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Senior and Post-Acute Healthcare News and Topics

Upcoming Webinar: Reducing Hospitalizations and SNF Reimbursement Implications

I am conducting a webinar on Thursday, November 8 regarding the strategies SNFs can and should employ to reduce unnecessary hospital transfers/hospitalizations (E.R. visits and inpatient admissions).  Value-based purchasing has just taken hold in the SNF realm with facilities about to experience their first outcome October 1, 2018 (incentive or reduction).  I’ll cover the policy implications but moreover, review upcoming reimbursement issues beyond just VBP, delving into the care transition (hospitalization) implications that are woven in PDPM.  For example, with PDPM instilling a critical focus on length of stay via imbedded payment reductions after day 20, facilities will naturally look to shorten lengths of stay perhaps at the peril of VBP (Value-Based Purchasing) implications.

During the hour-long session, I’ll address;

  • Reimbursement and policy related implications associated with unnecessary care transitions/hospitalizations under VBP but also, tangential to QRP, PDPM, Five Star QMs, survey and relative to the IMPACT Act.
  • Proven strategies with tools to identify transition risk, monitor performance and benchmark an SNF against its peers.
  • How to leverage good performance in a competitive market and to gain market share in a bundled payment, Medicare Advantage, pay-for-performance environment.

More information and registration information is available at this link.

http://hcmarketplace.com/reducing-readmissions

 

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September 13, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment

SNF Final Rule 2019: Key Points and Provisions

Beginning yesterday, I’ve been following the news regarding CMS’ annual issuance of Final PPS rules for providers.  Of greatest interest is the SNF Final Rule as it includes a completely new payment system, departing from the RUGS IV, therapy-centric system currently in-place.  I’ve read through the Final Rule (all 424 mind-numbing pages) and summarized what SNFs need to know right now. I will undoubtedly expand upon the PDPM model as more is known and I’ve modeled claims via provider experience data.

RATE: The Final Rule includes a 2.4% increase to SNFs via adjustments to the RUGS IV categories/CMIs.  NOTE:  Providers that have not met their QRP (Quality Reporting) requirements/data submissions will receive a .04% increase – net of the 2% penalty.

SNF QRP: There were no changes made to the SNF QRPs in this rule.  The Claims-Based Measures of, 1) Community/Post-Acute discharge; 2) Preventable re-hospitalizations (30 days post discharge), and; 3) Spending per Medicare beneficiary (SNF) remain.  The Assessment-Based Measures of , 1) Falls with injury; 2) New or worsening pressure injuries post-admission, and; 3) Percent of patients with functional admission and discharge assessments and care plans.  CMS did indicate that it will adopt a “burden” or return on investment test for adoption or removal of future measures.

SNF VBP: The impact of Value-Based Purchasing begins Oct. 1, 2018. This incorporates an incentive payment or penalty reduction for the lone applicable quality measure: 30 day re-hospitalization rates post SNF discharge.  The Final Rule includes notably, an extraordinary circumstances exception policy plus discussion on future baseline periods for measurement, scoring changes, etc.

PDPM: This new payment system (Patient Driven Payment Model) is set to go into effect on October 1, 2019 (FY 2020). It will replace the RUGS IV system.  It is case-mix driven, utilizing the MDS assessment tool to categorize resident care needs via five case-mix categories: Physical Therapy, Occupational Therapy, Speech Therapy, Nursing, and Non-Therapy Ancillary requirements.  The base non-clinical case-mix category remains which captures the room and board and capital costs for SNFs (technical stuff here so no need for detail). As part of PDPM, only three assessments (MDS) are needed/required. The first is correlated to admission, the second to discharge and the third is related to change in condition/change in need.  Payment, regardless of service utilization, is assessment driven via each case-mix category.  Also gone from this system is any intensity measure of therapy services (no minute requirements or frequency). Added to the therapy requirements is a provision that as much as 25% (aggregate) of therapy treatment time can be group or concurrent.  Based on data provided, the unadjusted Federal Urban PDPM rate (10/1/2019) would be $410.85 (before labor/wage adjustments). The Unadjusted Rural PDPM rate would be $425.37.

As in the Proposed Rule, PDPM incorporates a variable rate concept.  The Final Rule maintained this concept unaltered.  After day 20, rates begin to decline at a pace equal to 2% every 7 days, starting at day 21.  The decline correlates to reductions in PT and OT rates (.03 per day) and a reduction in NTA (Non-Therapy Ancillary).  More below on Non-Therapy Ancillary inclusions.

Under PDPM, residents are classified/coded via ICD 10 into one (only one) of ten clinical categories corresponding to the primary reason for the inpatient stay. CMS intends to map ICD-10 codes into the clinical categories for providers.

  1. Major Joint Replacement or Spinal Surgery
  2. Cancer
  3. Non-Surgical Orthopedic/Musculoskeletal
  4. Pulmonary
  5. Orthopedic (that doesn’t fall into #1)
  6. Cardiovascular and Coagulations
  7. Acute Infections
  8. Acute Neurologic
  9. Medical Management
  10. Non-Orthopedic Surgery

To accommodate higher-cost, sicker patients in the SNF setting, PDPM implements a Non-Therapy Ancillary case-mix. The NTA categories are below.  Other than the first category of HIV/AIDS, each NTA is picked-up from a corresponding MDS item. Sorry for the length but I think the list is informative for providers.

HIV/AIDS 

Parenteral IV Feeding: Level High

Special Treatments/Programs: Intravenous Medication Post-admit

Special Treatments/Programs: Ventilator or Respirator Post-admit

Parenteral IV feeding: Level Low

Lung Transplant Status

Special Treatments/Programs: Transfusion Post-admit

Major Organ Transplant Status, Except Lung

Active Diagnoses: Multiple Sclerosis Code

Opportunistic Infections

Active Diagnoses: Asthma COPD Chronic Lung Disease Code

Bone/Joint/Muscle Infections/Necrosis – Except Aseptic Necrosis of Bone

Chronic Myeloid Leukemia

Wound Infection

Active Diagnoses: Diabetes Mellitus (DM)

Endocarditis

Immune Disorders

End-Stage Liver Disease

Other Foot Skin Problems: Diabetic Foot Ulcer

Narcolepsy and Cataplexy

Cystic Fibrosis

Special Treatments/Programs: Tracheostomy Care Post-admit

Active Diagnoses: Multi-Drug Resistant Organism (MDRO)

Special Treatments/Programs: Isolation Post-admit

Specified Hereditary Metabolic/Immune Disorders

Morbid Obesity

Special Treatments/Programs: Radiation Post-admit

Highest Stage of Unhealed Pressure Ulcer – Stage 4

Psoriatic Arthropathy and Systemic Sclerosis

Chronic Pancreatitis

Proliferative Diabetic Retinopathy and Vitreous Hemorrhage

Other Foot Skin Problems: Foot Infection Code, Other Open Lesion on Foot

Complications of Specified Implanted Device or Graft

Bladder and Bowel Appliances: Intermittent Catheterization

Inflammatory Bowel Disease

Aseptic Necrosis of Bone

Special Treatments/Programs: Suctioning Post-admit

Cardio-Respiratory Failure and Shock

Myelodysplastic Syndromes and Myelofibrosis

Systemic Lupus Erythematosus, Other Connective Tissue Disorders, and Inflammatory Spondylopathies

Diabetic Retinopathy – Except Proliferative Diabetic Retinopathy and Vitreous Hemorrhage

Nutritional Approaches While a Resident: Feeding Tube

Severe Skin Burn or Condition

Intractable Epilepsy

Active Diagnoses: Malnutrition

Disorders of Immunity – Except : RxCC97: Immune Disorders

Cirrhosis of Liver 

Bladder and Bowel Appliances: Ostomy

Respiratory Arrest

Pulmonary Fibrosis and Other Chronic Lung Disorders

Summary: Ten clinical categories essentially begin the coding process (reason for admit).  From this point, each case-mix category is developed (PT, OT, SLP, Nursing and NTA). This is done via the admission MDS.  The rate is constant for days 1-20 of the stay.  Beginning on day 21, the rate reduces equal to 2% every additional 7 days.  A change of condition MDS can occur, altering the rate variability (reduction) by change in patient need.  One more assessment (MDS) is completed to recap the stay at discharge and capture QRP data.  In the meantime, stay tuned for additional information and strategic tips on how to prepare for PDPM and what specifically, to know in interpreting the “best path/best-practices” at the facility level.

 

August 1, 2018 Posted by | Skilled Nursing | , , , , , , , , , , , | 2 Comments

SNF PPS Final Rule 2019

Yesterday I wrote a quick post regarding the news that CMS was about to issue the SNF Final Rule for Fiscal Year 2019.  Today, the text is available.  Official publication in the Federal Register is set for August 8th.  Readers may access the text here: SNF 2019 Final Rule

I will have analysis and more information available regarding the Final Rule implications for providers later today.  NOTE: Biggest implications center on the shift away from RUGS IV to PDPM (new payment model).  That shift/change occurs 10/1/19 unless otherwise delayed.  On this site, on the Reports and Other Documents page, there is a PDPM calculation worksheet for download.  You can also access it here via this link: PDPM Calculation for SNFs

The worksheet is a good tool/review to grasp the basic mechanics of PDPM and how rates are/will be derived.

August 1, 2018 Posted by | Skilled Nursing | , , , , , , , , , , , | Leave a comment

CMS Final SNF PPS Rule for 2019: Increases plus PDPM

Late this afternoon, I caught news that CMS will release a number of Final Rules impacting post-acute providers over the next few days.  Below is a quick summary of what is known for SNFs.  I will update this information as I get access to the Final Rule.

  • PPS rates (manual) to adjust by 2.4% (increase).
  • A final version of PDPM is included in the Final Rule.  Implementation steps including dates won’t be known until the Final Rule is issued and likely, there will still be some “fill-in-the-blanks” that will be later developed and issued. The good news is that the assessment and documentation changes that were part of the PDPM proposal remain.
  • There will be some quality measure changes forthcoming as CMS’ Meaningful Measure Initiative is tasked with weighing cost vs. benefit across provider measures.  It will be some time however, before it is clear which measure changes will occur and the impact.  Important to know: Changes in meaningful measures impact QRP and ultimately, Value Based Purchasing/Pay for Performance for providers.  It is important that SNFs pay close attention to these measures as their use is beyond reporting; now reimbursement correlated and compliance correlated as well (new survey process is very similar in many ways to QIS – data driven).

More information on this topic once the Final Rule is public.

July 31, 2018 Posted by | Uncategorized | , , , , , , , , , , | Leave a comment

Five Post Acute Axioms (Truisms)

I read a lot – part of the job.  I hear lots of conversations and participate in many in-person and online.  Last week, I spent a few evenings with my rehab partner.  Between he and my wife, with clients across the country, it was fascinating how the conversation regarding fortune or famine (providers) boiled down to a few simple truths.  Summarizing, those that do well have accepted and work doggedly at embracing and living out these axioms.  Those that are struggling, simply refuse to grasp these plain truths.  Regardless of the entity (SNF, HHA, etc.), these axioms apply (truthfully, for any provider including hospitals).

To preface, I’ve slimmed-down hours upon hours of recent conversations to these five “axioms”.  One could argue more apply.  Between my partners, my wife (a partner) and me, we have some context here as we work with multiple entities that rank in the top 1,000 post-acute providers in the nation.  For example, we all share a working relationship with the 6th ranked SNF in the nation, out of 15,636 SNFs.  Unfortunately, we also have client relationships with the lowest ranked providers including one that ranks 15,609.  This dichotomy (cruel as it is) gives us a unique perspective regarding truisms (embrace them and succeed, ignore them and fail).

  1. Quality Matters: This isn’t about hype or verbiage; it’s about results.  Organizations that are succeeding are doggedly, persistently and hyper-fixated on their care outcomes.  Their culture is deep in quality and they benchmark themselves and what they do, how they perform, with an effort on getting better all the time.  Their outcomes demonstrate their quality.
  2. Staffing Matters: Providers that perform invest in and have in number, great staff perform better.  They put the right people closest to the patients.  They have assessed their operations and know precisely, what levels of staff by credential and education, their operations require.  They train, teach and invest in their “troops”.  You won’t find a great SNF that doesn’t have RNs on every shift, every day.  You won’t find a great provider, HHA or SNF, etc., that doesn’t have actual employees, not contractors, taking care of patients (primarily).
  3. Excellence in Management and Leadership is Imperative: The best have long-term, highly qualified management and leadership at every level in the organization.  They retain great talent and grow it like a prized rose-bush (ever watch rose “aficionados” you’ll get the reference). These folks aren’t the highest paid or even with the most credentials; they are excellent directors of task and people.  The most credentialed (education, certifications, etc.) don’t correlate to the best manager or leader.  In a nutshell: Excellence here means bright, strategic, engaged, earnest, industry and trade experts, that are quality driven.
  4. The Devil is in the Details: The best providers are not just current with policy issues and reimbursement trends, they are ahead and know the implications and manage to these details.  For example, they know length-of-stay matters and they are working to shorten each encounter to only the resources required (days, visits, etc.).  Their quality measures are excellent because they review the dozens of measurable data points to look for trends and to track outcomes.  They have protocols and disease pathways in-place.  They adopted antibiotic stewardship practices before the buzzword existed.  They already were on pain and the management thereof, without or minimizing opioids, before alarms sounded.  They had steps in place to quality review care transitions and hospitalizations.  QAPI was something new but not to them.  Doing things right was and still is, the driver for these excellent organizations.
  5. The Organization is like a Car: This is meant to be a silly reference but also serious.  Driving is all about what is going on ahead of you and being anticipatory and prepared.  The rearview mirror is checked but only briefly.  Failure to pay attention to the road ahead and anticipate hazards, keep safe distances, etc. is how one arrives at a destination, safely and efficiently. Think of it this way: Slow is smooth, smooth is fast (an old and time-honored, Special Forces reference). Great providers embrace this philosophy – do things slowly, smoothly to be able to respond quickly when necessary.  What differentiates the very best providers from the very worst is their focus on FORWARD – being very anticipatory and developing core, innate competencies that help be “smooth and fast” as adaptation is required in health care.

Food for thought.  If one chooses to use the above points on a comparative basis, my guess is you will find what I know.  The best embrace these axioms.  The worst don’t or don’t consistently.  Everyone else in the middle has a choice to make – get better or get worse.  The truth about “great’ in health care is easy to understand.

 

July 16, 2018 Posted by | Home Health, Skilled Nursing | , , , , , , , | Leave a comment

Stuck in Neutral: Bundled Payments and Post-Acute Providers

After CMS nixed the mandatory expansion provisions for Bundled Payments and reduced the metro areas participating in CJR (joint replacement), the prospects for post-acute provider involvement in non-fee-for-service initiatives (payments and incentives based on disease states and care episodes) went in to limbo.  With a fair amount of excitement and trepidation building on the part of the post-acute world about different payment methodologies, new network arrangements, new partnerships, incentive possibilities, etc., CMS put the brakes on the “revolution”; a screeching halt.

While Bundled Payments aren’t dead by any means, the direct relationships for post-acute providers are in “neutral”.  The Bundled Payments for Care Improvement Advanced (BPCI Advanced) initiative announced in January included no avenue for SNFs, HHAs (home health) to apply and participate.  Nationally, other voluntary bundle programs continue including the remnants of CJR, and Models 2, 3 and 4 in Phase II.  According to CMS, as of April of this year, 1100 participants were involved in Phase 2 initiatives.  The Phase 2 initiatives cover 48 episodes of care ranging from diabetes, through various cardiac issues and disease to UTIs.

BPCI Advanced opportunities (episode initiators) involve hospitals or physician groups.  Post-acute will still play a role but the direct connections and incentives aren’t quite tangible or specific, compared to CJR.  Time will tell how the roles for post-acute providers evolve in/with BPCI Advanced.  Oddly enough, the economic realities of care utilization and negative outcome risk suggest that post-acute should play a direct, large role. As hospital stays shorten, outpatient and non-acute hospital surgical procedures increase, the directed discharge to post-acute has taken on greater meaning in the care journey.  HHAs in particular, are playing an expanded role in reducing costs via enhancements to their ability to care for more post-surgical cases direct from the hospital/surgical location.  Simultaneous however, readmission risk exposure increases.  What is certain is that system-wide, the window of 30 to 90 days post hospital or acute episode is where significant efficiency, quality and cost savings improvement lies.

While the direct opportunities initially forecast under BPCI for the post-acute industry have evaporated (for now), strategic benefits and opportunities remain.  Providers should not stray from a path and process that focuses on enhancing care coordination, improving quality and managing resource utilization.  Consider the following:

  1. For SNFs, PDPM (new proposed Medicare reimbursement model) incorporates payment changes and reductions based on length of stay (longer stays without condition change, decrease payment after a set time period).  A premium is being placed on getting post-acute residents efficiently, through their inpatient stay.
  2. For HHAs, payment reform continues to focus on shorter episodes in the future.  Like PDPM for SNFs, the focus is on efficiency and moving the patient through certain recuperative and rehabilitative phases, expeditiously.
  3. Medicare Advantage plans are increasing market share nationwide.  In some markets, 60% of the post-acute days and episodes are covered by Medicare Advantage plans – not fee-for-service. These plans concentrate on utilization management, ratcheting stay/episode length and payment amounts, down.  Providers that again, are efficient and coordinate care effectively will benefit by focused referrals and  improved volumes.
  4. Quality matters more than ever before – for all providers.  Star ratings are increasingly important in terms of attracting and retaining referral patterns  Networks and Medicare Advantage plans are focused on sourcing the highest rated providers.  Upstream referral sources, concerned about readmission risks are targeting their discharges to the higher rated providers.  Consumers are also becoming more market savvy, seeking information on quality and performance.  And of course, government programs such as Value-Based Purchasing place providers with poor performance on key measures (readmissions for SNFs) in the reimbursement reduction pool.
  5. Indirectly, Bundled Payment initiatives move forward and the Advanced option will require physicians and hospitals that participate, to source the best referral partners or lose incentive dollars and inherit unwarranted readmission risk.  SNFs and HHAs that excel at care coordination, length of stay management, have disease pathways in-place, can manage treatment, diagnostic and pharmacology expenses and produce exceptional outcomes and patient satisfaction are the preferred partners.

June 29, 2018 Posted by | Home Health, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , , , | Leave a comment

Interoperability and Post-Acute Implications

I’m not sure how many of my readers are following the subject and CMS stance/policy on interoperability among providers but the concepts and resultant debate are rather interesting.  I am trying to encourage as many clients and readers to tune-in on this subject as the implications are sweeping – positively and negatively.

Interoperability in this context means the ability of computer systems or software to exchange and/or make use of information for functional purposes.  In health care, the genesis of the interoperability concept began with HIPAA in the nineties.  HIPAA spawned the HITECH Act in 2009 which ultimately created Meaningful Use.  For anyone unfamiliar with Meaning Use and its incentive provisions, think no further than Value-Based Purchasing (VBP) and quality reporting.  The IMPACT Act is an analogous outgrowth of blended concepts between Meaningful Use, Value-Based Purchasing and Interoperability.  Conceptually, the goal is to create data measures that have “meaning” in terms of clinical conditions, outcomes, patient care and economics.  Ideally, data that matters and can be shared will improve outcomes, improve standardization of care and treatment processes and reduce cost through reduced waste and duplication.  Sounds simple and logical enough.

In April of this year, with the roll-out of various provider segment Inpatient PPS proposed rules for FY 2019, CMS included proposals to strengthen and expedite, interoperability.  The concept is contained within the SNF and Hospital proposed rules.  The twist however, is that CMS is changing its tone from “voluntary” to “mandatory” regarding expediting or advancing, interoperability. Up until this point, Meaningful Use projects that advanced interoperability goals were incentive driven; no punishment.  Among the options CMS is willing to pursue to advance interoperability are new Conditions of Participation and Conditions for Coverage that may include reimbursement implications (negative) and fines for non-compliance and non-advancement.  In the SNF 2019 Proposed Rule, providers are mandated to use the 2015 Edition of Certified Health Record/Information Technology in order to qualify for incentive payments under VBP and avoid reimbursement reduction(s).  For those interested, the 2015 Certified EHR Technology requirement summary is available here: final2015certedfactsheet.022114

The possible implications for providers are numerous – positive and negative.  The greatest positive implication is a (hopeful) rapid escalation of software systems that can share functional data directly without having to build and maintain separate interfaces (third-party).  Likewise, the proposed regulations will facilitate faster development of Health Information Exchanges (HIEs).  Many states have operating HIEs but provider participation and investment has been limited.  A quick interoperability interchange is via an HIE versus separate, unique data and software platform integration.  As SNFs and HHAs have MDS and OASIS assessment requirements on admission, fluid patient history, diagnoses/coding exchange and treatment history will facilitate faster and more accurate, MDS/OASIS completion – a real winner. Dozens of other “tasky” issues can be addressed as well such as portions of drug reconciliation requirements by diagnosis on admission, review of lab and other diagnostic results, order interchanges and interfaces, etc.

The most negative implication for providers is COST.  In reality, the post-acute side of health care isn’t really data savvy and hasn’t really kept pace with software and technology developments.  Many providers are small.  Many providers are rural. Many providers maintain primarily paper records and use technology only minimally.  Full EHR for them is impractical and with present reimbursement levels, unlikely any time soon.  The second most negative implication for providers is the fragmentation that exists among the system developers and software companies in the health care industry.  The “deemed” proprietary nature of systems and their software codes has limited collaboration and cooperation necessary to advance interoperability. HIEs were supposed to remedy this problem but alas, not yet and not at the magnitude-level CMS is foretelling within its Proposed Rules.

Interoperability is needed and amazing, conceptually.  The return is significant in terms of improvements in outcomes and reductions in waste and cost.  Unfortunately, the provider community remains too fragmented and inversely incentivized today to jump ahead faster (money not tied to integration and initiatives among providers).  Software systems don’t work between providers in fashions that support the interoperability goals.  More troubling: the economics are daunting for providers that are not seeing any additional dollars in their reimbursements, capable of supporting the capital and infrastructure needs part and parcel to additional (and faster), interoperability.

 

June 27, 2018 Posted by | Home Health, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , | Leave a comment

SNFs and PBJ Article

Attached is a link a to a good PBJ (payroll based journal) article.  It covers the basic concepts of what is going on today with regard to staffing level reporting and the Five Star system.  Recall, staffing as a domain, is one of the stars in this system.  The article is posted here (re-published) with permission of the original publication.  Enjoy!

Excerpt_S3_BALTC_0618

June 13, 2018 Posted by | Skilled Nursing | , , , , , , , | Leave a comment

CMS Proposes Reintroduction of Pre-Payment Review for Home Health (with a twist)

In a memo set for release today, CMS is proposing to reintroduce pre-payment review (with a twist) for Home Health claims.  The memo version is here: HHA Pre Payment Recall, CMS first introduced pre-payment review in August 2016, starting in Illinois.  The process required agencies to submit claim-related data BEFORE receiving final payment or face an adjustment in their payment of minus 25%.  This reduction could not be appealed. Providers could resubmit additional data to achieve full affirmation of their claim PRIOR to submitting final billing for the claim.  After a certain threshold of claims was reviewed and determined proper, the pre-payment process would sunset for the agency.

The initial trial that began in Illinois was such a debacle for agencies and the industry due to the time delays and criterion laxity, slowing cash flow and increasing administrative burden that Congress finally stepped in and put the program on hiatus.  The Illinois experiment was so initially bad that further expansion to other states (Florida was next), never occurred.

In this new proposal which will open for comment (60 days) after publication in the Federal Register, CMS is keeping the program design constant with a couple of twists.

  1. Providers/Agencies in the demonstration states of Illinois, Ohio, Florida, North Carolina, and Texas will be able to choose whether to submit data to the MAC (Medicare Administrative Contractor) for review on a pre-claim or post-claim/payment basis.
  2. Providers/Agencies may opt-out of the payment review (pre or post) by accepting payments at a discounted rate – minus 25%.

As with the former program, providers/agencies will need to meet an acceptable level of affirmed claim submissions (pre or post) to move to an episodic review standard.  In effect, after the agency has been subject to sufficient claim reviews and found to be compliant with required documentation and billing standards, the agency transitions to an “every so often” sampling of claims.  As before, providers that fail to submit data or elect pre or post payment reviews will see claim payments automatically discounted by 25%.

The rationale from CMS to return to this review process is the same as before; assurance of claim accuracy and fraud reduction.  CMS continues to believe that HHAs are sloppy and negligent enough in their claims process that improper payments are too high (as a percent of all claims) and or fraud, still prevalent enough to warrant a program of systematic review. Of course, as of now, CMS can offer no assurance that the next incarnation of claim reviews will go smoother than the 2016 experience.  The belief is that lessons were learned and steps put in-place by the MAC to smooth out reviews and not harm agency financial status or create undue additional burden.  Frankly, I hold no such expectation or belief that the process will be markedly better.

May 31, 2018 Posted by | Home Health | , , , , , , , , | Leave a comment

Home Health and Hospice: Strategic Movement in an Evolving Market

Last year 2017, was a bit of a “downer” in terms of mergers/acquisitions in the home health and hospice industry.  Though 2017 was fluid for hospital and health system activity, the home health and hospice sectors lagged a bit.  Some of the lag was due to capacity concerns in so much that health system mergers, if they involve home health as part of the “roll-up”, take a bit of sorting out time to adjust to market capacity changes (in markets impacted by the consolidations).  The additional drag was attributable to CMS proposing to change the home health payment from a per visit function to a process driven by patient characteristics – after implementation, a net $950 million revenue cut to the industry.  CMS has since scrapped this proposed payment revision however, the future foreshadows payment revisions nonetheless including changing to some format of a shorter episode window for payment (ala 30 days).

Hospice has always been a bit of niche in terms of the post-acute industry.  Where consolidation and merger/acquisition activity occurs, it is most often fueled by a companion home health transaction.  De Novo hospice “only” activity of any scale has been steady and unremarkable, save regional and local movement.  From a reimbursement and policy implication standpoint, hospice has been far less volatile than home health.  Minor changes in terms of scaling payment levels by length of stay have only marginally impacted the revenue profile of the industry.  What continues to impact hospice patient flow is the medical/health care culture within the U.S. that continues to be in steep denial regarding the role of palliative medicine/care and end-of-life care, particularly for advanced age seniors.  Sadly, too many seniors still pass daily in expensive, inpatient settings such as hospitals and nursing homes (hospitals more so), racking up bills for (basically) futile healthcare services.  If and when this culture shifts, hospice will see expansion in the form of referrals and post-acute market share.

Despite somewhat (of) a tepid M&A climate in 2017, the tail-end of the year and early 2018 provided some fireworks.  Early 2018 is off to the races with some fairly large-scale consolidations.  In late 2017, LHC group and Almost Family announced their merger, recently completed.  Preceding this transaction in August, Christus Health in Texas formed a joint venture with LHC, encompassing its home health and hospice business (LTAcH too).  Tenet sold its home health business to Amedysis (though not a major transaction by any means).  And, Humana stepped forward to acquire Kindred’s Home Health business.

In the first months of 2018, Jordan, a regional home health and hospice business in Texas,  Oklahoma, Missouri and Arkansas, announced a merger with fellow regional providers Great Lakes and National Home Health Care.  The combined company will span 15 states with over 200 locations.  In other regions, The Ensign Group, primarily a nursing home and assisted living provider continues to expand into home health and hospice via acquisitions; primarily underperforming outlets that have market depth and need restructuring.  Former home health giant Amedysis continues to redefine its role in the industry via additions of agencies/outlets in states like Kentucky.  Amedysis, once the largest home health provider in the nation, fell prey to congressional inquiries and regulatory oversight regarding suspected over-payments and billing improprieties.  Having worked through these issues and shrinking its agency/outlet platform to a leaner, more core and manageable level, Amedysis is now growing again, though less for “bigger” sake, more for strategy sake.

Given the preceding news, some trends are emerging for home health in particular and a bit (quite a bit) less so for hospice.  Interestingly, one of the trends apparent for home health has been present for hospitals, health systems, and now starting, skilled nursing: there is too much capacity, somewhat misaligned with where the market needs exist.  I believe this issue also exists for Seniors Housing (see related post at https://wp.me/ptUlY-nA ) but the drivers are different as limited regulation and payment dynamics are at play for Seniors Housing.  While home health is no doubt, an industry with continued growth potential as more post-acute payment and policy drivers favor home care and outpatient over institutional options, capacity problems still exist.  By capacity I mean too many providers wrongly positioned within certain markets and not enough providers properly positioned to deliver more integrated elements of acute and post-acute, transitional services in expanding markets (e.g., Washington D.C., Denver, Dallas, etc.).

Prior to their final consolidation with Humana, Kindred provided an investor presentation explaining their rationale for exiting the home health business (somewhat analogous to their exit rationale from skilled nursing).  The salient pages are available at this link: Kindred Investor Pres 2 18 . Fundamentally, I think the underpinnings of the argument beginning with the public policy and reimbursement dynamics which are extrapolated against a “worse-case” backdrop (MedPac recommendations don’t equate to Congressional action directly nor do tax cuts equate directly to Medicare reimbursement cuts) get lost to the real reason Kindred exited: excess leverage.  Kindred was overly leveraged and as we have seen with all too many like/analogous scenarios, excessive overhead and fixed costs in a tight and competitive market with sticky reimbursement dynamics and risk concentration on Medicare beget few strategic options other than shrink or exit.

With the backdrop set, the home health environment is at an evolutionary pass – the fork-in-the-road applies for many providers: bigger in scale or focused regionally with more network alignment required (aka strategic partnerships).  I think the following is safe to conclude, at least for this first half of 2018.

  • The M&A driver today is strategy and market, less financial.  While financial concerns remain due to some funky (technical term) policy dynamics and reimbursement unknowns, the same are more tame than 12-18 months ago.  To be certain, financial gain expectations are part of every transaction, just less impactful in terms of motivation.
  • The dominant strategic driver is network alignment: being where the referrals are.  The next driver is “positioning” as a player managing population health dynamics.  Disease management focus is key here.
  • Medicare Advantage penetration is re-balancing patient flow in many markets.  As the penetration escalates above 50% (half or better of all Med A days coming from Med Advantage), the referral flows are shaping to more demand for in-home care (away from institutional settings), shorter lengths of stay across all post-acute segments, increasing complexity and acuity on transition, and pay-for-performance dynamics on outcomes (particularly, re-hospitalization).
  • Market locations are key and very, very strategic.  With home health, being able to channel productivity, especially in a low labor supply/high demand environment, is imperative.  Being proximal to referrals, being tight with geographic boundaries, being able to lever staff resources, and being able to deploy technology to enhance efficiency is operationally, imperative.
  • Partnerships are synergistic today and in-flux.  It used to be that a key partner was an acute hospital.  Today, the acute hospital remains important but not necessarily, primary.  With physicians starting to embrace ACOs and Bundled Payment models, the referral relationship most preferred may be direct agency to doctor.  In fact, the hospital partner may not be anywhere near as valuable as the surgical center partner, owned and controlled by physicians.
  • Capacity and capability to bear risk from a population management perspective and to accept patients with higher acuity needs (in-home) and broader chronic conditions.  Effectively, home health agencies are going to continue to feel pressure to take patients with multiple chronic needs and comorbidities and to coordinate these care needs across perhaps, two to three provider spectrums (outpatient, specialty physicians, hospice if required, etc.).

 

May 23, 2018 Posted by | Home Health, Hospice | , , , , , , , , , , | Leave a comment