SNF Update

What looks like the beginning to a rough late-summer/early-fall period, there are now numerous pending and current policy and reimbursement events that are breaking in the SNF industry.  From the July 31 CMS announcement regarding Medicare payment reductions to the release of the marked-up House Tri-Committee bill on Health Care Reform (HR 3200) on the same date, the SNF industry (as well as other industry segments) appear to be in for some rough “policy” and “reimbursement” seas.

Following an apparent trend across the health care industry, CMS gave wide credence to MedPAC’s recommendations in its 2010 reimbursement (Medicare) updates titled in its press release, “More Accurate Payment Rates for Medicare Skilled Nursing Facilities”.  In government speak, more accurate means clearly, lower or less.

• In an effort to balance prior year adjustments with costs and to reduce or constrain overall program spending, CMS is calling for a $360 million reduction via a 1.1% decrease in payment levels from 2009.
• A recalibration of CMIs (Case Mix Indexes) results in a program savings of $1.050 billion (3.3%) but a planned 2.2% inflationary or market basket increase provides for an offset to the spending reduction of $690 billion (hence the $360 million overall “net” reduction).
• The payment reductions and refinements are being justified as a re-balancing to the 2006 RUG refinements that were implemented to better compensate facilities for caring for medically complex patients.  CMS had projected that such refinements would be “cost neutral”  where in reality, patients were being classified more frequently into the higher payment categories, triggering unexpectedly higher payment levels.

In addition to the reimbursement changes intended in this rule, CMS is proposing programmatic and policy changes again in a parallel step to many MedPAC recommendations.

• Introduction of a revised case-mix classification system RUG – IV, with implementation targeted for 2011.
• Providing additional information on the implementation of MDS3.0 with a schedule for completion.
• Information on the possible inclusion by CMS (paralleling a MedPAC recommendation) of a new rate component for non-therapy ancillaries as well as a new requirement for a possible quarterly reporting requirement on nursing home staffing data.

It is possible, and likely, that Congress will intervene and make changes to the implementation of the proposed final CMS rule above however, it appears that it will be more akin to “piling on” rather than softening the blow.  In HR 3200 (the House version of health care reform), the provisions applying to SNFs under the section titled “Medicare and Medicaid Improvements”, more and greater reimbursement and policy changes (greater meaning more dramatic) are foreshadowed.  The key reimbursement and policy changes are delineated below.

• Freeze the market basket update for SNF payment updates in the second, third and fourth quarters of 2010.  Recall from above that CMS’s proposed final rule offsets a substantial portion of a $1 billion payment reduction via an intended inflationary adjustment (market basket update) of $690 million.  This provision would all but evaporate (reduce by 75%) this “positive” offset.
• Add a productivity measurement to the market basket beginning in 2010.  This measurement is designed to trend opposite of inflation as a means of illustrating that improvements in technology and information (productivity) create an efficiency that may mitigate inflation.  On a somewhat positive note, the provision does establish a “floor” for the market-basket that is greater or equal to zero (the adjustment can never be negative).
• Codifies the final CMS rule (discussed above) for 2010, inclusive of payment refinement, introduction of a non-therapy ancillary payment category and provides for a budget neutral adjustment within the payment system for non-therapy and therapy related ancillary services.
• Includes a provision targeting avoidable readmissions between hospitals and post-acute providers scheduled to begin in 2012.  This provision adjusts payments to hospitals for three patient risk categories (determined to be at high readmission risk) based on the percentage of Medicare volume of patients the hospital treats in each category.  These categories are to be expanded over time by the Secretary of HHS and gives the Secretary power to modify the payments for the expanded categories based on hospital performance. In 2015, the Secretary is tasked to implement a risk-based payment system and readmission policy similar to the hospital system, for all post-acute providers.
• Includes a provision directing the Secretary to develop a detailed plan submitted to Congress, within three years, that bundles post acute payments, inclusive of a bundled payment system between hospitals and post acute providers.
• The bill provides for the extension of therapy cap exceptions for medically necessary therapy through 2011.

The bill also includes a whole series of “new” provisions titled, “Nursing Home Transparency”.  These provisions summarized are;

• Requires disclosure of ownership and operator information for each SNF in a format specified by the Secretary.
• Requires SNFs to operate compliance and ethics programs beginning no later than 3 years after the effective date of the legislation.  Further requires the Secretary to develop a quality assurance and improvement program for SNFs beginning no later than December 31, 2011.
• Directs the Secretary to include information on staffing and complaints on the Nursing Home Compare website.
• Requires SNFs to report spending for direct care, indirect care, capital and administrative costs on cost reports beginning two years after the bill in enacted.
• Requires the Secretary to develop a standardized complaint form and requires states to develop complaint resolution processes.  This provision also provides whistleblower protections for employees who complain about care and quality in an SNF.
• Requires the Secretary to establish a method for SNFs to report staffing data based on payroll data, inclusive of agency  and contract staff.  This provision goes into effect two years after the bill is enacted.
• Includes a provision authorizing the Secretary to impose Civil Monetary Penalties (CMPs) for a deficiency that results in the direct proximate cause of death of a resident.
• Directs the Secretary to establish a National Independent Monitor pilot program in concert with the Inspector General of HHS.  This monitor program is designed to oversee the operations of large intra and inter-state chain operators.
• Requires a specific Notification of Closure program that Administrators must follow when a facility is closed.
• Requires facilities to implement a Dementia Awareness and Abuse Prevention training program for all staff prior to employment and if deemed advisable by the Secretary, to be incorporated as part of an SNF’s required on-going training for staff.
• Requires the Secretary to study the content of training programs for Nursing Assistants and Supervisory staff in an SNF and to submit a report to Congress within two years, on the recommendations for revised content and length of the training.

Within the entirety of the legislation, there are dozens of other provisions that will also impact the SNF industry ranging from quality provisions to increased CMP provisions to reductions in the time allowed for Medicare claim submissions (twelve months versus eighteen) and requirements for all providers to adopt programs to detect and eradicate, waste, fraud and abuse.

The CMS final rule notwithstanding, the likelihood of HR 3200 being passed “as is” and enacted is slim to none.  The Senate has yet to send forth its companion legislation on Health Care reform and when it does, assuming the House passes its version and the Senate passes its version, a joint committee will be tasked with forging a final bill for passage and ultimately, presidential signature – if this is at all possible in the upcoming months post the August recess.  In short, changes will no doubt be forthcoming but even within the changes, there is substantial probability that the end or final legislation will include many of the provisions that are in HR 3200.  What is yet known is whether additional, more onerous provisions are included and whether the totality plus, of the reimbursement changes/reductions will stand or (is it possible?) become worse.