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!
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.
Compliance, the Courts and a Risk Reminder
In previous posts I’ve written about the need for providers in all industry sectors to fully understand the compliance and legal risks that are inherent to the appropriate industry sector, as well as to health care today in general. As someone who has been immersed in health care operations and health policy for the past quarter century, I can honestly say that I have not seen a period more perilous for providers and quite frankly, I perceive that it will remain risky and perhaps escalate in the near future. Consider the following;
- There is renewed vigor and funding in Washington to root out perceived waste and fraud, principally focused on Medicare. Every sector that I follow is a target for the OIG and/or Recovery Audit activity. In spite of GAO findings that Recovery Audits have fallen short of achieving their targeted goal of reducing $231 million in over-payments or improper payments, the action from CMS is to “improve” the system or in other words, increase the amount of personnel and resources devoted to this task. In July, the Department of Justice announced the results of a multistate Medicare fraud investigation implicating 90 individuals, tied to a total of $251 million in Medicare payments. The investigation involved doctors, nurses, therapy companies and others. The investigation was part of the new Health Care Fraud Prevention and Enforcement Action Team.
- According to a recent report from the Congressional Research Service the number of new agencies, commissions and boards created under the recently passed Health Care Reform law is “unknowable”. The Center for Health Transformation headed by former speaker Newt Gingrich estimates that 159 new agencies, offices and programs were created under the PPACA and the Joint Economic Committee claims 47 new bureaucratic entities were created. What this all means in brief is “more regulation”, not less and in most cases, regulations that haven’t even been written yet. Most troubling is that the PPACA seemingly creates bundles upon bundles of additional regulation but is virtually moot on any current regulatory relief or reform. Two interesting charts regarding the bureaucracies created under the PPACA are available at http://www.healthtransformation.net/
- Existing regulatory burdens are already steep and increasing, regardless of the PPACA. Take for example, the annual CMS rule making process regarding rates and payments. Wholesale changes in Medicare assessment requirements and payments are forthcoming this fall for the SNF industry. The home health industry has also seen its share of Medicare reimbursement changes and required assessment and documentation changes under Medicare imposed by CMS without any legislative activity. New HIPAA requirements regarding electronic communications came into play this year, new self-disclosure rules under Stark and the False Claims Act, as well as dozens of other agency regulations.
- Non-health care specific laws also change constantly and impact providers. Whether these laws are labor related, tax related, state laws, local laws, commerce laws, building codes, etc., all are in some way related to the general business conducted by providers.
- The court system (or more appropriately, the plaintiff’s bar) has become more actively focused on the provider side of the health care industry. In just the first seven months of this year, two significant class-action suits have laid new fertile ground that providers should both fear and understand. The first occurred in California where a jury awarded plaintiffs $613 million in statutory damages and $58 million in restitutionary damages (punitive damages not yet determined) against Skilled Healthcare Group, a proprietary nursing home chain. The award was predicated on a 4 year old complaint that the organization failed to staff its facilities to meet the State of California’s minimum staffing requirement of 3.2 nursing hours per patient day at 22 of its California facilities. The ”rub” in this case for providers is that no harm or actual damage theory was applied to the “class of patients” affected or in other words, the residents of the 22 facilities were never effectively damaged in total yet, the jury awarded the maximum damages allowed under California law. The result is that, even before punitive damages are assessed, the damage amount is larger than the value of the organization or more simply, if the damage amounts remain unaltered, Skilled Healthcare is bankrupt. A final piece of irony? The regulatory system that oversees nursing homes in the state took no specific action against Skilled Healthcare to prevent the “understaffing”. The second case comes from the home health industry where as of today, three class action suits have been filed against Amedysis, the industry’s largest proprietary home health company. The suits were born as a result of a Wall Street Journal article and a subsequent Senate Finance Committee inquiry into the Medicare billing practices of large, for-profit home health companies. The fundamental allegation is that Amedysis, along with other major for-profit companies, used the Medicare rules in-place to essentially increase their revenues. The fundamental issue pertains to therapy visits and a provision under Medicare two plus years ago that provided for incentive payments to be made to agencies based on the number of therapy visits (more visits, higher payments). The basis of the suit against Amedysis (clearly a target because of its size, its focus on Medicare patients and the Wall Street Journal article) is that the company overstated its revenues and once investigated or discovered, the same activity now disclosed caused shareholders to lose value as a result of falling stock prices. In a unique twist, the suits use Sarbanes-Oxley, a securities related law that requires senior corporate officers to avoid activity that would result in unethical conduct or malfeasance, harming shareholders. As in the Skilled Healthcare case, the irony here is thick. First, there is no allegation that patients were harmed or that care was rendered inappropriately. Second, the activity of Amedysis was not under investigation by CMS or the OIG concurrent to or before the filing of the suits. In other words, the government’s own enforcement activity was moot on this issue and there is considerable question as to whether what Amedysis did was even improper given the rules that were in effect at the time. Third, virtually all providers practice Medicare maximization or that time-honored practice of using Medicare’s own rules concerning reimbursements to maximize the amount of reimbursement available to them. If the Amedysis case is the standard, virtually every Medicare provider would in fact, be guilty of similar conduct dependent on the industry and the applicable reimbursement rules.
Taking the above into account, and it is truly an overview only, providers need to recognize the gravitas of the environment and the totality of legal and compliance risks that are present and mounting. Recognition and identification of the compliance requirements per applicable industry sector and the legal risks associated with the business and operations encompassed is where providers can begin to respond, not react, and develop the tools, processes, plans and ultimately culture, that mitigates risk and creates effectively compliant operations (“effectively” because totally compliant is improbable if not impossible). Below are some time-honored tips and approaches for creating an organizational environment that achieves high-levels of compliance and mitigates legal risks (I ran a very large, multi-site, complex organization for twenty plus years and never had a lawsuit).
- Within each industry sector there are tons of regulations that in theory, require daily compliance. Likewise, within each industry sector, there are compliance themes and “key” compliance requirements. Focus on the key compliance requirements as activities, tools, and systems that drive compliance in these areas mitigates 90 plus percent of the compliance risk and in all cases, the risk that is expensive and serious. I like to think about the core intent of compliance and create understanding and organizational capacity and systems around these intents. For example, in the areas of patient care, outcomes are the baseline of regulations. Regulations focus on documentation of outcomes, prevention of negative outcomes, and actual standards for outcomes. Systems which assure a close match with the regulatory expectations and are part of an organizational QI process (constantly) achieve the regulatory intent and create a “halo” of compliance. The same can be said for billing practices under Medicare and Medicaid, privacy requirements under HIPAA, etc. Polices are insufficient to achieve the requisite level of compliance required and quite often, do nothing more if not integrated within organizational practices and systems, than create more compliance risk.
- Legal risks are harder to quantify but in some cases, easier to generally address. Take the two legal cases I illustrated above. In the first case, if the staffing requirement in a state is 3.2 hours per patient day, any provider flirting with these levels consistently is asking for trouble – avoid the risk entirely. In the second case, as I pointed out, Medicare maximization is a time-honored tradition for providers. What is not time-honored or allowable, is any activity that suggests that the provider is routinely and consistently, seeking to “game” the system. I see too many therapy companies and SNF providers that merely “up-code” all residents into Ultra High therapy categories as a means of achieving the highest Medicare reimbursement per day. I see too many providers stress the justifications for additional days, manipulate the rules to extract additional benefit periods, and create care requirements and documentation that is not supported by the actual needs or conditions of the patient. These activities, when pervasive and constant, create a legal risk that is tough to impossible to defend. A better approach is to develop strategic and operational plans that maximize revenue the right way. The right way is by achieving high-levels of organizational capability in delivering the right care to the right patient at the most efficient cost levels possible. It also means developing marketing plans and programs that attract the ideal patient mix that produces the highest possible revenue profile for the organization. With respect to employment, avoiding significant legal risks means dealing with employees within the constructs of employment law. This doesn’t mean don’t fire or don’t discipline. It means fire and discipline effectively and only for consistent, documented and legally permissible activity. A core or key requirement is to effectively train and only employ, capable and competent management that know and understand the applicable labor laws and are capable of using effective hiring and supervision methods that produce organizational results without violating company policy or the law.
- Organizationally, the primary methodology to achieving a high level of compliance and to mitigate legal risks involves creating an organizational culture that focuses on compliant activity and solid risk management principles. While not exhaustive, here are some key elements that are part of the culture.
- Internal and external education and audits that identify risks and provide solutions. Developing organizational thought-leaders and subject matter experts provides key resources that can be deployed to solve problems, identify risks, and provide education.
- Encourage reporting and self-disclosure and reward the activity. Management must be open to hearing “what is not right” and providing reinforcement for this activity.
- Integrate compliance and risk management as part of strategic planning and allocate budgetary resources adequate to address the risks. While risk prevention always appears to be money with another use, it is far cheaper to prevent compliance and legal risks than it is to bear the costs after an event has occurred.
- Reward the concept and ideology of “doing the right things” first as opposed to those things which may be short-term, expedient or more profitable.
- Benchmark and test key indicators constantly. For example, if your Medicare census and revenue per day is higher than industry norms and/or market norms, make sure that such results are tied directly to organizational performance and activity, not to billing creativity.
- Provide ownership to compliance activities and outcomes to all staff, not just management. Engage the entirety of the workforce.
- Keep up with pending or new regulatory activity and legal activity and get “ahead” of the curve. Organizations that only respond to laws already passed and cases already decided tend to get caught trying to “react” rather than remain vigilant and prepared. Rarely do new compliance requirements and legal requirements come instantaneously on the radar screen – they have been there for a while. Providers that see and understand the trends can use the virtue of time to integrate new systems into existing systems, teach new knowledge requirements, and build new organizational capacity to manage effectively, the new requirements.
Health Reform Implications for Institutional Providers
My last post covered CMS’ proposed rule affecting LTAcHs in fiscal year 2011 (October 1, 2010). In this post I noted that CMS’ proposed rule included a disclaimer that any impacts related to the PPACA (health reform) were not included and as a result, CMS would from time to time, release updates providing additional guidance. Late yesterday, the government released additional technical guidance on the provisions contained in the PPACA that impact institutional providers, effective April 1, 2010. Below is a summary of the information and respective implications.
Note: The following provisions are found in sections 3401 and 3137 of the Patient Protection and Affordable Care Act (PPACA). CMS is at work to implement these provisions and the expectation is that payment modifications will occur in late April/early May.
- Inpatient Acute Care Hospitals: A .25% reduction in the PPS (inpatient) market basket for FY 2010 applied to discharges on or after April 1, 2010. The reduction will affect PPS rates for discharges occurring between April 1 and up to September 30, 2010.
- Long Term Acute Hospitals: A .25% reduction to the hospital’s market basket for FY 2010 applied to discharges on or after April 1, 2010. The reduction will affect LTAcH rates for discharges occurring between April 1 and up to September 30, 2010.
- Inpatient Rehab Facilities: A .25% reduction to the Inpatient Rehab Facility market basket for FY 2010 applied to discharges on or after April 1,, 2010. The reduction will also result in changes to the standard payment conversion factor, payment rates, and the outlier threshold amount.
- Extension of Section 508 Hospital Reclassifications: Extends section 508 and special exception hospital reclassifications from October 1, 2009 to September 30, 2010. Effective April 1, 2010 section 508 and individual special exception wage data is removed from the calculation of the reclassified wage index if doing so raises the reclassified wage index. Any hospitals affected by this provision will be assigned an individual specific wage index effective April 1, 2010. If the hospital’s section 508 or individual specific wage index for the period October 1, 2009 to September 30, 2010 is lower than for the period after April 1, 2010 through September 30, 2010, the hospital will receive an additional amount to make up for the difference. This provision applies for inpatient and outpatient payments.
Stark, Health Care Reform and Updated Compliance Requirements
When the Patient Protection and Affordable Care Act (PPACA) became law, a provision within adds a new dimension to the rules on self-referral and refund requirements of overpayment (Medicare) contained within the Stark Law. Specifically, the PPACA requires the Secretary of HHS to develop a new self-disclosure protocol whereby health care providers can disclose known (or found) violations of the Stark Law. The PPACA also gives new authority to HHS to settle claims on a “compromise” basis, creating more reasonable terms and conditions when violations occur and are disclosed.
Stark was created to prohibit a physician from referring patients to entities with which the physician (or physician’s family members) had a financial relationship. Broadly, Stark sought to control business relationships between referring physicians and other providers furnishing services (inpatient and outpatient hospitals, etc.) when such relationships involved financial gains applicable to the referral for the physician or, when compensation associated with such a relationship for the physician was beyond the normal and customary payment the physician would receive within his/her primary practice. Over time, Stark’s realm has expanded to include the OIG’s interpretation of applicability with the Anti-Kickback Act (prohibits payments made in exchange for referrals or recommending the purchase of supplies or services reimburseable under a government health program) where provisions exist in strikingly similar context to the language and intents found in Stark. The OIG at least realized the problems facing providers and allowed for (actually encouraged) self-disclosure under its Self Disclosure Protocol. While disclosure to the OIG did not relieve providers of the burden of Medicare refunds, it did provide for a methodology to avoid the imposition of Civil Money Penalties and exclusion from continued participation in the Medicare program.
Adding an additional complication to the provisions for disclosure under Stark is the interpretation on the part of CMS of its obligation to collect 100% of all Medicare payments made in conjunction with the disclosed violation. According to CMS, it is limited in its authority to compromise the government’s right to full recovery of any and all payments made in conjunction with a Stark violation. Prior to the passage of the PPACA, CMS claimed that the Federal Claims Collection Act provided that an executive agency may only compromise collection of claims that do not exceed $100,000. Claims in excess of $100,000 could only be compromised by the Justice Department. Inserting the provisions found in the False Claims Act and the matter of recovery becomes even more complex. Under interpretations of the False Claims Act, the government and certain courts, state that it is a violation of the Act for a provider not to disclose Medicare overpayments. Briefly, the logic is as follows. It is a violation of the act for any person who “knowingly and improperly avoids or decreases an obligation to pay or transmit money to the Government”. The penalty for such a violation is triple damages. In effect, a violation of Stark creates a potential violation of the False Claims Act and as such, a de facto requirement that any Medicare payments be refunded. A False Claims Act violation, if determined as a result of a Stark disclosure, carries the imposition of signficant damages due to the treble damages provision. The risk therefore, to a provider that reports a Stark violation, is the determination that a violation of the False Claims Act also occurred bringing forth not only the obligation to reimburse the Government for all related Medicare payments but the imposition of the higher damages provided for under the False Claims Act; totals which could be extreme. Medicare participating providers have always faced the risk that any illegal act involving self-referral or unwarranted excess compensation or benefits could trigger a circumstance where the activity nullifies the right of the provider to receive Medicare reimbursement (Medicare is legally bound to not pay for services provided when the provision of such service is connected to a violation or is a violation, of federal law).
With the passage of the PPACA, providers receive some additional potential relief while remaining subject to many of the same risks and obligations associated with reporting a Stark violation (as discussed above). For example, the PPACA requires the Secretary along with the OIG, to establish a new self-disclosure protocol. The purpose of this new protocol is to assist providers and suppliers with disclosure of an actual or potential Stark violation. Establishment of the protocol is to occur within six months of passage of the PPACA (late-September 2010) and identify a specific official or office where disclosures are directed. The PPACA also provides the Secretary with an exception to the False Claims Collection Act, allowing the Secretary to take into account certain factors such as the nature of the illegal practice, the duration of the practice, the timeliness of disclosure, etc., when determining the government’s claim. Providers should note however that the PPACA also requires potential or known disclosures to occur within sixty (60) days of discovery of the violation. Failure to disclose within 60 days correlates to a False Claims Act violation and as such, the remedies available under the False Claim Act are triggered.
In application, providers today should consider the following.
- The predominant cause for a violation is sloppy administration of contractual relationships between a providers and physicians. Examples include discounted office space, leases for space that are not at fair-market value, leases that are not signed by the parties, provisions for physicians to use free staff resources, overpayments for services under Medical Director agreements, Medical Director agreements that aren’t signed, etc. Each of these examples is a potential Stark violation requiring disclosure.
- In light of the point above and the requirements in the PPACA for disclosure of actual or potential violations within 60 days, providers should be fully engaged in routine QA activities to identify, correct and disclose any violations. Ideally, implementation of solid education, preventative QA activity, and effective use of counsel is already in-place, mitigating the occurence of a violation or at the worst, mitigating the extent of a violation.
- Providers should not wait for the completion of the new disclosure protocol as doing so creates undue peril that a violation extends beyond the 60 day disclosure requirement in the PPACA and results in a False Claims Act violation. Providers can and should continue to disclose actual or potential violations to CMS even though it is likely that CMS will not resolve any disclosures until implementation of the Secretary’s new protocol. The best case is that CMS will allow providers to update disclosures made prior to the implementation of the protocol and avail themselves of the new claims resolution system created by CMS and the OIG (an updated disclosure providing more detail sufficient to reduce the liability due to the government).
Hospital Re-Admissions: Update to an Earlier Post
Last week I wrote about hospitals using “observation stays” as a means of dealing with the potential risk of reimbursement penalties imposed by CMS for certain re-admissions. The focus of my post was on how the trend of hospitals using observation stays to avoid CMS scrutiny (and penalties) was impacting Medicare admissions at SNFs. I concluded my post with a few strategies that SNFs could use to deal with this growing phenomenon.
Today while reviewing my always copious amounts of industry e-mails, I ran across a story about a non-profit coalition in Alabama called AQAF that is working on addressing the issue of hospital readmissions. This group comprised of home health providers, hospitals and SNFs is one of 14 groups contracted with CMS in a pilot program known as “care transitions”. The objective of the groups is to develop strategies and processes to reduce what CMS considers to be, avoidable hospital re-admissions.
Knowing many of you read (and some commented) on my post regarding observation stays, I thought you may enjoy the story on the Alabama project. The link to the story is here: http://blog.al.com/living-news/2010/02/project_aims_to_reduce_hospita.html
Hospital Observation Stays Impacting Medicare SNF Admissions
An issue that I am fielding a fair number of inquiries about lately involves Medicare patients spending more than three days in a hospital, subsequently ‘discharged’ to a SNF and the SNF learning later that the patient was never technically admitted to the hospital. Mostly, the inquiries I am getting are along the line of “what’s happening”, is this practice legal, what’s going on with hospitals, etc. Unfortunately, based on the number of inquiries I am getting and from all across the country, this practice or recent phenomenon must be fairly widespread.
In a nutshell here is what is technically happening. I’ll explain why in the next paragraph. Hospitals are admitting certain Medicare patients, typically not all or even close to a large number for an “observation” stay. An observation stay is not classified as an admission to a hospital bed or an inpatient unit as the patient is generally in a separate area of the hospital, typically adjacent or proximal to the Emergency Department or Outpatient area. Even though the customary and CMS encouraged length of stay for observation purposes is 48 hours or less, hospitals are apparently pushing the envelope on the length of stays. There is no current provision under Medicare that limits observation stay length. I have recently heard of observation stays extending up to seven or eight days. Since the patient never was admitted to the hospital via a Medicare definition, the three-day qualifying inpatient stay for Medicare SNF benefit purposes has not been met. The SNFs that I have talked with recently are justifiably confused, upset, and often, stuck in a quandary about how to explain to the patient and to the family, why Medicare will not cover their SNF stay (or a portion thereof).
When this observation stay practice appears to occur the most is when the patient is already an SNF patient. It appears to occur less frequently when the patient is originally from an Assisted Living or some other care domicile. I have started to hear of cases where the patient was recently hospitalized, discharged to home health and now will likely require a return to home health or to an SNF environment. I have not yet heard of many cases or instances where the patient originally resided in the “community” (his/her home) and subsequently, incurred a prolonged observation stay prior to being discharged to an SNF.
The cause for the recent increase in the prevalence of observation stays in hospitals for Medicare patients is CMS and the HHS OIG, aided in part by last year’s discussions/deliberations on health care reform. Essentially, the issue under Medicare is two-fold. The first issue is the focus of CMS and HHS on reducing what are called “preventable or unplanned readmissions”. According to CMS, unplanned (and thus, primarily preventable) readmissions costs Medicare over $17 billion annually. CMS in 2004, did away with allowing for a second DRG payment to be made to a hospital for readmissions occurring within a twenty-four hour period. Today, the focus is predominantly on readmissions occurring within the 30 day window, post-hospital discharge. To combat this problem, CMS has begun to publish readmission data for certain hospitals for patients admitted for heart-attacks, heart failure and pneumonia. In 2009, hospitals were required to begin reporting 30 day readmission data for these diagnoses. Now beginning in 2010, CMS may reduce, modify or deny payment for a readmission occurring within 30 days of discharge for these diagnoses. For a typical 250 bed hospital, according to industry data, the potential readmission revenue loss is $1.5 million for just these three diagnoses.
The second part of this two-fold issue concerns the HHS OIG and the wide ranging ability of this organization, along with CMS, to impute an issue of Medicare fraud to a hospital that bills for multiple readmissions, regardless of original diagnosis and the readmit diagnosis. In an allegation of fraud circumstance, the basis would be that the hospital billed Medicare for care that it should have provided adequately and completely enough to avoid the need for a readmission. Essentially, the issue frames-out that it is illegal and fraudulent to bill Medicare for unnecessary and unwarranted care. Hospitals, knowing full well that the OIG and CMS are looking very closely at thirty-day readmissions and hospital to hospital patterns, are wary of readmitting Medicare patients regardless of the diagnoses (although the three identified by CMS are most perilous) for fear that they (the hospital) will be targeted by CMS and the OIG for Medicare billing review and potential recovery activity; or worse, fraud allegations and reviews.
Boiling the above down to every day life, what SNFs are seeing and experiencing is hospitals using observation stays as a means of circumventing the readmission penalties and peril that are being imposed by CMS and the OIG of HHS. For the time being and perhaps for a bit longer until enough heat is placed on CMS and other industry care-coordination measures are fully integrated, hospitals will monitor their readmissions closely, the causes, and where they deem applicable, use observation stays to avoid getting caught in the readmission “penalty box”. Don’t look for the heat from CMS on this issue to remediate any time soon as the potential savings to Medicare from curbing readmissions that occur within 30 days of discharge is substantial.
My advice to SNFs that are encountering this issue more than very infrequently is as follows.
- The SNF can assist the patient if it desires, to appeal the classification of the stay to the Medicare intermediary. The use of this approach however, needs to be well though out by an SNF as appeals are not usually decided timely and during the interim until a decision is rendered, the issue of payment to the SNF is still in question.
- The SNF should develop very pro-active working arrangements and referral arrangements with its hospital partners. This means having SNF admission staff go directly to the hospital to work with hospital discharge staff and to know in advance, whether the stay is observation or an admission. This will assure that the SNF doesn’t get caught unaware of Medicare coverage issues come the time when the patient is admitted to the SNF.
- The bigger and best strategy is for the SNF to develop a very solid partnership with its primary referral hospitals and work with the hospital and the medical staff at the hospital and the SNF to develop integrated care protocols and discharge plans to help both the SNF and the hospital, combat the readmission problem. To be frank, hospitals are a major part of this problem and their traditional unwillingness to recognize any ongoing responsibility for care outcomes post-discharge is the major impetus behind CMS’ aggression on readmission frequency. This said however, SNFs can and need to do a better job of upping their care competency as well and to reduce the reasons that their patients are being sent back to hospitals within the thirty day window. If both parties committed to truly developing a concerted game plan with each taking responsibility for their own factors/issues that contribute to this problem, observation stays would become far less prevalent and certainly, far shorter in length.
Non-Profit Health Care Outlook for 2010
Moody’s Investor Service released their annual sector outlook today for not-for-profit health care organizations, stating that they (Moody’s) continue to maintain a “negative” outlook on the industry. Important to note in this report is that the focus is principally on hospitals and since the report is produced by Moody’s, its primary perspective is on credit and investment. That said, even with the predominant focus being on hospitals, there is quite a bit of take-away information for non-profit health care providers in general, including those in the post-acute sectors.
The emphasis Moody’s places on their negative or dim outlook is economic related primarily and public policy weighted secondarily. They point to the continued weak economy as the cause for slack patient volumes and concerns regarding provider debt levels, particularly those providers that may be facing an expiring Letter of Credit (LOC) situation over the next twelve to eighteen months. With regard to public policy issues, Moody’s points to budget insufficiency issues in Medicare and Medicaid foreshadowing tighter or declining reimbursements and uncertainty of the outcome of health reform although, as they indicate, the legislation today, is effectively in limbo.
According to Moody’s, the weaknesses inherent for non-profits are their reliance on governmental sources for payment more so than proprietary operators and their need to be cautious of their tax-exempt status in terms of a political culture requiring more and more justification of expenditures made on behalf of the uninsured or under-insured population. I would also add that other forces such as unions are today, targeting non-profits more so than ever and the result is higher labor costs and higher legal defense costs (to abate organizing campaigns). Similarly, the plaintiff’s bar is far more active today and for non-profits, their fair-haired status once given due to religious affiliations primarily, is all but gone. It is not uncommon any longer for attorneys to seek damages against large or for that matter, even small to medium-sized non-profit providers.
The report cites the following reasons as the primary factors contributing to Moody’s negative outlook.
- Sluggish patient volumes due to high levels of unemployment combined with the loss of health insurance.
- Pressure on revenue streams, particularly Medicare and Medicaid combined with intensified recovery activity (RACs and Probes).
- Greater difficulty in cutting costs due to the cost-cutting measures already undertaken in 2009 and late 2008. There is little room remaining for significant expense reductions.
- Increasing bad-debt exposure.
- Debt structure and liquidity risks driven by high bank exposure, potentially expiring LOCs and less than a full recovery of investment losses.
- Greater or increasing capital needs after a year or more of deferred capital spending.
- Expiration of the federal stimulus program at year-end 2010.
In addition to the above negatives, Moody’s cites three positive factors.
- For some providers, strong management capability that allows the provider to respond quickly to negative operating changes and positive improvements as they occur.
- Partial recovery of investment losses adding back some liquidity.
- Likely increase in merger and acquisition activity which Moody’s believes is good for the market.
As I reviewed the report, my conclusions are as follows. These conclusions I believe, are universal for all non-profit health care providers.
- The pace of economic recovery will push forward or hold back, the recovery of non-profit health care provider’s fortunes. A quickening pace including job growth will help providers recover quicker although a lag in terms of patient volume increases will clearly be present. A slow, mixed recovery with equally elongated new job creation will hurt providers and potentially, lead to insolvencies and failures. The key to remaining solvent in the event of a slow recovery is debt structure, depth of product/service mix and generally low non-wage related labor costs (turnover, legal issues, compliance problems, supplemental staffing costs, etc.).
- Access to capital at reasonable terms will remain an issue for the sector throughout the bulk of 2010. While I see some softening, the present stance the Feds are taking on taxing the banking industry could very quickly, chill any warmth that has softened the credit markets. Within the next twelve to eighteen months, a very large ($19 billion) amount of Letters of Credit will come due. Providers with struggling balance sheets or under-performing newer projects may struggle to meet new conditions and terms to enhance their credit. Without question, debt costs and the related costs associated with debt issuance will continue to be higher than any period over the last five plus years. The significant question remaining about access to capital is what role the Feds will play and will they continue to bolster lending activities via HUD to help stabilize some of the credit/lending markets.
- Of particular concern to me and in concert with the point immediately above is the growth in deferred capital investing that is occurring, particularly in the SNF industry. This industry is already dominated by aging physical plants and as providers have been forced to defer capital investment due to the economy and due to the reimbursement climate, the industry continues to shed asset wealth via depreciation and become more functionally obsolete. With growing regulatory pressure for SNFs in terms of environmental standards and new mandates on fire suppression systems, access to reasonable cost capital will be imperative for this industry to modernize and recapture at least a portion of its physical plant asset wealth.
- With health reform on the Washington back-burner for the moment, I believe providers will tend to breath a collective sigh of relief – prematurely. While I believe that a reform conflagration is not imminent, the fiscal woes of Medicare and Medicaid trudge on and as a result, the reimbursement outlook from my perspective, remains rather bleak. There will be continued financial pressure at the federal and state levels to reduce or reign in the trajectory of entitlement spending and as a result, I believe providers need to be vigilant about the prospects of flat to declining reimbursement rates. Of particular concern to providers should be Medicaid which today, is heavily bolstered by federal stimulus dollars set to evaporate in December. With state budgets remaining in the “tank” due to the slow recovering economy, states are going to be looking for Medicaid savings with a vengeance unless the feds continue additional matching provisions or add new dollars.
- In the merger and acquisition area I’m less of a believer that this market will heat-up than Moody’s is. I think that the time is certainly ripe for some increase in activity but I believe that the credit markets will have more to say about the volume than the desire of providers to acquire or be acquired. I do believe however that this is an opportune time for non-profits to look at merger and affiliation arrangements as opportunities are plentiful, the benefits of consolidating balance-sheets are obvious, synergies can be maximized across and within markets, and the costs of mergers/affiliations are far less and can be completed with minimal to no need for new debt.
Any readers that would like a PDF copy of the Moody’s report can go to the Author page and send me an e-mail request. In your request, please provide me with your full name and a working e-mail address that I can use to forward the document.
Wisconsin’s Newest Triple Tax
Yesterday, Governor Jim Doyle signed AB 75 (now Act 28) otherwise known as the Wisconsin Budget Bill, inclusive of 81 vetoes unlikely to be overridden in the Assembly. Amid fanfare and small accolades for passing “on time” (today is the deadline) a new budget, is the harsh reality that this budget kicks off a new era in Wisconsin tax policy. For the first time in Wisconsin’s history, residents will experience a triple taxation in the form of their healthcare and of course, the inevitable result of higher healthcare costs. Wisconsin to date was not widely known as a “low cost” healthcare state and thanks to this budget, will keep that “booby” prize designation for some time to come.
If per chance, you have read my other posts regarding the Medicaid shell game that is perpetrated during budget preparations, you will have an inkling as to how Wisconsin tax payers and healthcare consumers just got triple shafted by this budget. In the final analysis and “budget”, the gouging occurred in plain sight and to my dismay, without too much opposition from consumers, providers, or politicians. In plain language, here is what just occurred.
- Under the guise of capturing additional Federal matching dollars, the budget jacks-up the nursing home bed tax from $75 to $150 immediately (tomorrow) and then again, by another $20 next year. Unless you believe in Peter Pan, the Tooth Fairy and the Easter Bunny (Santa Claus is off limits of course), you know that this tax will be passed on to residents capable of paying privately for their room and board. As the tax occurs on every licensed bed, providers with the greatest census comprised of private paying residents will feel a disproportionate share of this tax “pain” as they are forced to pass it along to their residents and the resulting Medicaid rate increase of 2% will fall woefully short of making up the “paid in” difference versus the “receipt” difference via the rate increase. Conclusion: Nursing home residents see their costs go up and providers see their costs go up – strike one.
- Nursing homes in this budget are not alone as hospitals now fall under the spell of the “shell game”. With this budget, hospitals now will pay a “revenue” based tax, again under the guise of attracting Federal matching dollars to bolster Medicaid reimbursement. Similar to the repeat dilemma that nursing homes experience, hospitals will quickly realize that the tax that they pay in plus the added Federal match doesn’t quite translate dollar for dollar into reimbursement improvement. In actuality, the sleight of hand legislature and the Governor will “sift” a few million here and there from this new “pot”, moving it hither and yonder to balance other “bloated and unfunded” elements of the State budget. And of course, like in the nursing home scenario, hospitals will pass this tax on to their paying customers thereby inflating the costs of hospital based healthcare for each and every resident in Wisconsin that carries insurance or pays for their care privately. Conclusion: Hospital care just got more expensive and that expense will be passed on via insurance rates and costs of care to anyone who can afford to pay – strike two.
- The final leg of the tripartite tax stool is perhaps the toughest to understand for most people and the least direct. This leg is the Federal stimulus and matching funds leg that is referenced as the source to be tapped via raising the nursing home bed tax and creating the new hospital tax. Simply stated, to understand this leg is to understand that Washington and the Feds have no money that did not already come in the form of taxes paid. In other words, the money being used to match the nursing home and hospital taxes is taxes already paid by individuals and business in Wisconsin. The cruel irony is that we will be paying new taxes for nursing home beds and hospital care that will be used to return taxes already paid and in exchange, receive the reward of higher cost healthcare. Even more bizarre is the fact that the taxes once paid to the Feds and theoretically returned via a match with the new healthcare taxes, will be skimmed by the Legislature and Governor for uses other than for which they were taken in the first place; clearly not for lowering the cost of healthcare. Conclusion: The Feds never had any new source of money and never will save the taxes already paid by taxpayers – strike three.
I leave you with a simple economic lesson tied directly to this subject – Governments are not sources of money, people and businesses are sources of money and ultimately, people are truly the only source. In a climate where healthcare is already too expensive and the economy is lack-luster at best, raising taxes via healthcare in any fashion to theoretically redistribute dollars from another source is simply bad economic policy. There is absolutely no chance in this scheme for the healthcare consumer or for providers for that matter, to come out ahead and sadly, their loss will come at the expense of all tax paying citizens and businesses in the State.
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