As alternative payment models expand and the options clarify, the post-acute segment of the health care spectrum faces a series of strategic questions, primarily;
- Join a network that exists or is forming be it part of an ACO, a SNP, a preferred provider organization in a Managed Medicaid state, or part of a bundled payment initiative
- Form one de novo – a SNP, a PACE, etc.
- Wait and see what evolves as certainly, much will change over the next two to four years.
One consideration that cannot be overlooked is that CMS plans on aggressively pursuing additional “value-based payments” at the expense of fee-for-service arrangements presently in-place. The process, if consistent with what has occurred in terms of roll-out/roll-forward, suggests a pace that will include new initiatives (e.g., bundled payments) every 12 months. Simultaneous or parallel to this movement, states continue to push forward on various hybrid Medicaid options including managed Medicaid plans, hybrid plans for dual eligible individuals, and the encouragement of more SNP and PACE options with some states offering incentives for formation (PACE Innovation Act allows for different program options with different benefit structures across more population categories. Also provides program opportunities for for-profit organizations).
The question oft asked these days is given the above, where to next for an SNF, a HHA, or even an ALF or Hospice? The answer starts with the market area and the dynamics within the market. The trends I see are truly unique and different region to region, market to market, state to state. For example, in certain states and regions, ACOs exist, are up and running, and have experience under their “belt”. In other states, ACOs are just forming or in some cases, re-forming post a distasteful experience and opportunities are fresh. In still other states, ACOs don’t exist and perhaps trial balloons have floated but nothing has persisted to conclusion.
The market factors that drive (majority of) network formation and thus, the maturity of the formation, the opportunities and the palate for additional or new ventures are;
- How much “managed” Medicare and Medicaid exists in the state, region, etc. and for how long. In markets with a large penetration of Medicare Choice plans, narrow networks and the experience and acceptance between providers is greater.
- Are ACOs up and running and/or forming. The more they are or are developing, the greater the interest in and opportunity for, network enhancement and development
- The market experience with early-phase, bundled payments via BPCI – the precursor to the current bundled payment initiatives. Similarly, whether the region is participating in the CCJR initiative or will in the new cardiac bundled payments.
No matter the dynamics of the market however, certainty does exist that post-acute providers must move to adapt to a value- based payment paradigm. How much risk a provider can and will accept depends on the provider, its existing care management acumen, its infrastructure maturity and its financial/capital position. Similarly, the evolution period that predominates the post-acute world now requires balance. This period is still fee-for-service heavy yet, transitioning (depending on regions, markets) to value-based payments. Providers must manage and excel at both though strategies to succeed in both are not mutually exclusive. Additionally, while payments are evolving, the compliance requirements are not. Oddly enough, the forthcoming revised Federal Conditions of Participation for SNFs will not in any way, provide accommodation for providers that work heavily in a transitional, post-acute world. The regulations are long-term care driven and heavily so in some cases wholly anathema to the transitional care world that is evolving.
Assumptively, this episode of care, value-based payment world is not going away. What this means is that survival in such a world for any post-acute provider is to avoid reactive strategy (defensive), instead applying resources and energy in the direction of the change. What I advise, before I answer the questions posed in the title, is as follows;
- Know your market and critically evaluate the landscape. What is going on in terms of Medicare Advantage plans, ACOs, etc.? If not done, have an in-depth conversation with hospital and physician referral partners regarding their approaches, strategies, etc. to bundled payments. Don’t be surprised however, if a level of vapor-lock exists. Be willing to forebear the task and direct some additional dialogue.
- Assess your organization critically. Where are your quality ratings and measures (stars, etc.)? How does your organization manage its lengths of stay, key quality measures (falls, hospitalizations, wounds, patient satisfaction, etc.)? Where is your HIS/MIS at? Can you communicate with other providers, provide physicians access, etc.?
- Can your organization make investments financially in infrastructure and staff realignment while still caring for a payer mix that is predominantly fee-for-service? Can you survive lower margins perhaps even losses while you transition? You may have extra staff temporarily, different staff, and more capital investment than typical.
- Can you laterally partner or downstream? For example, an SNF needs to find a HHA partner. What synergies in the market exist? Can (or will or already is) the SNF be in the HHA business? How about outpatient? How about physicians? Partner? Employ? Joint venture (careful here)?
Concluding: To the questions(s) posed in the title. Join? Yes, particularly if the provider is single site or limited sites in a region. Again, I am assuming the provider is prepared to join (I’ll summarize at the end). Source complimentary networks and get in and watch for opportunities in the market and within the network to develop additional product/service lines.
Form? Not unless the provider has mass, expertise and enough geographic span and parallel partner alignment to manage a population of at-risk individuals for capitated payments. This is a step that requires significant infrastructure and capital. A provider must have enough outlets and partners to manage population risk across a group exceeding normally, 10,000 lives (ideally larger). The common network models applicable for post-acute providers looking to form their own network are SNPs and PACE programs.
Wait? I can’t recommend waiting as doing so will leave any provider at peril of being left-out as networks continue to evolve. This said, a play cautiously strategy is fine provided that the provider or group is diligent and active in gauging networks and negotiating. A wholesale “wait and see what happens” is an ill-advised strategy.
Final Note: By prepared to join a network I mean minimally, having the following pieces with experience and data as applicable.
- Ratings at 3 Stars or better – ideally 4 or higher particularly in markets where multiple 4 star or better providers exist.
- A great QAPI program that monitors outcomes and tracks and trends quality data and quality measures plus patient satisfaction. Minimally, the provider should have data and analysis on infections, falls, wounds, hospitalizations, response times, other care transitions, length of stay, etc.
- A procedure and personnel to care manage referrals through a full episode of care.
- A process of sharing quality data and communication on patient care and service issues across provider segments.
- HIS/MIS at a level that allows certain functional connectivity between providers such as lab/diagnostics, hospital, physicians, pharmacy, etc. such that patient information can be communicated and acted upon.
- Parallel service partners (either owned or contracted with) across, up and down stream – physicians, hospitals, pharmacy, HHA, hospice, outpatient, etc.
- Care algorithms to support best practices for outcomes on key patient profiles (minimally, bundled payments) plus supportive protocols for key co-morbidities such as COPD, CHF, diabetes, peripheral vascular disease, depression, and other source acquired pressure injuries and infections. The latter are necessary to minimize re-hospitalization risk.
- Care staff trained and using INTERACT tools and versed in physician communication protocols, ideally from a source such as AMDA.
On July 25, CMS released a proposed rule to create additional bundled payments/DRG focused EPMs, targeted for July 1, 2017. The announcement/proposed rule is consistent with CMS’ and the Administration’s goal to migrate up to 50% of all traditional FFS (fee-for-service) payments to alternative models by 2018. As with the CJR (bundled payments for hip and knee replacements), the comment period is relatively short. Similarly, the likelihood of CMS deviating much in terms of timelines and methodology (payment) from the proposed rule is slim. The view is that CMS has foretold providers of these initiatives, created a pathway or road map via analogous alternative models (BPIC and ACOs), and developed a systematic approach to the operational elements of the initiatives sufficient for providers to adapt and move forward.
Bundled Payments for Coordinated Cardiac and Hip-Fracture Care
As in the CJR initiative/rule, CMS has identified certain DRGs that it believes via evidence and study, present opportunities for cost reduction and improved quality outcomes emanating from initial hospitalization through an episode of care equaling 90 days. Following a near identical road map or path used with CJR (hip and knee replacement), CMS will provide the originating hospital with a target payment goal based on a regionally weighted average with a small, statistically smoothed reduction. This targeted value is the cost benchmark for the applicable DRG plus all related costs for a period totaling 90 days, encompassing the hospital originating stay. Functionally, the payment equals the hospital inpatient stay, post-acute services, outpatient services, certain physician and supply components, etc. (aka the Episode Payment or “bundled payment”). Below is a summary of the DRGs that make up the new “bundles” and the methodology in terms of how this initiative is set to work.
- Includes cardiac care elements/DRGs for myocardial infarction and coronary artery bypass graft procedures (MI and CABG) plus an orthopedic element for hip/femur fractures and surgeries that is an addition or augment to the CJR. The cardiac elements are mandated for hospitals in 98 MSAs (anyone who wants the list or wants to know about a particular region, contact me as provided on this site). The hip/femur element is only applicable in the CJR regions; the original 67.
- The related DRGs are:
- Myocardial Infarction (MI): DRGs 280-282
- Coronary Artery Bypass (CABG): DRGs 231-236
- Surgical Hip Femur Fracture Treatment (SHFFT): DRGs 480-482
- The Hospital is paid a calculated amount based on a regional target by applicable DRG
- The amount is equal to the cost of the care at the hospital and the target, reflects the total expected cost for the complete episode of care (hospital, physician, post-acute). The actual payment to the hospital is the target amount minus a quality measures discount equal to 1.5 to 3%. Based on actual performance, savings can be returned as an incentive or recouped.
- Post-acute providers bill per fee schedule.
- In year 1, CMS reviews the costs per episode, the applicable quality indicators and patient satisfaction results. The review is against expected costs and quality standards.
- In year 2, CMS reviews the same data and if the costs and quality are equal to or better than expected, the hospital can receive an incentive payment. If worse, the hospital will see a payment reduction (capped at 5% in year 2, moves to 10% in year 3 and 20% in following years).
- Hospitals after year 1, can contract with post-acute providers to share risk (gains and losses) if the post-acute providers meet certain quality standards (3 star or better).
- The whole initiative is slated for a 5 year period after which, CMS will review.
(The above is a cliff-note version covering the major highlights. I have a client-based, in-depth summary that I can provide to readers. Contact me via email at firstname.lastname@example.org or via a comment to this post. Please provide a current, working email address and I will forward the summary, free of charge)
Within the proposed rule, CMS introduced two additional initiatives;
- Cardiac Rehab Incentive Payments: A series of incentive payments to get hospitals under the Cardiac initiative to aggressively push patients into cardiac rehab programs during the 90 day Episode. These payments would be made to participants in 45 regions not selected and 45 additional regions selected within the bundled payment program.
- First 11 cardiac rehab services will include a $25 per service bonus.
- Services after 11 will include an incentive payment of $175 per service, up through the 90 day episode window.
- Sessions are limited to 36 one hour periods over 36 weeks with a possible extension of an additional 36 sessions over a longer period if authorized by the MAC (Medicare Administrative Contractor). Intensive sessions are limited to 72 one hour sessions, up to 6 sessions per day, for 18 weeks.
- A pathway for physicians that participate in bundled payments to qualify for financial rewards under the Quality Payment Program (CHIP and MACRA). Essentially, the methodology creates incentives for physicians that choose to be at a certain level of financial risk for payment loss, to gain incentive payments for meeting certain quality standards and adopting Electronic Health Record Technology.
Post-Acute Implications and Strategies
Unlike CJR, the implications for post-acute providers under the cardiac components are fairly minimal. The typical down-stream referrals (post-acute hospitalization services) for the cardiac components in the rule are minimal. Most cardiac patients utilize after-care services through the hospital directly; principally for cardiac rehab. When post-hospitalization discharges include care services, the bulk are through and coordinated with home health. If more intense periods of inpatient care are required after acute hospitalization, the typical path is discharge to LTAcH or IRF. This component however, can provide some strategic opportunities for SNFs that want to embrace a cardiac program with proper staffing, technology investments (telemetry), etc.
The SHHFT (hip/femur fracture) initiative is similar in opportunity to the CJR. It presents SNFs and HHAs with numerous opportunities to partner with orthopedic groups, hospitals, and surgery centers to develop lower cost, high quality, coordinated care programs. As with CJR, this phase of the bundled payment programs includes regulatory waivers for high quality providers (start ratings 3 and above). These waivers include the three-day qualifying hospital stay for SNF coverage and the relaxation (requirements) of direct referral relationships that include incentive dollars.
For certain post-acute providers, there may be some opportunity to advance into the cardiac rehab arena. While the incentive payments are targeted to the hospital, the hospital can pass these along and many may want do to just that. Hospital cost structures are often too high to reap a modest incentive reward such as provided in the rule, necessitating a partner-type relationship to deliver the actual programming.
Strategically, post-acute providers need to consider the following and position accordingly;
- As with CJR, star ratings matter. SNFs and HHAs that want to succeed, garner partner opportunities and referrals should rate/rank 4 or 5 stars. While three stars can play, the same will be market constricted by the 4 and 5 star programs.
- Quality matters. Post-acute providers need to aggressively monitor their outcomes and their patient satisfaction. I recommend the following at a minimum.
- QA and reduce as much as possible, any rehospitalization. To do this, staff need training, tools such as INTERACT, service depth expanded and reviewed, and proper support tools and equipment available.
- Employ or develop a Care Navigator within your organization (more than one if need be). I recommend that this position is tasked with handling all critical elements of the initial referral and intake, coordinating all care during the post-acute stay, coordinating discharge including referrals downstream (e.g., SNF to home care), coordinating return physician visits, patient teaching, and all follow-ups on status and questions. This role should include watching lengths of stay and gathering critical quality measures such as weight loss, wound/skin, falls, infections, etc.
- Develop and utilize pathways and protocols that correlate to the bundled payment DRGs for the post-acute components. In other words, if your organization is a SNF, it should have a post-surgical pathway for a femur fracture that covers from admission, pain management, therapies, skin and wound, length of stay, patient teaching, discharge, etc. all laid out in a pathway/decision matrix married to care plans. Not only are these necessary to assure effective, efficient care; they are great marketing tools. Collaborate with the hospital, with physician partners and discharge partners to gain a complete perspective.
- Train and develop staff skills to coincide with the types of patients encompassed by the bundled payment models. Your SNF or HHA should have expertise in every care element plus ideally, staff that have advanced training and certifications in key disciplines. For example, an SNF that seeks to take post CABG patients needs RNs with ALS certification and telemetry experience/training.
- Develop a post-acute continuum. Playing in the bundled payment arena now and going forward as a post-acute provider will necessitate having a continuum of services. Bundled payments and being at risk are anathema to truncated, one-off providers. In other words, an SNF that doesn’t have a HHA component and outpatient component won’t be a referral magnet as the EPMs (episodic payment models) move forward. I recommend providers that can, acquire or develop their own programs and those that cannot, partner accordingly. Quality and efficiency are key so if for example an SNF chooses to partner with a HHA, the SNF is warned to find such an agency that will match quality, monitor all elements of outcome data and satisfaction, collaborate on program development, QA, etc. The same is true for outpatient relationships.
As with CJR, the focus in this next phase is to re-shape how the post-acute provider world interacts with the acute hospital and physician world. Providers need to re-organize thematically on quality, efficiency and collaboration. The winners (if you will) are the providers that manage the most services, in a coordinate delivery model, that can demonstrate quality with the ability to manage and coordinate care across a myriad of delivery points; seamlessly.
Nearing the end of the Supreme Court session, the Court issued an important clarification ruling concerning the False Claims Act in cases of alleged fraud. In the Universal Health Services case, the Court addressed the issue of whether a claim could be determined as fraudulent if the underlying cause for fraud was a lack of professional certification or licensing of a provider that rendered care related to the subsequent bill for services. In the Universal case, the provider submitted claims to Medicaid and received payment for services. The services as coded and billed implied that the care was provided by a licensed and/or qualified professional when in fact, the care was provided by persons not properly qualified. In this case, the patient ultimately suffered harm and death, due to the negligent care.
The False Claims Act statute imposes liability on anyone who “(a) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; or (b) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” It defines “material” as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” And it defines “knowingly” as “actual knowledge; … deliberate ignorance; … or reckless disregard of the truth or falsity of the information; and … no proof of specific intent to defraud is required.” The last element is key – no proof of intent to defraud is required.
Though providers sought a different outcome, the initial review suggests the decision is not all that bold or inconsistent with other analogous applications. The provider community hope was that the Court would draw a line in terms of the expanse or breadth of False Claims Act “potential” liabilities. The line sought was on the technical issue of “implied certification”; the notion that a claim for services ‘customarily’ provided by a professional of certain qualifications under a certain level of supervision doesn’t constitute fraud when the services are provided by someone of lesser professional stature or without customary supervision, assuming the care was in all other ways, properly provided. The decision reinforces a narrow but common interpretation of the False Claims Act: An action that would constitute a violation of a federal condition of participation within a program creating a condition where the service provided is not compliant creates a violation if the service was billed to Medicare or Medicaid. Providers are expected to know at all times, the level of professional qualifications and supervision required under the applicable Conditions of Participation.
The implications for providers as a result of this decision are many. The Court concretized the breadth of application of the False Claims Act maintaining an expansive view that any service billed to Medicare and/or Medicaid must be professionally relevant, consistent with common and known professional standards, within the purview of the licensed provider, and properly structured and supervised as required by the applicable Conditions of Participation. Below are a few select operational reminders and strategies for providers in light of the Court’s decision and as proven best-practices to mitigate False Claims Act pitfalls.
- One of the largest risk areas involves sub-contractors providing services under the umbrella and auspices of a provider whereby, the provider is submitting Medicaid or Medicare claims. In these instances the provider that is using contractors must vet each contractor via proper credentialing and then, provide appropriate and adequate supervision of the services. For example, in SNFs that use therapy contractors the SNF must assure that each staff member is properly licensed (as applicable), trained to provide the care required, and the services SUPERVISED by the SNF. Supervision means actually reviewed for professional standards, provided as required by law (conditions of participation), properly documented, and properly billed. The SNF cannot leave the supervision aspect solely to the therapy contractor.
- Providers must routinely audit the services provided, independently and in a structured program. Audits include an actual review of the documentation for care provided against the claim submitted, observations of care provided, and interviews/surveys of patients and/or significant others with respect to care and treatment and satisfaction.
- Establish a communication vehicle or vehicles that elicits reactions to suspicious activity or inadequate care. I recommend a series of feedback tools such as surveys, focus groups, hotlines and random calls to patients and staff. The intent is to provide multiple opportunities for individuals, patients, families and staff to provide information regarding potential break-downs in care or regarding outright instances of fraud.
- Conduct staff training on orientation and periodically, particularly at the professional level and supervisory level. The training should cover organizational policy, the legal and regulatory framework that the organization operates within, and case examples to illustrate violations plus remedy steps.
As we pause for what most Americans consider the beginning of summer and an extended weekend break from work, etc., please never forget those who serve, have served and gave the ultimate sacrifice. Freedom isn’t free! To all my brothers and sisters in arms past, present and future my deepest thanks and respect to you for your service
Across a number of regulatory elements beginning this year (May/June through October), hospitalization and readmission rates (to) post-hospitalization from SNFs will be measured and ultimately, factored into the SNF landscape via reimbursement penalties and Star ratings. Below is a quick summary of where and when the hospitalization/readmission issues come into play.
- CJR – aka bundled payments for Hip and Knee replacement, began April 1. The issue here is that readmissions post-hospital discharge count against the required measurement elements of cost and quality across the 90 day episode of care. The impact is direct to the discharging hospital but in turn, can impact the willingness of hospitals to discharge to an SNF if the readmission risk is outside the regional quality benchmarks. Poor performance can impact referrals, go forward partnerships and for those SNFs that can and will participate at-risk in Year 2, access to incentive payments.
- SNF VBP – Value Based Purchasing begins in July of this year with the first measurement period continuing through July of 2017. Rehospitalization rates for SNFs will be measured (all cause, risk adjusted). Beginning in October 2018, CMS will reduce Medicare A payments by 2% for SNFs that perform on this measure, below benchmark standards.
- Five Star – in May/June of this year, new measures are added including rehospitalizations (plus hypnotic use, discharge home, decline in ADL status since admission, mobility in room). The QMs will be rebased to incorporate these new measures.
- IMPACT Act – Expected in the SNF PPS final rule for 2016 (April, data collection beginning in October 2017) are four new measures including rehospitalization upon admission and 30 days post discharge from the SNF. The other elements are discharge to community, drug regimen review and average cost per beneficiary during and after the SNF stay.
Though I have cautioned facilities to pay attention to their hospitalizations/rehospitaliztions for some time now, it isn’t too late (almost) to get started; started in earnest! Below are my top four recommended strategies to employ ASAP (not in any particular order) to mitigate post-discharge hospitalization risk and post-admission rehospitalization risk.
- QA Your Transitions: Every hospitalization/rehospitalization requires a QA analysis of the reasons why, whether such reasons were appropriate/inappropriate, what transpired at the hospital, and most important, what could be done (if anything) to change the events leading to the transition. The latter element is part of the organization’s QAPI and begets staff training, system change, etc. The key is to do a true root cause analysis.
- Staff Education: As my firm works with facilities constantly, we notice that the largest, single reason for care transitions out of the SNF to the hospital (ER, etc.) is a lack of staff competence in assessment and communication with physicians and families. The inability to present a clear picture of the resident’s current condition, options, monitoring points, etc. creates confusion for the physician and a sense of insecurity for family, precipitating the transition if for no other reason than perceived “safety”. Plenty of tools exist (contact me for resources) from AMDA (physician communication protocols) to INTERACT.
- Advance Care Planning: Too often this subject is viewed as gathering advance directives (code/no code status, Living Wills, DPOaHCs, etc.). While these are important the real crux or guts of this element is the discussion concerning specificity of care decisions, including hospitalization/care transitions. Based on my and my firm’s experience, better than half of all care transitions to a hospital are avoidable with proper planning. Up front, clear conversation with patients/residents and families regarding the SNF resources (what can be done in-house, etc.) and the risks of hospitalization can and will reduce hospital transitions (particularly ER visits). I suggest developing a communication tool regarding the decision(s) and sharing it with staff, physicians and most important, patients and families.
- Algorithms and Pathways: These elements take the vagaries out of the care planning and care delivery process, eliminating what can be and typically are, transition triggers. For CJR, we built hip and knee pathways. These translate to standardized careplans, address the advance care planning elements, discharge points, pain, skin/wound, etc. comorbidities. As these elements are addressed pre-admission and within 24/48 hours of admission, a clear reduction in transition risk is present. Likewise, build as many comorbidity (common) algorithms as possible. For example, I recommend pain, anti-coagulation, diabetes, CHF, depression, and bowel/constipation protocols as a start. Depending on the SNF’s admission profile (typical case-mix), others may be more pertinent. What we know is that too many transitions occur as a result of an unclear game plan and approach to resident/patient care leaving careplanning gaps, communication gaps, and treatment protocol gaps.
Concluding: A few caveats apply. Reducing readmission and/or rehospitalization risk starts at a core facility/organization level. My strategies above assume that the SNF has proper/adequate staff levels and adequate resources in terms of a solid therapy program, medical direction and physician staff. Additionally, the SNF should have (by now) a functioning QAPI program in place. Without such a program, the core QA function required to understand transitions and complete a root cause analysis is only an exercise. Finally, one last tip. Reducing hospitalizations/rehospitalizations is an organization-wide initiative. It is not solely a nursing or social services function. Every discipline has a role and when the root causes of transitions are analyzed it becomes clear quickly, how many little or seemingly minor pieces properly detected and addressed, contribute to reducing this risk element.
The bulk of my work centers around gathering data, analyzing trends and working with the leadership of various organizations to implement strategy or more centered, strategies. The process is iterative, interactive and always fascinating. Throughout my career, I’ve worked within (virtually) every health care industry segment and seniors housing segment. I also counsel and have worked with entities that buy, sell, invest in, consult with, account for, finance, and research health care and seniors housing businesses. Its my work with the latter that is the genesis of this post and my decades of work with the former that is the “content”.
There are two fundamental reasons why health care leadership is hard and different from leadership duties in other industries: 24/7 demands and the immediacy of the customer to the enterprise. Health care and seniors housing (regardless of the segment specific) never closes, has no true seasonality, and demand can increase and decrease with equal force and equal pace, almost entirely related to external factors and forces. Pricing for the most part, other than seniors housing, is almost immaterial and unrelated to revenue. No other, non-governmental, business is as regulated and scrutinized and mandated transparent than health care. Likewise, no other business has the mandate that the full array and intensity of all services must be available 24/7, on immediate demand, with no ability to defer, fallow, or limit. Even a 24 hour PDQ won’t have all services available constantly (if the hot dogs run out, they are gone!).
While other industries will have close customer contact, health care has a unique, and intimate relationship with its customers. In SNFs, Assisted Living Facilities, Seniors Housing, etc. the customer is present for long-periods (years). In hospitals, the customer is present for hours, days, up to weeks at a time (the latter rare unless we are talking LTAcH). In the health care setting, the enterprise has total responsibility for all needs of the customer – great to small. The quality of care and service to all needs matters and is measured, reported and today in many regards, tied to compensation. Back to the PDQ, the over-done hot dog costs the same and there is no governmental entity that maintains a hotline for customer reports and investigations regarding the quality of the hot dog.
In health care, there is a very unique and in many ways, perverted twist concerning the customer relationship. The customer today is a Dr. Jekyll/Mr. Hyde manifestation. No other industry has customers that are bifurcated as such – the payer being a consumer unique and separate from the actual present being. Health care entities, to be successful, must satisfy both and manage the expectations of both, seamless and fluid to each party. I know of no other industry where on any given day in a hospital for example, where it is likely that of 300 individual inpatients there are dozens more of the payer/insurer consumers requiring unique attention, simultaneously. Miss a step, miss a form, etc. and the payer consumer refuses to pay for the human consumer that is receiving or received the care.
Because of the “constant” nature and customer relationships (coupled with many other reasons of course), health care leadership is hard. It is hard because these two fundamental components are nearly, completely, out of the control of the leader. The leader can only react or respond but truly, never change the paradigm or structure and always, in terms of the payer customer, sit beholding to the rule changing process and bureaucracy of the payer customer. This last element can be unbelievably insidious. For example, in the State of Kansas, dozens of SNFs face grave peril in terms of solvency because the State cannot efficiently certify eligibility for Medicaid for qualified seniors. The delay has left dozens of facilities with Medicaid IOUs at six digits and climbing – the human customer receiving care, the paying customer bureaucratically inept and unwilling and incapable of paying its bills, and the SNF sitting with no real recourse.
Given the above, its frankly easy to see why so many leaders fail or simply, give up. The deck is stacked toward failure. On the expense side of the equation, because of mounting regulation, fewer elements are within a leader’s control. With a rare exception, revenue is completely beyond control in terms of price and reimbursement for services provided. With RAC and other audits, revenue initially earned can be retrospectively recast and denied. (The PDQ six month’s later decides to recoup payment for the hot dog because, in its infinite wisdom, you didn’t need to the eat the hot dog or you should have made a wiser food choice). The overwhelming variables that can contribute to failure in a micro and macro sense for a leader are not lessening. His/her organization is open and under scrutiny, 24/7. He/she must oversee and be accountable for the health outcomes of a human customer that in turn are interpreted by the payer customer (remotely), subject to alteration, and retroactive scrutiny. Today, success isn’t just based on what occurred at the point of service but after the service concluded. The enterprise is at-risk for human behavior (compliance and non-compliance) of the consumer for not just days post service but months. Further, the enterprise is at-risk for the satisfaction of a consumer whose behavior and lifestyle may have significantly contributed to his/her need for care and service initially. As one executive told me recently; “We have to tell people the truth about their disease, figure out how to make it sound good and nice, and hope that we have done so in such a life affirming fashion that the patient will give us 5 stars for service. Figure that one out”. Alas, perhaps failure is inevitable.
Aside from failure correlating to burn out or shear “giving up” (the average large system executive tenure is less than 10 years), the failure in leadership that I see resides primarily in two areas. The first is an inability or lack of willingness to realize that the paradigm is constantly changing today and the pace of which, is accelerating. It is human nature to seek equilibrium; to pursue elements of stasis and calm. The same ( is) anathema to leading a health care enterprise. The second area is aversion to risk. Precisely because of the first point, taking risk or being capable of tolerating large elements of risk is imperative today in health care. The best leaders are true entrepreneurs today. They see opportunity and are willing to pursue it with vigor. They find the niches and pursue them. Every bureaucracy and rapidly changing industry paradigm begets opportunity with equal pace and ferocity. For example, the growing “private, non-reimbursed” service sectors in health care that continue to grow and flourish because of and in-spite of the heavily regulated, price tied market. I know of and have consulted for, provider groups that have moved further away from Medicare and managed care to private payment with phenomenal success. Was the strategy a risk? Yes. Most would not take this type of risk. I am harkened however by the notion that at times, the greatest risk present is the risk of doing nothing.
Successful leadership and leaders today, those that I know, have the ability to think systematically and algebraically – to solve the industry polynomials with all of the variables. They are inquisitive by nature and unwilling to accept the status quo, regardless of where and why. They embrace the famed Pasteur quote: “Chance (luck) favors the prepared mind”. They also have the soul and panache (tempered) of Capt. Jack Sparrow (from Pirates of the Caribbean). They like risk and have the entrepreneurial heart and mind to innovate and move fluidly through problems and challenges such that the same are opportunities. They don’t allow their enterprises to become complacent or bureaucratic.
Today, success is about better – better products, better service, and better care. Payers are demanding accountability and want an increasing level of care and service for lower levels of payment. That is the paradigm and it is moving to higher levels of accountability and lower levels of overall payment. The best execs know this and don’t quibble with it (much). They realize that success if about adapting the enterprise accordingly while finding the pliable spots that such an environment creates. These spots are service lines, system enhancements, productivity improvements, and different levels of patient engagement. Similarly, they realize the risk limits of concentration – too much exposure to certain payers. They have seen this trend coming and have already moved. For those still trying to reverse or slow the trend, this is where failure first begins ( the search for stasis in a rapidly changing world).
In my consulting career, I’ve done a fair amount of feasibility work (market, economic, etc.). Similarly, I’ve done a fair amount of similar analyses, primarily related to M&A activity and/or where financing is involved (debt covenant reviews, etc.). Heck, I’ve even done some bankruptcy related work! I’m also queried fairly often about feasibility, demand, market studies, etc. such that I’m surprised (often enough) that a gap still exists between “proper” analysis and simplified “demographic” analysis. Suffice to say, feasibility work is not a “one size” fits all relationship.
I’ve titled this post “CCRC feasibility” principally because the unique nature of a true CCRC project provides a framework to discuss a multitude of related industry segments simultaneously (e.g., seniors housing, health care, assisted living, etc.). Starting with the CCRC concept, a set of basic assumptions about the feasibility process is required.
- Demographics aren’t the arbiter of success or failure – feasibility or lack thereof.
- Demand isn’t solely correlated to like unit occupancy, demographics (now or projected), or for that matter, how many units are projected to be built (following the Jones’ as a qualifier).
- Capital accessibility isn’t relevant nor should it be.
- National trends for the most part, are immaterial. Local, regional and state are, however.
- Projects pre-supposed are projects with inherent risk attached. This isn’t an “if you build it, they will come” type exercise. The results shouldn’t be thought of as a justification for a “specific” project already planned.
The last point typically generates a “heresy” cry from folks and certain industry segments. Regardless, I am adamant here in so much that true feasibility analyses determines “what makes sense” rather or as opposed to, justifying that which is planned (or the implication that the client is paying for a study to justify his/her project). Remember, I am a fan of the fabled quote from Mark Twain attributed to Benjamin Disraeli (the former Prime Minister of Great Britain): “There are three types of lies….lies, damn lies and statistics”. As an economist, I have deep appreciation for this as all too often, I see analyses that smack of this latter type of lie.
(Note: The source of the actual “lies, damn lies” quote is still a mystery…thought initially to be said by Lord Courtney in 1895 but since, proven invalid.)
Carrying this feasibility discussion just a bit further, the approach that I recommend (and use) incorporates the following key assumptions about seniors housing (CCRCs) and to a lesser extent, specialized care facilities (Assisted Living, SNFs, etc.).
- The demand for seniors housing, true housing, is very price elastic. Given the elasticity, all demand work must be sensitized by price. The more specialized or unique the project might or may be, the more sensitive the demand elasticity becomes (greater or lesser).
- Local economic conditions matter – tremendously. This is particularly true for CCRCs and higher-end seniors housing projects, especially real estate conditions.
- Regional and state trends matter particularly the migration patterns, policy issues, job issues, etc. Doubt me? Let’s have a discussion about the great State of Illinois (for disclosure, I have a home and office in Illinois).
- Location(s) matter. I incorporate location/central place theory elements in all of my feasibility work and analyses.
- Demographics are important but not in the normative sense. Yes, age and income qualified numbers are important but education and real estate ownership, location and years residency in the market area(s) can be as impactful.
- Competition is important but in all forms. Given the demand elasticity of seniors housing, the higher the price, the greater the wealth status required of the potential consumer, the greater the options available to that same consumer.
- Ratios matter. The demographics are important but the ratio within the demographic correlated to the project, within various locations, etc. is “money”. (Sales folks love this stuff). How many seniors does it take to fill a CCRC?
Because no one project is equal to another, feasibility work and like analysis is both (an) art and a science. I liken the process to cooking. Recipes are key but taste and flair and creativity are important as well. Honestly, knowing the industry well from an overall perspective is ideal – like being a chef trained by the masters! When I see flawed analysis, it typically comes from a source that follows a recipe; a recipe for market analysis, etc. Knowing the industry, having operated organizations or facilities, being trained in quantitative analysis, etc. separates good or great from average. Remember Twain/Disraeli.
So to the title of this post; the correct or proper methodology for feasibility studies and similar analysis (sans some detail for brevity and not in any particular order)….
New Facility/New Location
- Location Analysis – in economic parlance, the application of elements of Central Place Theory. This includes a review of the site in relationship to key ranked variables such as market/demographics, accessibility, staff/employment access, proximity to other healthcare, other services, etc.
- Pricing – what is/are the core pricing assumption(s)….I’ve written on strategic pricing models on this site. If I am doing the pricing work, I apply the concepts in the Strategic Pricing presentations and worksheets found on the Reports and Other Documents page on this site.
- Demographics – I’ll use my pricing data and my location analysis to frame my demographic analysis. Aside from age and income, I’ll look at migration patterns, education, career history, etc. plus I’ll review the information on a geocoded basis to refine market relationships between customers and other competitors.
- Demand Analysis – From the demographic data and tested against the pricing, I’ll build a demand analysis and a penetration analysis that provides a range of likely target customers, within the market areas, give the pricing information, for a particular product. Historic migration and market area occupancy of like accommodations is used to sensitize the demand analysis.
- Economic Analysis – This is a review of current market conditions and trends that can impact the project’s feasibility, positively or negatively. Real estate, income, employment, business investment, economic outlooks, policy implications such as tax policy, etc. are all key elements reviewed.
- Competitive Analysis – What is going on within the area/regional competition of like or quasi-comparable projects is important as a buffer or moreover, a stability (or lack thereof) check. I like to look at all potential or as many as practical, comparable living accommodations – not just seniors housing (condos, apartments, etc.).
I will complete a major portion of the above with less time spent on location analysis and pricing work (though pricing is still key for accurate demand). I have watched organizations cannibalize their own market share and occupancy levels with expansion projects so accurate gauging of current and pent-up demand is critical along with conditional trends (economic, competitive analysis, etc.).
M&A, Financing, Etc. Projects
Again, all of the above work is relevant but depending on the circumstances, I will incorporate benchmark data from industry sub-sets. For example, for SNFs I look at compliance information, CMS star ratings, staffing numbers, payer mix/quality mix and of course, federal and state reimbursement and policy trends. When I review covenant defaults and provide reports, I narrow the analysis based on the core nature of the default but most often, the issues of late are occupancy, pricing, and revenue models versus fixed and variable cost levels. Pricing work is often key along with a review of marketing strategies.
Is there more to this topic area? Of course and this post isn’t meant to be exhaustive nor a text-book supplement. It is however, a ready framework that can provide guidance to those looking at conducting or contracting for, a feasibility, financing or market analysis. My advice: Getting it done right the first time saves money, prevents future problems, and assists with positive outcomes for any project or purpose.
On April 1, implementation of the CMS expanded Bundled Payments for Care Improvement demonstration for hip and knee replacement (aka CCJR) begins. This phase takes the initial voluntary BPCI program and expands the concept on a non-voluntary basis to 67 metropolitan regions. See my post on the final rule here at http://wp.me/ptUlY-jh. Effectively, Medicare reimbursed knee and hip joint replacements through a covered (Medicare) center (hospital or qualifying surgery center) within one of the designated regions, will be paid on a “bundled” basis.
Beginning April 1, 2016 (and for five consecutive years) CMS will establish a target price for each designated region for each episode (hip or knee) of care. This target price is then discounted by 2% and operates as a benchmark – the bundled payment amount. For any Medicare hip or knee replacement surgery at the qualifying hospital, the payment is designed to reflect the costs of the admission, surgery, hospital services, and all additional post-acute costs of care for 90 days following the surgery. All providers, including the hospital and suppliers, bill Medicare for care provided (Parts A and B as applicable) on a fee-for-service basis. CMS then aggregates the payments made via Medicare for the referenced element of care and all other related (hip and knee) elements across a performance year and compares the same to the regional target. If costs incurred are equal to or lower than the target (bundled payment benchmark) and the hospital met or exceeded certain quality measures, a bonus or reconciliation payment is made (payment is the difference between the actual costs and the benchmark, up to a specified cap) to the hospital. In year one, no penalty is applied for costs above the benchmark or lesser levels of quality. In year two however, less than targeted cost or quality outcomes will create a payment recoup scenario equal to the cost difference compared to the benchmark, up to a certain cap.
Implications for SNFs
For SNFs, while there is no direct correlation in Medicare payments per the bundled payment initiative (no bonus applicability, penalty, etc.), the indirect implications are enormous and potentially for many, survival (or not) deep. Consider the following;
- While the hospital is accountable directly for costs and quality, the cost benchmark covers all care costs within the element of care, including the SNF post-acute stay. An expensive, inefficient stay imputes higher costs into the “total cost” equation.
- While the hospital is directly accountable for the quality measures, the quality measures cross domains. Poor quality, readmissions, low patient satisfaction affects the over quality measures and can lead to payment reductions after year one. The quality measures are;
- Complication rates post procedure
- Readmissions within 30 days
- Patient satisfaction of providers across the element of care
- After year one, only SNFs (that) rated three stars or above can participate in the program. Hospitals can only refer to 3 star or higher ranked providers.
Taking into account the three points above, SNFs can and will experience, game changing referral and relationship dynamics within the affected regions. Hospitals will seek (and have sought) relationships with high quality, cost-effective post-acute providers. For example, one hospital system that I advise regularly has drawn a clear line for referrals at 4 stars and preferably, 5 stars – one year ahead of the requirement. They have already shifted their referral practices in anticipation. Further, as the Final Rule created opportunities (regulatory laxity) and freedom for incentive sharing, alliances are forming whereby providers will share incentives in order to assure high quality, cost-effective outcomes.
Strategies for SNFs in a Bundled Payment Region
While April 1 looms, there is still time for an SNF to get properly positioned initially, for a bundled payment transition. Why I say initially is that most providers, including hospitals, will not be fully ready (and CMS is still providing additional details) for the “new” reality. As with all programs of this nature, a great deal is learned as lived as regulatory details dribble past deadlines and frankly, many providers simply won’t have systems in-place, fully integrated to monitor the costs, quality measures, etc. across all domains. Further, year two is where the game really changes as penalties apply in addition to bonus opportunities and the three star limit becomes effective.
Below is my outline or roadmap that SNFs should follow to succeed and thrive in a bundled payment environment. Note: CMS will push forward, additional elements of care, beyond hips and knees, with bundled payments. Likewise, regions will expand and targeted regulations (separate from bundled payments) for SNFs impute quality measure impacts on payments (commencing in October 2016). Simply stated: the following has broader implications than just bundled payment implications.
- Manage Your Stars: Simple but difficult for many. If your facility is not four stars or above, you will have trouble and will see a reduction in Medicare census and referrals. Even three stars is and will be, inadequate. This is especially true in a market where there are competing facilities at the three or better (star) level. Changing your star rating is not an overnight process but the best start is to drill hard on your quality measures (improve) and survey results. Staffing numbers can shift quickly but only by integrating more professional nurses at the bed side, without reductions in per patient day staff ratios (a financial investment). Remember, with PBJ forthcoming, the numbers can’t be “phantom” staff (sorry but too many SNFs today have jacked up their star levels by gaming the self-reported staffing system).
- QA Your Care Transitions: No SNF should today, fail to intimately manage their care transitions – all transitions. Readmissions are a risk area in bundled payments and today, for SNFs regardless (readmission penalties apply for 2016). Similarly, one of the simplest ways to manage costs related to any stay is to insure that the maximum level of care is available on-site and the resident doesn’t need to transition for things like wound management, radiology, other diagnostics, physician visits, etc. The cost of the transport if attended and billable, the costs associated with the encounter, the diagnostic, etc. all “count” in the analysis of the cost of care per element against the bundled benchmark. In addition, risk is inherent in any transition for a resident/patient. Everything from infection to fall risk heightens when a resident/patient is transported out of the environment and then back.
- Excel at Advanced Care Planning and Discharge Planning: From the hospital encounter through the SNF stay and beyond, keeping the stay efficient and the resident/patient satisfied is all about care planning and discharge planning. The rule of thumb is the earlier the better. If possible, assign a Care Coordinator to the encounter, early – ideally concurrent with the hospital admission. Discuss the options with family, the patient, the team and build as much into the discharge plan as early as possible. For example, if “home” is the goal, get into the patient’s home as early as permissible. If there is family involved, start teaching and providing resources as soon as possible. If post SNF care is required, connect as much of it (e.g., home health) as early as possible and get the other provider elements into the equation ASAP.
- Use an Algorithm or Pathway: Build a hip and knee protocol, pathway/algorithm that covers all elements (typical) of therapy by day by type of surgery. Inclusive should include radiology protocols, pain, wound care, supplies, safety precautions, etc. Work this protocol through your QAPI process with your physicians/Medical Director. Ideally, get hospital folks to react and help and add input, especially Orthopods (if they will participate). I recommend incorporation of pharmacy, nutrition, nursing, and social service as integral elements, especially as the same relate to co-morbidities or post-surgical management. For example, having pharmacy manage and coordinate your anti-coagulation protocol. The more you can develop a “recipe” for folks to follow and measure, the greater the likelihood of a smooth transition, exceptional outcomes, and enhanced patient satisfaction.
- Manage and Align Your Partners: Understanding that risk comes from multiple elements is key to achieving high quality and superior efficiency. Many SNFs use contractors for care elements such as therapy and pharmacy, physician services, etc. Every discipline that is part of the care process must be aligned to assure high quality and efficient care. This environment (bundling) is different now. Its not about “more” care as many have become accustomed via Medicare RUG maximization and extending lengths of stay. It is about the right care. Physicians need to help; keep orders simple, reduced redundancy and unnecessary tests, etc. Pharmacy needs to do medication reconciliation at admission and actually, somewhat virtually. Formularies must be tight to assure the most targeted, effective, and lowest cost medication regime. If home health is part of the discharge process, pick a single partner or limited partners and integrate them into the process. Remember, the risk areas encompass satisfaction and cost elements across a 90 day horizon!
- Build Your Core Competency: Delivering high quality, cost-effective care is about having exceptionally competent, well-trained staff giving the care, supported by focused, competent management. Nurses must be capable of caring for the patient profile from wound to pain to skin to all other components. All staff must be responsive and focused on issues like fall risk, weight loss, dehydration, infection, etc. These issues are monitored daily and part of, what should be, an integrated QAPI program. Social Workers must be able to field questions, coordinate resources, and be responsive, informative and knowledgeable about resource issues (Medicare, insurances, etc.). Review all aspects of care and look to bring them into the environment if feasible. For example, invest in anti-coagulation machines, products to float heels (Heelzup), proper size wheelchairs, patient lifts, air mattresses, etc. I commonly recommend having at least some staff wound care certified, pain management certified, cardiac certified, etc. I like to have therapists with advanced training in neuro, lymphedema care, sports medicine (great for ortho rehab), etc. Without the resources in-house, it is very unlikely that an SNF will be able to manage the current and go-forward demands of lower cost and higher quality.
This last week the Department of Justice and CMS announced a $125 million settlement with RehabCare, a subsidiary of Kindred Healthcare, regarding improper Medicare billing. As in virtually all cases of a similar nature involving false or improper billing to the Medicare program, this matter began with a whistleblower suit (insiders establishing False Claims Act violations perpetrated by the organization). What is different in this case or unique by comparison, is that RehabCare is not a “provider”. It did not actually conduct the billing but as alleged, caused the false or improper claims to occur through a certain set of business practices.
RehabCare has been party to a number of improper Medicare billing settlements and enforcement actions. For example, the Arch Care case in New York (I wrote a post on this case in 2015 at http://wp.me/ptUlY-im). In prior cases, RehabCare was tangentially involved as the contract therapy provider. The enforcement action was taken against the SNF as the “provider” as opposed to the therapy contractor. Recall that the Government/Provider relationship is between CMS and the SNF as it is the SNF that holds the provider agreement and ultimately submits the claim for the “improper” services to Medicare. In this most recent settlement, the Government used the insider information provided RehabCare therapists to direct a “conspiracy” action against the company. Simultaneous to the larger settlement, the Department of Justice announced four other settlements with nursing homes (SNFs) for improper therapy billing, each involving RehabCare as the therapy contractor. The settlements ranged from $3.9 million to Wingate Healthcare (Massachusetts and New York) to $750,000 for a SNF operated/owned by Frederick County Maryland.
To my knowledge, this is the first time that the Department of Justice has brought a conspiracy type suit against an organization, alleging an intent to defraud the government via the billings of the actual “provider”. This is a unique twist in the False Claims Act application (as applied to health care fraud) as it does not involve a party that actually “billed” Medicare – the SNF that contracted with RehabCare filed the claim. The whistleblowers alleged and the government pursued, a case where the allegations ranged from RehabCare setting unrealistic financial goals for its therapists to not allowing discontinuation of therapy services after the therapist recommended discharge to over-treating and upcoding. And while all these allegations may be true, the fascinating element is that the government took the “brunt” action against RehabCare even though the SNFs involved were technically and legally responsible for making sure that the claims submitted to Medicare were proper, legitimate, etc. Ultimately, it is the SNF (the actual provider) that is responsible for assuring that the Government is not billed for inappropriate, improper, fraudulent, etc. services. The False Claims Act nuts and bolts language is below:
(1)In general.—Subject to paragraph (2), any person who—
- With RehabCare fallen, do not be surprised that organizations like Genesis are next or already in process. Any provider (SNF) that uses a national therapy provider for contracting purposes should immediately do all of the following.
- Review the contract between the SNF and the therapy contractor, especially the liquidated damages clauses. Meet with the contractor’s representatives and openly discuss concerns. Undoubtedly, assurances that all is “well” will be offered. Ask for the same in writing and a revisit to the liquidated damages section to re-craft a shared risk provision.
- Engage a qualified firm to conduct a full audit of the therapy contractor’s practices, a reasonable sample of Medicare claims, and supporting documentation. Again, for readers, I have resources here for referrals to the best firms.
- Use a triple-check. Anyone who needs resources, contact me.
- Integrate your billing and Medicare RUGs data into your QAPI. You want to review monthly, your RUGs distribution, EOTs, COTs, lengths of stay, average daily rate, etc. Benchmark your date and trends.
- If you haven’t bid your therapy contract within the last two or so years, plan on it. Again, best practice is to use an outside consultant who knows the therapy side and contracting to assist with the bidding process.
- Consider, strongly, going in-h iouse or developing a hybrid partnership for your therapy services. Again I can provide some resources and direction here. Partnerships can be as beneficial (SNF with hospital, etc.), done right, as in-house programs and again, can go a long way to minimizing the expansive fraud risk and complications that come (historically) via RehabCare, Genesis, etc.
On November 16, CMS issued the final rule for bundled payment demonstration, lower extremity, effective April 1, 2016. A single payment, made to a qualifying hospital in one of 67 regions/MSAs covers all aspects of the hospital care, the surgery, and any post-discharge, post-acute stay components through 90 days (from initial hospitalization). The payment exclusions include unrelated hospital and Part B costs, unrelated acute and chronic DRGs and drugs outside the episode (clotting factors, etc.). The original proposal known as CCJR (Comprehensive Care for Joint Replacement) included 75 regions/MSAs. The final rule whittled the total to 67 excluding regions such as Colorado Springs, Richmond, VA and Las Vegas.
The CJR (eliminate “care”) is the adjunct or next logical progression from the BPCI (Bundled Payment for Care Improvement) project. The BPCI is voluntary. CMS has foretold policy watchers and providers that this initiative was forthcoming and while comments to the proposed rule were deep, CMS was determined to move forward. The sole major concession was a 3 month delay in implementation (April 1 v. January 1). Among the concerns expressed were;
- Impact likelihood on home care (negative) as the home health value based purchasing model comes on-line January 2016. Concern across the industry about adjustment and preparation time given that the two program implementation dates are fundamentally, side-by-side.
- Lack of preparation time and specifics in the final rule regarding payment.
- Lack of fraud and abuse clarifications in the rule. CMS has acknowledged a need to publish guidance and waivers for providers, specifically around physician self-referral and kickbacks (incentives shared between participating Medicare providers in a coordinated care program violate Medicare anti-kickback provisions on a prima facie basis). CMS has provided waivers before to facilitate ACO operation and formation.
The core of the demonstration program is to clearly, create a model for shared risk and shared savings between providers, targeted at common care events that span acute and post-acute stays/utilization. The fee for service average for hospitalization and recovery ranges from $16,000 to $33,000 (excluding medical/physician care). CMS is targeting $343 million in savings over the 5 year program life.
In order to achieve the targeted savings, the program has some unique twists or elements that are different from the typical fee-for-service model.
- The three-day/three inpatient overnight rule for coverage in a post-acute environment is waived. Patients can be admitted or not, surgery performed, and discharged as care and conditions warrant.
- For SNFs to participate, their star ratings must be no less than 3 stars on the CMS Compare website. This is already an issue in certain markets where few facilities meet the criteria.
- The target price for an episode is a blend of historical and regional pricing, discounted by 2%. If the actual spend is less than the target price, a reconciliation or incentive payment is due PROVIDED, the hospital has met or exceeded (30th percentile nationally in years 1-3, 40th percentile thereafter) the HCAHPS (patient satisfaction measures), hip and knee readmissions and hip and knee complications measures. Any over-spend or failure to meet quality measures equals no reconciliation payment. Reconciliation payments are effectively the recoup (partial) of the imputed discount to the target price.
The takeaway for post-acute providers is simple, especially as it relates to the thematic shift this demonstration project is foreshadowing: get lean, get good, and get partners. I wrote about the “new era” a few months ago on this site: http://wp.me/ptUlY-iE . The fee-for-service trend and the Medicare maximization game (highest RUG, longest stay, etc.) is ending. I have lectured and written for years before this rule was ever finalized that quality is the number one element that SNFs and HHAs must understand, embrace and demonstrate if they wish to thrive and survive. The CJR demonstrates it via the “star rating” requirement for SNFs. Facilities that haven’t paid attention, are not up to par, will risk being left out. Improving your star rating is not quick nor is there a gimmick to employ to change the rating or an appeal process available.
In a soon to follow post, I will address the go-forward implications and strategies for post-acute providers, principally SNFs and HHAs, with respect to the CJR.