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Senior and Post-Acute Healthcare News and Topics

RUGs IV Here to Stay!

The news we all hoped for came forth this afternoon, wrapped with a big bow just in time for the Holiday season – RUGs IV is here to stay.  The House this afternoon passed a companion version of the bill passed in the Senate yesterday.  President Obama is expected to sign the bill into law shortly.

The legislation calls for $19.2 billion in appropriations to make RUGs IV effective retroactively to October 1, 2010.  In addition, the legislation extends the Medicare Part B therapy cap exception provision presently in place, until the end of 2011.  Without such an extension to the exception process, the Part B therapy caps were set to be automatically reinstated with no exception on January 1, 2011.  As part of the extension of therapy cap exception process, the legislation also staves off pending cuts of approximately 25% in Medicare payments to physicians required by the current sustainable growth formula which drives the physician fee schedule (and related Part B services such as outpatient therapies) under Part B.  Without such a correction to the physician fee schedule, physician fees were set for the significant reduction on December 18 (Congress had already moved the date back to the 18th from the 1st of December).

The implementation of RUGs IV back to October 1 solves significant headaches for SNFs and CMS.  As difficult as it has been for providers to get up to speed on MDS 3.0 and RUGs IV, the process was significantly complicated by the unknown of how the planned RUGs Hybrid would work and whether CMS would seek to recoup potential overpayments from providers as a result of RUGs IV being used temporarily.  Many providers sought to establish liability accounts on their balance sheets for just such an event, even though estimating the liability was somewhat complex due to the lack of solid information regarding the Hybrid groups coming from CMS. 

Having spoken to a number of people within CMS, the implementation of RUGs IV back to October 1 is a true gift.  There were consistent difficulties in getting the Hybrid grouper to function in conjunction with MDS 3.0 and as such, a growing number of inquiries from the industry bombarded the agency expecting more information.  Even more troubling was the prospect of having to deal with payment recapture; a procedural boondoggle CMS was hoping to avoid.  In the end, I am confident that a number of people at CMS are rejoicing this evening.

On a final note, I wish to offer my personal congratulations to my industry colleagues and the trade associations who lobbied for this victory and to my readers, clients and business partners who required that I kept them informed and in many cases, helped me with additional information and of course, thoughtful inquiries that made me stay on top of this important issue.  This policy victory was long overdue but as the saying goes, “better late than never”.

December 9, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | 1 Comment

MDS 3.0, RUGs IV, RUGs III, Hybrid: A 45 Day Review

Forty- five days past the October 1 conversion to MDS 3.0 and the interim RUGS IV payment groups and I still am getting a great deal of requests for analysis tools, questions on payments, liabilities, dates and rates for the Hybrid (RUGs III) groups, maps between RUGs III and RUGs IV, etc.  While I lost track of how many spreadsheets I have e-mailed and how many questions I’ve tried to answer, I have managed to keep track thematically of the issues and ongoing needs of the folks that contact me.  To that end, it seems appropriate to consolidate the information I have, the questions I’ve gotten (and continue to get) and the issues as I hear them and provide my readers, colleagues and clients with a forty-five day recap.  Many thanks to Brett Seekins at Baker Newman Noyes who has passed along his insights based on ongoing conversations with principals at CMS.

RUGs III Hybrid

As of today, the Hybrid grouper is still not functional and CMS states that it is still undergoing development and testing.  I have confirmed this from numerous sources and CMS still is providing no hard date or date range when the Hybrid grouper may be functional.  Per a contact that Brett Seekins from Baker Newman has at CMS,  a crosswalk between RUGs III and RUGs III Hybrid was supposed to be posted on the CMS SNF web page by today.  As of now, it is still not posted but when it does become available, I will get it, analyze it and make it available to anyone who requests it.  NOTE: There is no crosswalk document between RUGs IV and RUGs Hybrid although there is a crosswalk between RUGs III and RUGs IV which I have and continue to make available to anyone who requests it.  Based on what I see when I gain access to the RUGs III to Hybrid crosswalk, I may be able to make some sense of a crosswalk strategy between RUGs IV and Hybrid.

Retroactive Adjustments/Overpayment Collections

This is a hot topic and one that remains very much in limbo.  First, CMS has made no definitive statements on how and if, repayments or retroactive adjustments will be handled when the switch is ultimately made between RUGs IV and Hybrid.  Recall that when MDS 3.0 went into effect on October 1, RUGs IV was the only grouper system that worked with 3.0 and thus, is being used to pay providers.  The issue that remains is for CMS to construct the Hybrid grouper and then, to determine how and if, overpayments occurred in the interim while RUGs IV was used.  The “how” and “if” determination will drive what CMS does with respect to retroactive adjustments or recoupment of overpayments.  My take on this subject is that CMS is a bit politically stuck at the moment as it, like the provider side of the business, is waiting to see if Congress steps forward and retroactively implements RUGs IV as law effective October 1, 2010.  This step would be huge and eliminate a ton of complications.  As to how likely this is, my guess is a shade better than 50/50.  Despite the present “lame-duck” session where historically, little of great significance is accomplished legislatively, a Medicare ticking time bomb exists.  This time bomb has to do with the pending cuts to the physician fee schedule, an issue I wrote extensively about in late spring and early summer.  Recall, that Congress created a temporary series of patches, the last creating a modest increase in the fee schedule (and related Part B services such as rehabilitation therapies) while pushing the scheduled cuts back to November 30.  The cuts are a result of a law passed by Congress years ago tying the increase or decrease in physician fees (and related Part B services) to a sustainable growth formula or more simple, a formula that is based on economic growth and overall program spending in Medicare.  Due to a languishing economy, the formula in-place calls for cuts in physician fees by 21% in 2010 with another forecast for additional cuts in 2011 (the current fiscal year).

Considering the physician fee schedule issue, Congress now must address this problem or face an enormous potential crisis with physicians and other providers reducing their services to Medicare beneficiaries.  The good news here for RUGs IV is that legislation regarding Medicare will be drafted if for no other significant purpose than to address the fee schedule problems, leaving room for other program changes to slip in such as those involving the implementation of RUGs IV.  In any other lame-duck session scenario, I would say that the chances of the RUGs IV issue being addressed would be “slim and none”.

On a final note, CMS has their hands full with getting the hybrid system in-place and therefore, retroactive adjustments are a far distant priority.  Remember, RUGs III and RUGs IV are pegged at budget neutral or in other words, RUGs IV is not supposed to cost Medicare any more dollars than the cumulative outlays under RUGs III.  In reality, because of the complexities of the new MDS assessment and the resultant changes to the case-mix weights that drive payments under RUGs IV, I believe CMS will spend less money initially under a RUGs IV system.  It will take providers a year or two to learn the intricacies of the new system and to adjust their operations, coding and billing practices accordingly.  This means that CMS will be under minimal pressure to recoup overpayments as few will likely exist.  I believe a greater probability is that CMS will make a technical adjustment in their annual rate setting for SNFs in July/August next year, reducing potential increases by a small factor for overpayments during the transition period.  Again, this only occurs if Congress fails to address the implementation date of RUGs IV back to October 1, 2010.

Establishing a Liability for Overpayments

Given the above discussion on retroactive adjustments, I have advised providers to prudently establish a liability for overpayment based on their Medicare utilization since October 1.  Here is what I am advising people to do regarding this transition and hybrid period. First, obtain a calculator with RUGs III hybrid rates and use it to establish a liability on the balance sheet for overpayments.  The calculator allows you to enter your utilization by RUGs III and/or RUGs IV claims and produces results for each payment system.  I have a calculator tool that I make available. Second, run a month end manual test on your claims by using the published hybrid rates. CMS released these in August. The manual test is as easy as a quick sample of claims for the month, mapped against the hybrid categories. Where a hybrid category does not exist, use the RUGs IV category – CMS has said it will use RUGs IV categories where no RUGs III hybrid exists. Third, compare your results and adjust your liability up or down by the error percentage (how much your sample said you were over or under) for the next month and error on the side of being conservative.  If in fact, Congress acts or CMS chooses not to recoup payments from individual providers, the liability simply evaporates to income once the issue is resolved.  The sole side-effect temporarily, is that income is slightly understated by the effect of the liability.

Monitor Performance and Progress

Regardless of where an SNF feels it is on the journey post October 1, the number of questions I am still getting plus the number of tools that I still send out suggest that providers are still transitioning.  This is to be expected given the enormity of change and the ordinary bumps in the road caused by CMS and its intermediaries.  My advice is that SNFs check their progress on the transition by doing the following.

  • For any SNF that is using a therapy contractor or rehab company, audit your contractor/rehab company. The largest change that occurred under the switch to MDS 3.0 and ultimately RUGs IV is in the provision of and payment for therapy.  Recall that the therapy company is not the Medicare Part A provider; the SNF is.  Any liabilities that arise from billing problems, overpayments, etc. are ultimately the responsibility of the provider with the agreement with CMS or in other words, the SNF.  I have seen tons of therapy company contracts with very limited indemnity clauses, typically not worth much in the event of a major billing probe, upcoding issues, fraud investigations or recoupment of overpayments.  In virtually all of these clauses, the indemnification back to the SNF from the therapy company is for the cost of the therapy charged by the therapy company to the SNF; not for the lost revenue and/or fines and penalties that can occur.  It is the SNF’s responsibility to assure that Medicare is appropriately billed and care is correctly provided and documented as assessed on the MDS.  The simplest way for an SNF to assure that such is the case is to audit the therapy company’s performance.  I have an outstanding partnership relationship with a therapy management firm (not a therapy company) that can provide such a service, cost-effectively and efficiently.  The principals are all MDS 3.0 certified and have decades of experience as therapists in the long-term care industry.  I advise any SNF that hasn’t audited their therapy provider to do so ASAP.  Even for SNFs that provide their therapies via employees, it makes sense to have an expert come-in, review current practices and to provide guidance where improvements can be made.  Feel free to contact me for a referral.
  • Periodically, check your utilization patterns as occurred under RUGs III and now, under RUGs IV.  Use a crosswalk tool to see exactly how your claims under RUGs IV are trending compared to what they were under RUGs III.  In 45 days, a significant change should not occur as for most providers, case-mix evolves rather slowly.  If you are seeing big jumps or changes, something is amiss (for example, Ultra High rehab patients should still conform accordingly under the RUGs III method and then group accordingly under RUGs IV).
  • Monitor your MDS completions and the time it is taking to complete the assessment.  MDS 3.0 is heavily driven by interviews and accordingly,  a provider should see a shift in time taken with direct patient interviews.  Likewise, the ultimate shift under RUGs IV significantly changes therapy minute counting, especially concerning concurrent therapy.  Provider should see movements toward more individualized therapy time and elimination of look-back assessments.
  • Sample some new admissions looking for a match between clinical charting and MDS coding.  What is being coded on the MDS should correlate tightly with what is reflected in the resident clinical record.  If there is a gap, time for re-training.

Tools

I have a number of tools that I can forward to make the analysis, budgeting, forecasting, checking, etc. easier.  For example, I have current Hybrid rates, RUGs IV rates by region/location, a RUGs III, Hybrid and RUGs IV calculator by region/location, a RUGs III to RUGs IV crosswalk and hopefully soon, a RUGs III to Hybrid crosswalk.  Feel free to e-mail me and request any or all of these tools or comment to this post with a valid e-mail address and I will get them to you ASAP.  My e-mail is Hislop3@msn.com.  Likewise, feel free to drop me a question and I will do the best I can to answer it or point you in the right direction.

November 15, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | 3 Comments

Economic Value Analysis, Value Propositions and Marketing

Recently I gave a presentation on strategic pricing and senior housing (see Reports and Other Documents page on this site for the presentation power-point).  A key theme that I often refer to centers around the “value proposition” or in other words, the concept that pricing is both monetary and non-monetary and as such, the value proposition is about not only the price but also about the functional and psychological value of the service or product.  In short hand, the utility; how the product/service satisfies both functional and psychological needs at or for the given price.  During the presentation and since, I’ve received a fair number of questions regarding “how” a value proposition is determined and thus, how the same is correlated to price.  Knowing how complicated senior housing and all forms of long-term care (SNF, ALF, Senior Housing, etc.) are today to market, understanding the core concepts of pricing, economic value analysis, and value proposition can make a real difference in establishing an effective sales and marketing program.

Initially, the primary concept to understand is demand and how demand and price work together.  Demand, for purposes of this article and simplicity, is the ability and willingness on the part of an individual to buy something.  In general, demand and price have an inverse relationship such that the demand for a particular good or service (the quantity thereof) tends to increase as price decreases.  Of course, a variety of factors impact demand including the actual nature of the product or service.  Funeral services for example have a fairly steady level of demand and in actuality, the demand only changes by a change in supply of dead people (morbid as this thought is).  If for example, a major pandemic began to sharply increase the number of people dying, the demand for funeral services would increase.  Conversely, if a break-through in genetic research produced a series of cures for diseases such as diabetes, heart disease and cancer, the demand for funeral services would gradually decrease.  In the example of funeral services, price is less of an influencer on demand as once an individual has died, few alternatives exist (legally) to disposition of a corpse.  While there may be multiple options for pricing inside the range of possible mortuary services (cremation, caskets, size and style of services such as wakes, etc.), there remains a core price that is basically inelastic; doesn’t really change demand as it rises or falls.

For goods and services such as senior housing and to a lesser extent, other long-term care such as Assisted Living and SNF care, demand is more elastic as price changes.  The simple reason is that alternatives exist to each level of care that are available, supply or provide the same basic utility and range in cost (expressed as price).  In the case of senior living, many options exist at a great many price points.  With SNF care, fewer options exist but still, many providers exist and home care and even in some cases, Assisted Living present alternatives at different prices.  The net result is that demand is influenced by price as well as a host of other factors.

  • The service’s core price is a factor such that all products and or services have a “going rate” calculation.  When demand is highly elastic such as with senior housing, the safest presumption is that the core price is equal to living in one’s existing residence as normally, a move to a senior housing facility is equal to or more expensive per month.  If the costs associated with a senior housing option are rising, demand will taper off.
  • The price of related or alternative goods will impact demand, especially when substitution products or services are widely available.  For example, using the funeral home example, if prices for a particular line of wood caskets drop substantially below the prices of metal caskets, the demand for caskets stays essentially the same but the demand for wood versus metal rises substantially.  For senior housing, the demand can be widely impacted by the cost associated with alternatives such as market rate apartments, condominiums, or staying at home with certain services.
  • The ability of the consumer to buy in terms of economic resources changes demand.  If the consumer’s purchasing power changes as a result of loss of income, lower income or lower overall resource levels, the demand for particular goods and services at current price points declines, perhaps shifting to less expensive substitute products/services.
  • An increase or decrease in desire or preference on the part of a consumer can change demand positively or negatively.  The greatest mover here is consumer confidence.  A consumer with a more positive outlook on the economic condition of his/her situation is simply more motivated to consumer.  Consumer expectations about prices also impacts the decision to buy.  A consumer that believes that prices will rise in the near future is more likely to buy immediately and conversely, an expectation of falling prices triggers a delay in consumption.

Taking the above into account regarding demand, economic value analysis and the determination of a value proposition is fundamentally about determining the monetary value of the product or service as well as the functional and psychological value.  The monetary value is not the product/service price but the value, expressed in dollars, of the total cost of a product or service’s ownership.  In this regard, the monetary costs also produce monetary benefits.  For example, using senior housing, calculating the monetary costs requires an analysis of the following (minimally);

  • Rent or mortgage payment
  • Monthly amortized cost of any entry fee including interest cost and negative amortization costs (loss of refund as applicable)
  • Utilities
  • Taxes
  • Insurance
  • Other fees such as parking, etc.
  • Other cost intangibles such as free health care, reduced cost health care, delivery of medications, meals as part of rent, rent increase guarantees (limits), etc.

Calculating the monetary value thus becomes an exercise in quantifying the above elements over a reasonable period of time such as five years, etc.  Once this is complete, the result is used as a comparison against like or alternative options.  Below is an example for a non-profit, senior housing provider with a fully refundable entry fee compared to a person remaining in their home in the community, with no mortgage payment (a fairly typical situation).  The costs I’ve illustrated are over a five-year period (rent for example is monthly times 60 months).

  Sr. Housing Home          
Rent $72,000 $0.00          
Mortgage $0.00 $0.00          
Prop. Taxes $0.00 $25,000          
Insurance $3,000 $7,000          
Utilities $0.00 $18,000          
Depreciation $0.00 $6,250          
Repairs $0.00 $5,000          
Lawn Service $0.00 $1,200          
Parking $0.00 $0.00          
Meals (1 x day) $0.00 $6,400          
Entertainment $0.00 $2,500          
Healthcare (1) $0.00 $1,500          
Misc. Transport $0.00 $1,000          
Entry Fee (2) $18,924 $0.00          
Home Price +/- (3) $0.00 $5,400          
  $93,924 $79,250.00          
               
(1) Sr. Housing provides free wellness services such as flu shots, blood pressure monitoring,
medication assistance, setting appointments, education, screenings, etc.    
               
(2) Entry fee is fully refundable ($150,000) at no interest.  Interest yield is assumed at
2% compounded monthly            
               
(3) The home price increase or decrease reflects what the resident can safely assume
the home price will be in five years.  A negative number is an increase in value whereas 
a positive number reflects a decrease in selling price.  Price of the home is assumed  
to be $300,000 in current dollars.          

In this example, the monetary value of the senior housing option is greater (negative) than the monetary value of remaining at home or simply, it costs more to receive the same basic utility to move to the senior housing community.  The value essentially becomes negative with the inclusion of the entry fee interest loss or cost.  On the surface, this appears to be a negative value proposition for the senior housing community.  The key to achieving a balance or a higher proposition value for the senior housing option is to monetize the functional and psychological costs between the two options.  Ideally, the spread between the two is worth at least $14,674 or the present negative difference between the senior housing option and remaining at home.

In monetizing the functional and psychological costs and benefits between the two options, the trick or key is to have a clear understanding of the profiled consumer.  This means having a true handle on current customers and seniors living in the community.  For example, a psychological benefit to senior housing versus remaining at home is security.  It is possible to measure the value of security by talking to your current customers and imputing a value for a security service to the remain at home option.  A functional value is transportation and convenience.  If for example, the senior housing option provides shopping trips to local grocery stores or has an in-facility delicatessen and convenience store, the cost between the two options in terms of convenience and transportation is measurable.  Other examples such as activity, access (even at a cost) to prescription drug delivery, on-site medical care, check-in services, laundry, housekeeping, etc. are all items with a potential functional and psychological benefit.  Perhaps the most under-valued is the access to on-site, future health care such as an incorporated Assisted Living or Skilled Nursing Facility, even if such access is nothing more than guaranteed accommodation without a price reduction.  The important point here is that each functional and psychological benefit that is discernible and tangible to current customers has a value that is quantifiable and comparable across each option or living alternative.

The value proposition is the accumulation of the monetized values for the core product or service plus the functional and psychological factors.  Consumption activity incorporates all three elements and effective marketing strategy is grounded in communicating the value proposition of a product/service as compared to all other alternatives. Of course the largest difficulty arises in communicating values ascribed to psychological factors.  The key in doing so is the heavy use and reliance upon, current satisfied customers.  They are the source of input as well as the ground for determining monetary values associated with the related psychological factors.

As senior housing demand is highly elastic, creating and communicating a value proposition is critical in terms of developing potential customers.  I would argue that the same approach is as critical for SNFs that are looking to attract certain types of patients with certain payer sources.  In using the above approach, an SNF would complete its economic analysis against its competitors, again monetizing the core service, the functional and psychological factors.  In many regards, completing the analysis against existing competitors is an easier exercise as quantifiable data is far more plentiful.

Pricing strategy comes into play when the value proposition is imbalanced.  Pricing strategy re-weights variables and allows the value proposition to change favorably against key alternatives or competitors.  For example, in the senior housing analysis above, pricing change involving the entry fee instantly changes (positively or negatively) the initial calculated proposition.  For an SNF, adding amenities within service offerings or adding clinical competence improves the value proposition, even under a fixed-payment scenario such as Medicare.  The objective from a marketing strategy approach is to maximize all elements of the value proposition as compared to the competition or to the alternatives.  Taking this approach and then developing an effective sales and communication strategy dramatically improves the opportunities for successful new customer conversions – sales.

October 27, 2010 Posted by | Assisted Living, Senior Housing, Skilled Nursing | , , , , , , , , | 1 Comment

Hospice Contracts in SNFs: Survey Reminders for the SNF

Due to a fair amount of travel recently, I’m a tad behind in pushing out updates, etc.  Despite my rather harried schedule, I have kept track of questions, issues, etc. and in the next week to ten days, I will endeavor to get caught up.  Please know that I do appreciate the comments and questions from readers and colleagues.

A theme that I get queried on quite a bit involves the relationship between Hospices and Nursing Homes, particularly when the SNF enters into a contract with a Hospice for the provision of hospice care to its residents.  Suffice to say that I frequently, and I have written on this subject before ( http://wp.me/ptUlY-3W ), hear concerns and misunderstandings among both providers (Hospices and SNFs) about contractual issues, care issues, documentation issues and compliance issues.  The most recent set of questions or issues comes via my wife who is a clinical consultant (RN) in long-term care.  While working with a client SNF on pre-survey preparations, she saw a number of things wrong from a compliance perspective that the SNF simply missed or misunderstood in regard to its responsibilities for its residents placed on hospice service with one or more of its hospice contractors.

Below I’ve outline the required compliance elements for SNFs when they have residents in their facilities that are on service with a Hospice agency (of course, via a contract).  These elements are taken right from the federal Conditions of Participation for SNFs and represent the essential requirements that surveyors are tasked to review.  NOTE: For SNFs it is imperative to remember that even though the primary responsibility for the careplan for a hospice patient in an SNF belongs to the Hospice, the SNF cannot transfer any compliance requirements that are its responsibility under the law to the Hospice.  The all too common theme that I hear of “he/she is now on hospice and therefore, is no longer an SNF resident” is false.

  • The Hospice and SNF must communicate, establish, and agree upon a coordinated plan of care for both providers that reflects the hospice philosophy, the individual’s needs, and the unique living circumstances of the individual in the SNF. The plan must address pain and symptom management and be revised and updated as necessary to reflect changes in the individual’s care needs.  The plan must also identify the services that each provider will deliver in order to meet the needs of the patient and his/her desire for hospice care.  NOTE:  Regardless of this requirement, the Hospice is still required to provide the core hospice services (nursing, social service, bereavement, etc.) as stipulated under federal law.  The subtleties lie in the definitions of duties as delineated in the plan of care.
  • The Plan of Care must reflect the following:
    • The participation of the hospice, the SNF and the resident and/or responsible party
    • The plan of care provides for pain and symptom management and clearly provides for (or has) updates reflecting the changing needs of the resident
    • Medications and medical supplies are provided for by the Hospice as required to care for the patient’s/resident’s terminal illness (requirement that the Hospice provides (or pays for) the supplies and meds related to the care of the terminal condition).
    • The Hospice and SNF communicate with each other when changes to the plan of care are required.
    • The Hospice and SNF are aware of each other’s duties and responsibilities in meeting the plan of care.
    • The SNF’s services are consistent with the plan of care and in coordination with the Hospice. The SNF resident/patient should not experience any reduction in SNF services due to his/her hospice status.
  • The SNF offers the same services to its hospice residents as it does to all other SNF residents not on a hospice service.  The resident retains the right to accept or decline services offered by the SNF.
  • If the SNF has concerns with the provision of service from the Hospice and the same is not satisfactorily addressed by the Hospice, it is the responsibility of the SNF to inform the appropriate licensing authority that has oversight of Hospice’s in the state.

The biggest key to take away from the above is that the SNF and Hospice need to develop a very clear plan of care, hold each other accountable for the delivery of services as outlined under the plan of care, and clearly understand each other’s duties and responsibilities under the law and as detailed in the plan of care.

September 17, 2010 Posted by | Hospice, Skilled Nursing | , , , , , , , | Leave a Comment

RUGs III to RUGs IV: The Core of “Need to Know”

In the past month with October 1 looming closer, I’ve been fielding lots of questions regarding the transition from RUGs III to RUGs IV.  Instead of listing the questions and trying to recap my answers (my memory is good but not that good), I’ve settled on an overview or “summary”; the core of what SNFs need to know or if nothing else, get up to speed on quickly.  To organize this post, I’ve used headlines for expediency.

Overview: Difference Between RUGs III and RUGs IV

Simply put, the major difference applies to therapy at the expense of nursing or clinical care needs.  CMS became concerned that changes in the SNF population and patient needs altered industry practices and the allocation of resources, principally away from clinical nursing to rehabilitation therapy.  Via the engagement of 205 nursing homes across 15 states, CMS completed a time study to analyze the required resources provided to patients versus the clinical needs of patients.  The end result was an update to RUGs III known as RUGs IV.  RUGs IV consists of 66 groups divided into 16 categories (two were added) versus 53 under RUGs III.  To utilize the RUGs IV groups for payment, CMS revised the standardized assessment tool known as the MDS to version 3.0.  The final implementation rule published by CMS includes assurance that in calculating RUGs IV, the goal of payment parity is maintained.  In other words, the historical distribution of total payments to SNFs, based on 2007 claims data applied to RUGs IV, creates the same level of total PPS expenditure for SNFs as would occur under RUGs III.  Of course, this is not an assurance to any particular SNF that upon transition, revenues under RUGs IV will be equal or greater than revenues received under RUGs III.  The average rate, per CMS under RUGs IV will be $431.71 compared to $420.42 under RUGs III.

Financial Impacts Under RUGs IV

As with all changes of this magnitude, there are or will be, winners and losers. The losers in terms of financial impact are facilities that have run high levels of non-clinically complex rehab patients, treating on a concurrent therapy model.  Clearly, the bias under RUGs IV is for facilities to provide one-to-one therapy.  Under the concurrent therapy rules, the total treatment minutes are divided between the two patients (max that can be treated concurrently is two).  For example, one hour of therapy equals 30 minutes per patient.  The clear impact is that overall treatment minutes are reduced, reducing the RUG level and/or the SNF will need to increase the overall amount of therapy provided to patients (not practical or clinically viable) concurrently.  For example, an ultra high rehab under RUGs IV is divided into three groups based on ADL scores;  RUC, RUB, and RUA. The requirement, regardless of the ADL score, is for the resident to have a rehab diagnosis requiring a minimum of 720 minutes per week, receive 1 discipline 5 days per week and a second discipline 3 days per week.  Doing the math, meeting this criteria with concurrent therapy is virtually impossible.  Via CMS’ own analysis, the predicted percentage of patients that fall into RUC, RUB, and RUA under RUGs IV vs. RUGs III declines from 17.8% of all days of stay (RUGs III) to 8.9% of all days of stay (RUGs IV).  Not surprising however, is that the rate does increase under RUGs IV for these groups by an average  of more than $100 per day.  While contract therapy companies will give me continued grief for saying this, facilities that have contract therapy providers fall predominantly into this risk category; much heavier emphasis on concurrent and group therapy treatment models as a means of maximizing staff resources and maintaining high levels of productivity (benefits to the contract therapy company).

Another clear category of losers is facilities that took significant advantage of the hospital look-back provisions under RUGs III to establish diagnoses, rehab and clinical care plans.  RUGs IV and MDS 3.0 eliminate this provision entirely ( an exception exists for ventilator patients).  I like to use the example of “former” treatments such as IVs for fluids or medications present in the hospital.  Facilities that used the presence of IVs while a patient was in the hospital under the “look-back” provision could justify an extensive services qualifier to a high rehab group, capturing a high rehab plus extensive services RUG under RUGs III, even if the IV was gone when the patient was admitted to the SNF.  Under RUGs IV, no IV present on admission becomes the assessment basis plus, IVs for nutrition/hydration and medications now qualify as Clinically Complex rather than Extensive Services.  Extensive Services qualifiers under RUGs IV only include ventilator care, tracheostomy care, or isolation for an active, infectious disease.  The patient must also have an ADL score of 2 or higher.

The clear winners under RUGs IV are facilities that care for clinically complex patients and patients that are more ADL dependent.   For example, and in follow-up to the paragraph above, SNFs that provide ventilator care, tracheostomy care, care for infectious diseases, etc., plus provide rehab, can win “big”.  For example, a ventilator patient receiving 325 minutes of therapy per week from 1 discipline 5 days per week (Speech and/or OT are the most common here) would be categorized as an RVX under RUGs IV with a corresponding urban federal rate (payment rates are by regions) of $786.66.  An RVX under RUGs III pays $467.62.  A similar relationship holds true across the categories for facilities that provide care to more ADL dependent patients.  Higher ADL dependency scores increase payments rather rapidly.  There is a note of caution here though as today, I routinely see ADL scoring that is speculative at best (typically upped) as the MDS 2.0 is less sensitive about ADL scores to generate a RUGs rate.  Under MDS 3.0, the ADL assessments are far more sensitive and detailed, designed to truly qualify ADL deficits.  I believe a fair number of facilities will find their ADL scores decreasing rather than increasing over time.

As I indicated previously, RUGs IV increases the nursing index weights at the expense of rehab.  Essentially, facilities that typically bill below average rehab utilization (days) under RUGs III stand to come out ahead under RUGs IV, provided their clinical complexity is average or higher.  For example, an SSB for wounds under RUGs III correlates under RUGs IV to HD1 or HD2, depending on the presence (lack of) depression.  The clinical weight index jumps by  .50 under HD1 or by 1.0 under HD2, creating a positive revenue impact of $90 to $140 per day respectively.  Fundamentally, facilities that provide more clinical nursing care to a population with higher ADL deficits, cognitive impairments, and maintain an average rehab profile as expressed through utilization, will fare better under RUGs IV than RUGs III.

Assessing the Impact of RUGs III to RUGs IV

In order to assess the financial impact or revenue impact of payment under RUGs III vs. RUGs IV, a provider needs to essentially map their current/historic Medicare case mix as determined under MDS 2.0 (paid under RUGs III) to RUGs IV.  To date, there are two ways to do this and neither are easy.  The first is to complete an MDS 3.0 for each current resident under Medicare.  I don’t advise doing this as it is cumbersome and in many cases, providers are still learning the nuances of 3.0 assessments.  The second option is to use a cheat sheet and a somewhat simplified method.  The method is as follows.

  • Pick a fairly consistent utilization period such as the last six months to a year.  Across that period, total the number of patients billed under each applicable RUGs III category, including the days billed.  Obviously, not every group will be used.  For example, if during a set period such as six months, the facility had 42 patients in RHA with respective lengths of stay ranging from 22 days to 36 days,  I’d list 42 RHA with a calculated average length of stay.
  • For each RUGs III group with billed patient days, pull the corresponding MDS’ for each patient.  Analyze the MDS’ to develop a consistent profile of the patients that fit into the corresponding categories.  The profile should be specific enough to cover typical ADL scores, significant clinical issues (wounds, IVs, etc.), therapy disciplines and minutes, etc.
  • Next, using a spreadsheet that I can provide (drop me a note at hislop3@msn.com including your e-mail address and I will send it out), map your RUGs III profiles as created in steps one and two to RUGs IV groups.  Note: An RVX under RUGs III will not likely correspond to an RVX under RUGs IV as to qualify,  a patient under a RUGs IV RVX must have a ventilator, require tracheostomy care or have an active infectious disease.  Also, be very conscious of the concurrent therapy minute changes under RUGs IV when mapping your therapy minutes.  Remember, under RUGs IV, concurrent therapy is divided equally among the two residents/patients (i.e., two residents in PT treated concurrently for an hour does not equal 60 minutes of therapy for each resident but 60 minutes total, 30 minutes allocated to each resident).
  • Once the facility has mapped each RUGs III profiled group  to corresponding RUGs IV groups, you can analyze the revenue impact.  Multiply the number of residents per RUGs III group times the average length of stay for the group times the applicable RUGs III rate.  This is your RUGs III revenue average.  Next, do the same calculation for the RUGs IV groups (if you need the RUGs IV rates, drop me a note at hislop3@msn.com and I can provide them to you).  Finally, compare the two sets of revenue numbers.

IMPORTANT: The second method gives you a good generalization of the revenue impact but it is not exact.  To be more precise, one would need to analyze each billed encounter under the RUGs III system and then, translate the same profile to RUGs IV.  Additionally, the only true exact method is to reassess each patient under MDS 3.0.  Because of the significant changes under RUGS IV to ADL scoring, look-back periods, and therapy minutes (concurrent vs. one on one vs. group) and the weighting of clinical issues (IVs no longer qualify as “extensive”, etc.), it is very difficult to map precisely, the financial impact of transitioning from RUGs III to RUGs IV.

Important Points to Consider/Remember

Based on my varied and numerous conversations with providers, I’ve created this brief list of issues and/or important points regarding the transition from RUGs III to RUGs IV.

  • RUGs IV and MDS 3.0 will change “how” SNFs do business or it should, unless the SNF wants to see Medicare revenue shrink.  Extremely key to remember and plan for;
    • No look-back period
    • Concurrent therapy rules
    • Highest Rehab groups (extensive services)  require the patient to be on a ventilator or require tracheostomy care or have an infectious disease.
    • Next  highest rehab groups will be difficult to meet the minute and discipline requirements if your current standard for rehab relies heavily on concurrent therapy.
    • Emphasis on ADL scoring is key in terms of attaining higher groups within categories as is the documentation of depression (if present).
    • Assessments under MDS 3.0 are longer and meeting dates is critical to avoid default rates – more work, more staff time and time sensitive dates.
  • If an SNF is using a contract therapy provider or company, the time to review and gain understanding about the transition to RUGs IV is NOW.  The SNF needs to make certain that the therapy company is capable of providing the necessary staff resources to principally deliver one to one therapy.  The SNF also needs to understand the financial impact to its operations that occurs when the therapy company adds staff (if required).  Further, and this point can’t be ignored: Medicare billing liability for all claims under Part A and B follows or stays with the owner of the provider number.  In a relationship between an SNF and a therapy company, the SNF is the Part A and predominantly, the Part B provider – not the therapy company.  Under the law, the requirement to assure accurate and timely billing falls to the SNF.  Any OIG enforcement, RAC activity, etc., will focus all fines, penalties, recovery, etc. on the SNF, not the therapy company as the SNF is the owner of the Part A provider number.  Implication: Don’t let your therapy contractor “drive the bus” on the transition to RUGs IV.  This needs to be a partnership and one where each party knows the rules, knows the impacts and has clear duties spelled out in the contract with clear remedies.  SNFs should not rely on standard therapy company indemnity clauses as the clauses I have seen typically limit the damage to the SNF for claims rejections, etc. to the “charges” the therapy company passed on to the SNF for providing services under the contract as applicable to the specific claim.  In short, the SNF bears the loss of the revenue for the claim plus if applicable, any fines or penalties, even if the therapy company personnel and their actions were the primary reasons the Medicare claim was denied, rejected, and/or deemed fraudulent.
  • The weighting within RUGs IV and thus the dollars, skew to the nursing side of things, away from rehab.  The weighting has shifted to clinical from therapy and as a result, gaining dollars and better reimbursement will come from a) changing your patient profile to one that has more clinically complex patients, and/or b) capturing the true clinical needs of your patients and their depression, ADL dependency, etc., on the MDS 3.0.  I always urge caution about (b) as the daily documentation better support the picture portrayed under the MDS or the implication is that the MDS was created to take advantage of payment which, if not matched by a patient with those needs, is Medicare fraud. 
    • Providers that wish to alter their patient profile need to explore the full ramifications of doing so financially and operationally.  More clinically complex and dependent patients may generate more Medicare revenue under RUGs IV but they also come with a cost.  The cost is typically in higher medication use, supply use, and staff resources.  Suffice to say, this population requires more nursing staff and perhaps, different nursing staff in terms of qualifications and training.  Additionally,  more clinically complex and dependent patients require more Social Service time and are more potentially problematic from a survey standpoint as there is more “stuff” going on with them.  An SNF moving in this direction needs to evaluate fully, the risks, costs and benefits associated with such a strategy.
  • While CMS says that overall Medicare spending on SNF care remains the same under RUGs IV and RUGs III, don’t believe it.  The distribution as forecasted is clearly toward a particular patient profile that is different than current or, a RUGs IV profile patient is different than the current RUGs III profile patient.  MDS 3.0 is a lot of work and will require facilities to adapt how and when they do their assessments and what resources they allocate to the assessment process.  In short, to make a smooth transition between RUGs III and RUGs IV requires planning – a lot of it.  It is less about groups and assessments and more about “how” the SNF does business.  Understanding the core concepts behind MDS 3.0 and RUGs IV is akin to understanding the rules of the game.  No game can be played successfully and efficiently without first, fully understanding the rules.

September 3, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , | 15 Comments

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.

August 4, 2010 Posted by | Assisted Living, Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , , | Leave a Comment

RUGS-IV Still In Limbo

As the Senate is set this week to take a vote on the American Jobs and Closing Tax Loopholes Act (see my related posts), a key provision within the legislation having to do with implementation of the SNF payment system known as RUGs-IV remains in limbo.  The PPACA (health care reform bill) required implementation of a new standard resident assessment instrument known as MDS 3.0, effective October 1.  Under Medicare, the resident assessment triggers the PPS payment category corollary to Resource Utilization Group or RUG for short.  A provision within the American Jobs and Closing Tax Loopholes Act would require CMS to implement an updated PPS payment system, RUGs-IV concurrent with the changeover to the new assessment instrument, effective October 1.

The difficulty that occurs without simultaneous implementation of RUGs-IV is that CMS has to create a “bridge” payment methodology, ultimately phasing-in the new payment system.  This bridge payment system effectively changes in certain provisions unique to RUGs-IV such as concurrent therapy and look-back periods to model a hybrid payment for MDS 3.0.  As the Senate has not yet acted on the Jobs and Closing Tax Loopholes Act, CMS is preparing for an interim period and thus, a bridge payment strategy.  The full-phase in of RUGs-IV would not occur potentially until October of 2011.  During the interim year under the bridge payment, CMS will use modified payments and then, re-process claims once RUGs-IV is implemented. The modified payments are effectively RUGs-IV payments that are processed using the RUGs-III system, as modified under the PPACA.   Of course the peril for SNFs during this interim period lies in the possibility of carrying a receivable to Medicare (payments are less than what they actually would be under RUGs-IV) that ultimately is re-processed correctly, without interest.  Alternatively, a facility could have a balance due once re-processing occurred but this situation is less likely.

At this point, the “ball” is in the court of the House and the Senate.  CMS has indicated that it might take as long as six months to establish a hybrid payment system that correlates RUGs-IV categories to an interim payment system suitable for use under MDS 3.0.  The alternative of course is to have Congress legislate the full implementation of RUGs-IV by October 1.  Oddly enough, it was Congress that caused this confusion by delaying the implementation of RUGs-IV for a full year under the PPACA. 

CMS is holding a series of three national conference calls regarding MDS 3.0 transitions and the RUGs-IV/RUGs-III interim payment issues.  The first is set for June 24th at 1:30 P.M. Eastern time.  Feel free to e-mail me for registration information.

June 15, 2010 Posted by | Policy and Politics - Federal | , , , , , , , , | Leave a Comment

American Jobs and Closing Tax Loopholes Act – HR 4213

Funny title that is rather misleading given the gravity of the health care/post-acute care provisions that are included in this bill.  As is the case in Washington, especially these days, important health care provisions not addressed in the PPACA are coming forward in other bills; particularly bills involving unemployment benefits and COBRA benefits, etc.  Such is the case in this rather large expenditure bill which by title, is aimed at extending unemployment benefits, creating tax deductibility for COBRA premiums and removing a host of tax loopholes or tax deductions as some may call them. 

Imbedded within the bill are a series of important health care related provisions.  Briefly summarized, the provisions are;

  • A six month extension of the additional federal Medicaid match originally provided under the Stimulus bill.  The current added match is set to expire on December 31.  The extension provided under this bill would continue the match through June 30 of next year.  Fundamentally the issue here is the feds trying to provide a softer cushion or landing area for the states given the ramp-up in Medicaid spending that is coming under the PPACA, the current economies of most states (poor) and the harbinger of pending Medicaid cuts most states will require to keep their programs afloat.  While this match is likely a good thing in the interim, recall that it is in effect like giving a crack addict more crack.  Under Medicaid, the additional match comes only with additional state spending; spending that most states cannot afford without the additional federal money.  Unless the federal money is continually extended in some shape or form, the states will likely face the prospect of cutting their Medicaid budgets at some point, regardless of any economic recovery.
  • A provision that staves off any cuts to the physician fee schedule until 2014.  This doc-fix element includes increases in 2010 (for the balance of year) and 2011 with no increase specifically factored for 2012 and 2013 although, if spending on physician care remains (during this period) within Medicare spending limits, an increase may occur.  In 2014, the physician fee schedule would return to the current law based on the sustainable growth formula (per CBO, a cut in 2014 of 30%).  In addition, since Part B therapy rates are tied to the physician fee schedule, the rate cuts that are pending would be automatically fixed (in concert with the doc-fix) and in actuality, increases in rates would be forthcoming.  Physician fee-schedule cuts and the issue of physician fees being tied to the antiquated sustainable growth formula was a matter of contention during health care reform debate.  The House had passed a broad, permanent fix but the Senate failed to act.  The Senate desired something more temporary and less costly.  The final legislation as passed (PPACA) didn’t address the matter at all with the exception of counting the savings from the projected cuts as part of the financing elements that produced the “budget deficit reduction” effect.  In other words, Congress used the projected savings from the cuts as means of creating a positive financial projection from the CBO.  Most policy analysts and economists have claimed all along that one of the significant “risks” with the PPACA positive projections lied with the fortitude of Congress to sustain the significant Medicare cuts contained in the bill.  This measure is likely to create renewed calls that Congress is incapable of sustaining the Medicare cuts and in actuality, and as I have written multiple times before, the PPACA is nowhere close to deficit reducing.
  • The bill also contains a provision requiring CMS to implement RUGs IV by October 1, in concert with the roll-out and implementation of MDS 3.0.  This is a good thing for SNFs.  Without RUGS IV going hand-in-hand with MDS 3.0, there would be no case-mix payment system that matched the new assessment tool.  RUGs III is correlated to MDS 2.0. The end result would likely be comedic and tragic all at the same time as SNFs would have to complete the new MDS and try to correlate payment back to a case-mix system that didn’t match the new assessment tool.  I, and others, envisioned payment snafus abundant and the work to sort it out come RUGs IV roll-out in 2011, the responsibility of the SNF.

The Apex Healthcare E-Newsletter (my organization’s newsletter) for May was just released and posted yesterday and in this issue you can find additional information regarding this topic (the physician fee schedule fix and RUGs IV)  http://apexhealthcareconsultants.info/category/may-news-2010/

May 21, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | 1 Comment

Five Things Every Administrator Should Focus On

I had a phone conversation earlier today with a friend and colleague (he’s part owner of a rehab consulting and management company) and as we talked, the conversation reminded me about the host of issues facing health care administrators.  Our conversation flowed to long-term care and specifically, SNFs (he spends a lot of his time with SNFs) and the work his firm is involved with.  We kicked around some ideas and as our conversation concluded (hopefully with a golf date soon to be set), I did some thinking. 

My friend always tries to get me to do “more” speaking engagements, particularly at conferences and trade association meetings and in this case, he was trying to convince me that the discussion we had was great information that “everyone should know”.  Oddly enough, I agree but as time doesn’t always permit me to head out on the speaker’s circuit, it made sense to “boil down” our conversation into a quick written summary.

Health care administration, like any leadership discipline, should be (about) one-third current operations focused and two-thirds future operations focused.  I realize, having done the job myself for over twenty years, that some days or even weeks bend this ratio but over the long-haul, in order for an Administrator to lead (regardless of title), he/she must be willing to step a good distance forward to lay the ground work and strategies for “what will be”.  In other words, effective administration is about understanding what is going on in the industry, how events or policies, etc. not yet in effect will alter the business, and developing plans and strategies to move the “current” toward the “future’.  In simpler language: Effective health care administration is principally about planning.  Effective leaders have a running gap analysis in their heads; inherently understanding the current status of operations and matching that with what is yet to transpire.  Leaders with tenure have a bit of advantage as they should innately understand historically, how change roles out with new government policies, changes to reimbursement, etc.  The experience of having been through numerous changes in the business can’t help, if matched with effective planning abilities, but provide a clearer understanding of how to migrate current operations to the next required level of operations.

Synthesizing from my view, what has and is happening in health care today and what I see and hear about long-term care administration and the organizations in the industry, I hashed out five things (issues, concepts, etc.) that every Administrator (senior leader, etc.) should focus on.  Obviously, the list could be expanded but in reality, focus on the key or critical five below will produce the kind of results administrators desire and organizations require.

  1. Medicare and Reimbursement: Regardless of any white-noise concerning possible delays or advances in the implementation of RUGs IV, MDS 3.0, etc., the path is laid and the dates will occur sooner rather than later.  Getting clinical and billing functions up-to-speed, educated, and ready to roll is an absolute necessity.  During this process, I’d analyze a whole series of issues and begin to lay the ground-work for any related changes to the present course of business, such as;
    • What is the potential impact on my Medicare revenues? 
    • How is the revenue impact related to my current case-mix?
    • Should I begin to adjust my case-mix via different marketing strategies or the implementation of some new clinical programs?
    • Does my software/IT systems support new forms, new charting/documentation requirements, assessments, and billing documentation?  If not, what is my vendor doing to get us there and when will they be ready?
    • Big changes are about to occur in therapies particularly and what, if I am using  an outside vendor for therapy, are they doing to be ready?  Does this impact our contract and our overall care delivery in any way?  Is now a time to consider transitioning to an in-house therapy service?
    • Are we, as an organization, actively engaged in communicating what is happening to outside vendors, referral sources, etc.?
    • Do we have a fully integrate project plan, budget for change implementation (training, software, etc., costs), and a methodology in-place to review, change and update policies, procedures, forms, etc.?  (Names need to be involved, dates set, milestones identified, time set aside for review, time set aside for meetings, etc.)
  2. Compliance: This is a huge issue today and it continues to grow as health care reform upped the ante once again.  There are at least a dozen or more key concerns every organization should have in this area and very recent policy and legislative activities have added to the list.  Below is a sample of what should be at the forefront of every administrator’s compliance focus.
    • Billing compliance, particularly Medicare.  Health care reform and the focus on the part of Medicare to save money via reduction of fraud, waste, and overpayment is a hot topic now.  I routinely encounter way too many administrators and organizations that have pushed the revenue per diem issue far too much under Medicare, leaving enormous areas of exposure for recovery actions to occur.  In other words, I’ve seen way too much routine high level rehab coding, length of stay elongation, etc. than what the clinical documentation supports.  Too often, I encounter MDS coding to substantiate rates of payment and then when the resident’s chart/record is reviewed, the documentation is far different than what appears on the MDS.  Administrators need to be wary, even though the revenue numbers look good (perhaps too good), of questionable billing activity under Medicare.
    • To the point above and addressed in a recent post here, all organizations should have a compliance plan and now, under health care reform, SNFs are required to have one in place this fall.  Compliance is about not just being “compliant” with survey and certification rules but also with other federal laws such as Stark and the False Claims Act.  There is no reason that any organization participating in Medicare and Medicaid today does not have a fully developed compliance program and a process for routine audits to preemptively identify,correct, and disclose potentially illegal activity – the ramifications under the law for providers are far too severe.  For more information, see my post titled “Stark, Health Care Reform, and Updated Compliance Requirements”.
    • There are new privacy and security requirements under HIPAA that organizations need to have in-place.  For more information, see my post titled “New HIPAA Provision Now in Effect”.
    • Survey and certification requirements such as the QIS are here and the government is in the process of revamping the Five Star rating system.  As much as I think the survey and certification process is onerous and unrelated to true care quality, administrators need to understand the peril of poor performance and sub-standard quality.  Keeping an up-to-date and clean survey history is vitally important in order to avoid fines, public relations problems, rising liability insurance costs and potential litigation problems.
    • Patient/Resident satisfaction is an area that too many administrators believe is unrelated to compliance activity; think again.  I see way too many facilities that end-up in compliance problems as a result of resident and family complaints.  Dealing with satisfaction across the board is an “ounce of prevention” compared to the “ten pounds of cure” that are required when unsatisfied customers complain to the regulatory authorities.
    • Transparency and disclosure are two new buzz words that every administrator should incorporate into operations.  In today’s arena, disclosure of ownership, governance, staffing, etc. are the new rules of the road and there is no reason any longer not to publicly embrace a plan of transparency and disclosure of all this information and more.
  3. Labor Relations: The largest allocation of resources in health care is for staff via wages and benefits, etc. yet I still see too many antiquated labor relations approaches that produce high levels of turnover and poor productivity.  To me, it is time for health care to adopt labor relations strategies found in other industries and in companies that have world-class employee productivity, retention, and commitment.  Administrators can immediately and positively impact the bottom-line by simply focusing on improving retention, hiring practices (avoiding panic hiring and using better matching strategies), improving supervisor training, removing antiquated pay structures and reward systems, and adopting programs and policies that incorporate employees into the overall strategy and direction of the organization.  Stable staff equals better compliance, higher customer satisfaction, higher productivity and lower labor costs (less turnover, less recruiting costs, etc.).
  4. Risk Management: Leading an organization forward is about identifying “risks” that are inherent in the business and developing plans, strategies and processes to mitigate the impact of risk on the organization’s performance.  Though of another way and using a phrase I like and used to use frequently, it is about avoiding the expenditure of “stupid money”.  Stupid money is money spent unnecessarily on litigation defense, turnover, higher levels of insurance costs such as liability and worker’s compensation, on agency staff or outside pool staff, on fines and forfeitures, etc.  These are all expenses associated with identifiable and known risks and risks that can and should be mitigated by appropriate planning and system implementation.  Extremely effective risk management tools and practices don’t require large amounts of investment or even, elaborate policies and procedures.
    • The best defense is knowledge – knowledgeable and well-trained staff, active and capable management.  Risk management is practice best by management being where the “risk” is, not tucked in an office or tied up in too many meetings with limited purpose, no real agenda, and no specific outcome.
    • Using patient/resident satisfaction systems is simple and highly effective at identifying areas of potential problems or risks.
    • Using benchmarks available from various industry sources to review facility or organization specific indicators against industry norms. 
    • Using programs of “gain-sharing” and other incentive compensation practices, tied to compliance, tied to satisfaction, tied to workplace accidents, absenteeism, etc.
    • Keeping employees informed regarding organizational policies, standards, plans, etc.  Employees involvement and input is a very simple and effective way to mitigate a whole series of risks.
    • Using periodic audits to check documentation against billing, patient results and outcomes against set standards (infections, wounds, falls, etc.) and compliance with company policies and procedures.
    • Education which can occur via very cost-effective means such as webinars, books, staff to staff training, trade association meetings, etc.
  5. Purposeful Activity: The famed educational philosopher John Dewey wrote a great deal about “purposeful activity” or the time spent engaged in seeking a desired outcome.  For Dewey, this involved the application of the scientific method; the search for answers and insights via a systematic and “purposeful” approach.  Health care is a bureaucracy and I watch administrators create additional bureaucracy within their own organizations either in defense of the existing bureaucracy or as a symptom of the bigger bureaucratic problem.  I’ve never frankly, understood why health care is so fond of so many committees and meetings that accomplish virtually nothing and consume layers of management staff ad nauseum.  Purposeful activity for an administrator is about simplifying as much of the operations and business processes as possible and sticking to some real tried and true managerial and leadership approaches.
    • Every meeting must have a purpose, an outcome including a “next step”. No meetings or committees should ever be held or created without a purpose and an outcome and the outcome is never to “meet again”.
    • Every manager must have enough authority and be charged with making and held accountable for decisions.  Managers that are not accountable for “things” and don’t make decisions are enormous wastes of money and enormous sources of risk.  Organizations that allow managers the cover of committees and meetings are wasting enormous amounts of productive energy and time.
    • Formal meetings and committees should be entirely focused on two things and only two things; compliance (required reporting and information sharing) and addressing what is “new” or going to be “new”.  The latter is about change and developing new strategies or learning, etc.
    • Meetings must be brief and have requirements for preparation prior to the meeting and work or tasks to accomplish post the meeting.  Discussions don’t require a “meeting”.
    • Limit communication via voice mail and e-mail and require people to present their issues in person.  Voice mail and e-mail have become the bane of office productivity as they produce “cover”, allowing people not to address what needed or needs to be done. (The famous, “I sent you an e-mail on that”).
    • For an administrator, the most purposeful activity is planning and strategizing; taking in information, developing plans and strategies, and assessing the same in light of current operations.  All activity, or at least as much as possible, should be focused on improving what exists today, matching future industry trends and requirements with current operations and a strategy to address the future requirements, and communicating what is happening via plans, performance indicators, etc.  The test is whether the staff under the administrator can answer, “what happens next and why”.

May 3, 2010 Posted by | Home Health, Hospice, Senior Housing, Skilled Nursing | , , , , , , , | 3 Comments

GAO Releases Report on Poor Perfoming Nursing Homes

In 1998, CMS created the Special Focus Facility initiative or program designed to target or focus attention on improving the poorest performing facilities (performance defined by survey/compliance history).  Each state selects up to 15 of the poorest performing facilities until the program reaches its cap or maximum of 136 facilities.  The requirements from CMS to the states with regard to these identified facilities include more frequent surveys (double the number of average performing facilities), increased penalties, fines and enforcement action to hopefully create more direct movement to improvement and program termination or decertification if improvement is not made within eighteen to twenty-four months.  The GAO was enlisted to assess how states identify the poor performing facilities, to evaluate the effectiveness of state and regional CMS enforcement of the guidelines, and to identify if other strategies are used to improve performance.  The GAO reviewed CMS data from 2005 to 2009 of the facilities in the SFF and selected others and conducted interviews with various officials in fourteen selected states (states selected based on the number of SFF facilities).

What the GAO found was that states often failed to select SFFs from the available data supporting the poorest performers.  In other words, the states only selected SFFs from the five worst performing facilities about 57% of the time.  Factors influencing state selection included whether a particular facility had a change of ownership and such as change was perceived by the state as a movement toward improvement.  In addition, states often selected from possible candidate lists which included current SFFs, limiting the number of potential facilities to target or to address.  In effect, the GAO noted that what should have been “cleansed” candidate lists by virtue of SFFs improving or getting decertified from program participation, ended up being lists that contained facilities with a consistent year over year track record of poor performance.  The GAO further noted that the bulk of facilities in the SFF group are chain or for-profit owned, typically larger in bed size than the remainder of the average to better performing facilities.

In terms of program integrity, the GAO discovered that some states did not follow the SFF requirements.  For example. while survey frequency was better than a few years ago when 26 states failed to comply with twice yearly requirements, certain states (8) still failed to comply with the frequency guidelines.  Additionally, imposition of remedies and enforcement actions varied widely as a result of vague and inconsistent interpretations from CMS.  For example, the report notes that one facility was assessed no Civil Monetary Penalties (CMP) for repeat violations even though established criterion provided for fines of $825 per day.  In another instance, a facility with similar compliance problems to the facility that received no CMPs was assessed CMPs that increased from $300 to $600 per day for non-compliance.  The GAO notes that most facilities did improve beyond the SFF designation although some remained in the SFF program designation substantially longer than the 18 month window for improvement.  The report cites 17% of SFF facilities remained in the program (as of February 2009)  for longer than twenty-five months. 

Per the GAO, some states have undertaken additional or supplemental initiatives and actions to improve SFF performance.  These actions include requiring a facility to employ quality consultants, charging facilities for additional survey costs, providing training and technical assistance to the facilities and allowing one facility per state to work with a CMS designated contractor to identify core causes of repeat non-compliance.

The following recommendations are contained in the report.

  • Expand the program’s public disclosure strategy by directing states to notify facilities that they have been selected as SFF candidates and are “at-risk” of being selected as an SFF.
  • Revise the SFF candidate list by removing homes that are already SFFs so that states have the largest possible number of potential facilities to choose from.
  • Ensure that states impose more stringent enforcement including the highest levels of CMPs permissible and termination as warranted.  Clarify SFF sanctions and monitor to ensure sanctions are applied as required.
  • Provide regional CMS offices with descriptions that should be a part of their Systems Improvement Agreements (SIA) and monitor any lessons learned from their use.
  • Coordinate more directly with HSS and the OIG regarding their experiences with Corporate Integrity Agreements. See a related post I wrote regarding OIG and Compliance Requirements for Boards of Directors at http://wp.me/ptUlY-1b
  • To offset the costs of the program and to provide an additional incentive for SFFs to improve, the GAO recommends that CMS obtain legal authority to imposed additional fees to a facility for increased surveys.

Below I’ve pulled out (from the report) some key SFF facility demographics.  The data represents only facilities within the SFF program.

  • Average number of beds (size): 131
  • Average occupancy: 78.6%
  • Payer Mix:
    • Medicare: 12%
    • Medicaid: 70.8%
    • Other: 17.2%
  • Ownership::
    • For-Profit: 81.2%
    • Non-Profit: 15%
    • Government: 3.8%
    • Chain Affiliated (for profit): 54.9%
    • Chain Affiliated (non profit): 9%
  • Nursing Staff Hours Per Day: 3.48
    • Registered Nurses: .31
    • Licensed Practical Nurses: 1.04
    • Certified Nursing Assistants: 2.39
  • Five Star Rating: 97% at 2 stars or below (74% at 1 star)
    • Health Inspection Component at 1 Star: 92.5%

The full report is available at this link: www.gao.gov/new.items/d10197.pdf

 

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April 23, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , | Leave a Comment

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