pushed the level above 20%…a level this organization believed, for a non-profit, was unattainable without sacrificing “quality or service”. In the end, both improved along with the margin.
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.
OIG on Hospice: Restructure Hospice Payments for SNF Residents
This past week, the OIG released a report that represents a more definitive study of hospice payments and utilization trends under Medicare. The report is effectively a follow-up to recommendations made in MedPac’s annual report(s) to Congress. The report provides a review of OIG’s analysis of the growth of Medicare covered hospice patients over the period 2005 – 2009, specifically as such growth relates to the provision of Hospice services within SNFs. For the last three to four years, MedPac and to a lesser extent OIG, have commented about the rapid growth of hospice utilization under the Medicare benefit and the corollary relationship between this growth and SNFs, particularly as the same relates to for-profit hospice organizations. For more on MedPac’s report to Congress and their recommendations/analysis regarding Hospice, see my related post on this site at http://wp.me/ptUlY-8e .
Per OIG, Medicare spending for hospice services provided to SNF residents increased 69% between 2005 and 2009. In total dollars, the amount grew from $2.55 billion to $4.31 billion. During this period, the number of hospice beneficiaries residing in SNFs grew by 40%. Not surprising, during this same period the total number of hospices participating in Medicare also grew; the growth dominated by for-profit organizations. According to the OIG, hospices organized for-profit received higher levels of reimbursement on average (29%) compared to non-profit and governmental operated hospices.
Specifically related to hospice services provided to SNF residents, 8% or 263 hospices had two-thirds of their cases comprised of SNF residents. Of this group of 263, 72% were or are, for-profit. In total, 56% of all hospices participating in Medicare are for-profit. Comparing reimbursement or payments and utilization, the group that incurred two-thirds of their cases via SNFs was paid more per beneficiary ($3,182) and the average length-of-stay in “benefit” was three weeks longer than the median average length of stay across the industry.
| Table 1: Medicare Hospice Care from 2005 to 2009: Growth in Spending and in Number of Beneficiaries | |||||
| 2005 | 2009 | Percentage Increase | |||
| Spending on hospice care in nursing facilities | $2.55 billion | $4.31 billion | 69% | ||
| Spending on hospice care in all settings | $7.92 billion | $12.08 billion | 53% | ||
| Number of hospice beneficiaries in nursing facilities | 240,000 | 337,000 | 40% | ||
| Number of hospice beneficiaries in all settings | 871,000 | 1,085,000 | 25% | ||
| Source: OIG analysis of CMS data, 2010; and OIG,Medicare Hospice Care: A Comparison of Beneficiaries in Nursing Facilities and Beneficiaries in Other Settings, OEI-02-06-00220, December 2007. | |||||
As I have written before, the dominant profile of SNF residents enrolled in hospice includes Medicaid as the primary payer source, a primary diagnosis for SNF residency of Alzheimer’s disease or some other form of dementia or mental disorder, and the SNF in which they (the residents) reside has a payer mix that is at least 42% Medicaid. Additionally, the SNF resident has resided in the facility for a period of time (months) prior to enrollment within the hospice benefit. None of this information is new or should I say “news”. The SNF industry has quickly learned that transferring a certain liability for the cost of care of a Medicaid resident (drugs, certain supplies, some staffing) to a hospice that receives a routine hospice benefit under Medicare is financially advantageous, particularly since Medicaid continues to pay for the room and board costs of the SNF. In fact, the vast majority of state plans do not coordinate benefits with the Medicare Hospice benefit, leaving the facility to collect the full Medicaid rate for the resident’s stay while transferring an increment of care costs to the Hospice. Clearly, this niche is advantageous financially for the Hospice and the SNF. The Hospice, given the infrastructure of caregivers and other on-site SNF staff, can minimize its visits (substantially less in number than provided to a typical home-bound patient), effectively increasing its marginal profitability. The SNF transfers certain costs to the Hospice, now paid as part of the Hospice benefit while still receiving the total amount of the Medicaid payment. While I won’t say this makes Medicaid a profitable payer, it certainly increases the marginal revenue contribution from a group of now, hospice covered residents. As the OIG and MedPac have observed, the SNF resident hospice patient tends to be a patient with a terminal condition but arguably, one that is not necessarily imminent and/or in some cases, even clinically supported. The end or net result is a patient profile that stays longer (covered) under the Hospice benefit.
Concluding within their report, the OIG makes two recommendations that on their face, don’t vary much from recommendations made by MedPac. Their first recommendation is to monitor the activities of hospices with a high percentage of cases occurring in SNFs. Their second recommendation is for CMS to alter or lessen, the level of reimbursement paid to a hospice for care provided to an SNF resident. The report contains no recommendation of “how much” less. MedPac in comparison has recommended that the Hospice benefit be scaled for SNF residents – higher on admission, less in the middle term of the stay, and higher again close or precedent to death. For MedPac, this method more closely reflects the resources used or costs incurred by a hospice during a patient’s length of stay.
As I have indicated, this information is not new nor are the concluding recommendations. The Medicare Hospice benefit is dated and not reflective of how terminal care occurs and/or should occur. The system is ripe for fraud as CMS has not taken its time to scrutinize claims or the validity thereof, particularly for diagnoses that traditionally do not correlate to quick or timely death. All too many for-profit, non-hospital aligned hospices have realized that sans the SNF resident market, the actual hospice market is fairly limited and not sufficiently deep to support the current number of agencies. In other words, a hospice organized for-profit would likely have a difficult time sustaining its margins and building a sufficient base of business without SNF contracts. Given this reality, and the reality that SNFs with large Medicaid payer percentages and long-term stays among its residents also benefit via a favorable hospice relationship, the market reality becomes the same as concluded by the OIG. Changing this paradigm won’t occur until three core elements of reform pertaining to the Medicare Hospice benefit occur. First, refined clarity of diagnosis appropriateness and stronger requirements on re-certification for additional benefit periods. There exists sufficient clinical information to create clarity, even for end-stage Alzheimer’s/Dementia diagnoses. Second, payment changes that take into account coordinated or bundled payments for Medicaid SNF and private-pay residents. Neither the SNF or the Hospice should benefit disproportionately when a patient is on hospice. Third, requirements of disclosure for all hospice/SNF relationships and contracts and requirements that no one hospice may provide exclusive services to an SNF. Too many of the most egregious situations I have encountered occur when one hospice has entered into multiple SNF contracts, dominating the market and creating blatant ”sweetheart” relationships. Additionally, CMS must take proactive measures to perform timely claim reviews of SNF residents receiving hospice services – for all diagnoses – particularly involving disproportionate case-mix hospice providers (hospices with large number of SNF residents enrolled with certain qualifying diagnoses such as dementia, failure to thrive, and Alzheimer’s).
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.
Hospices Looking for Census Improvements: Add Some Innovations
Most hospices I talk with are finding census gains difficult these days. As I’ve written before, a number of factors are conspiring at the moment to keep census somewhat depressed and referrals tough to come by.
- With a struggling economy, all providers are looking for paying patient days. Referrals that should (or would) routinely go to hospice aren’t as readily available as upstream referral sources (hospitals, skilled facilities, etc.) don’t have the depth of other paying patient pools. In fact, all downstream providers are seeing compressed referrals. Simply put: When the queue of paying patients is smaller due to a fall-off of privately insured patients (due primarily to high unemployment), any paying patient including those that would be or should be hospice referred is better than a vacant bed. There simply are not enough patients with good payment sources for all of the supply of providers today.
- Hospice is a mature market or one that is stable and growing only very modestly. Despite the fact that it is cost-effective, arguably more appropriate and better for a terminal or near-terminal patient, it hasn’t permeated the traditional patient, familial and medical community psyche to a sufficient depth to create additional demand. Culturally, the medical community and patients still prefer to pursue curative options at virtually every step of the way as opposed to accepting death as a natural course of occurence.
- The financial incentives favor the pursuit of more expensive care as opposed to hospice. Payment in our system is highest and most fluid for acute, episodic, technologically based care and treatment. A simple economic axiom applies: What gets rewarded gets done (or, follow the money).
Taking the above into account, one would tend to think that generating additional referrals is an improbable task. While I won’t propose that doing so is easy, there are some options in terms of “innovation” that make sense. By innovation I mean programmatic changes or new programs that tap non-traditional markets or fractional markets. Being honest, simply marketing more or trying desperately to educate a few more patients and/or a few more physicians about the benefits of hospice care won’t create many additional referrals (again, see the top bullets for “why”).
Here are some favorites that I have seen tested in other settings, some within hospice programs, and/or other countries. Each is innovative and worthy of exploration by a hospice organization that is looking to create some novel niches, incremental referrals and brand differentiation.
- Day Hospice: A variation on adult-day care, this program provides a respite style of program but for caregivers to take a few hour break. Transportation, meals, socialization, etc. plus spiritual and other counseling typically round-out the services and where “cares” are involved, staff assist the patient as required. A hospice could start such a program either via a partnership with an existing adult day care provider, SNF, Assisted Living, Hospital or on its own in a suitable location.
- Disease Specific Programs: Develop end-of-life algorithms and care management programs for specific diseases such as ALS, MS, Parkinson’s, COPD, etc. Enlist physician specialists to provide review and consultation in the program development phase and even in a supporting medical director capacity. Consult with the local chapters of groups/associations that represent each disease (Parkinson’s Association, MS, etc.). The result of this approach is a three-fold win for the hospice. First, a segregated category of potential new patients. Second, a branding opportunity and co-marketing strategy through the physician specialists and the local disease representatives. Third, a focused opportunity to educate patients and physicians on when, why and how to make a hospice referral – these folks become a “warm” group.
- Embrace Alternative Therapies: Some organizations do this better than others but few do the compendium and certainly not as well as organizations in foreign countries (the Dutch are the best). Here’s a few of the better concepts that I have run across.
- Medicinal Marijuana: Now legal in 14 states and DC, medical marijuana is viewed as a wonder drug for symptom management, especially by cancer patients and patients with intolerable spasms (MS, Parkinson’s, etc.). Embracing this option where legal and perhaps, even becoming a distributor creates a “cutting-edge” brand and a marketing advantage.
- Acupuncture: For use either as a stand-alone symptom management aid or for adjunct therapy to deal with pain, nausea, spasms, headaches, etc. Bringing on staff, a certified acupuncturist is again, a cutting-edge option and one that is marketable.
- Mood Rooms: For inpatient programs, rooms developed with particular design elements have proven to be successful in easing patient’s symptoms and creating a more relaxed and tranquil environment. Hospitals have started to embrace this level of design and there is no reason that hospices don’t do the same. Everything from lighting to color to sound systems and views are designed to improve tranquility, comfort, and patient “mood”.
- Others: Massage therapy, music therapy, hydrotherapy, meditation, etc., are all fair game and in one form of another, have legitimate bases for use in a hospice setting.
- Increase the Technical Capabilities: Being more capable in terms of taking certain types of complex patients is always a cost-benefit issue although, done correctly, the return is still positive “financially”. Patients that often don’t benefit from hospice (due to cost issues) include ventilator patients, patients that require palliative radiation or palliative chemo-therapy, and patients that require specialty DME. In reality, the scope of each under a terminal diagnosis is limited and with solid advanced planning. good partnerships with other providers, and effective cost management, it is possible to tackle these patients and still achieve a modest margin. Don’t be automatically afraid or unwilling to accept patients in unusual circumstances and actually, increase your technical competence in dealing with these patients. They are an untapped market in many regards.
- Private Duty: For a hospice that is part of a home-care organization and/or can partner with such an entity, private duty hospice can be very profitable and very successful, albeit on a limited scale and honestly, only in certain market areas. There remains a class of people that are terminally ill, hospice eligible and in-need (and desirous) of extended caregiver or private-duty support at home. Targeting this market is as easy as developing good relationships with trust company officers, estate planning attorneys, and other trusted counselors to the “well-off”. One word of caution persists, however. This group is picky so to sustain the business, a hospice must be very customer service focused.
- Be Palliative, Not Just Hospice: For those hospices affiliated with home care agencies or, can build a relationship with a non-competing agency, offering expertise to patients that require symptom management and palliative services only makes sense, even if the same patients aren’t yet hospice appropriate or won’t at this point, consciously elect a hospice benefit. Expertise in symptom management and the palliation of chronic diseases is the strength (or should be) of all hospices and leveraging this strength to “marginal” hospice patients builds a bridge for the hopefully, inevitable referral. If nothing else, this business is incremental revenue.
As I indicated, the above is just a sample of my favorites from sources where successes have occurred. I encourage readers to add others, different ideas or to elaborate on perhaps, a twist or two to the above. Feel free to post your comments and experiences so that I (and you) can share our “collective” knowledge.
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