Reg's Blog

Senior and Post-Acute Healthcare News and Topics

Credit Markets to Remain Tight: FDIC Issues Caution

The Chairman of the Federal Deposit Insurance Corporation issued a statement warning that the biggest area of remaining risk for banks is commercial real estate loans. Her statement comes as a result of continued rising losses on commercial real estate loan portfolios. To date, over the past two years, banks have written off $6.2 billion in loans backed by commercial property. There is an additional $500 billion (estimated) of commercial real estate loans set to come due in the next three or so years.

What this means for healthcare capital lending is that markets will remain tight, especially within the traditional commercial banking arena. Healthcare lending is heavily backed by real estate (plant, property and equipment) which is unfortunately, often (and rightly so) viewed as specialized, single use collateral. In the event of default, there is truly no ready market to turn to for willing and able buyers. In addition, property values due to the specialized use, are difficult to ascertain. While comparables are available to a certain extent, there are huge regional differences in property values making comparables from one region to the next literally like comparing apples to oranges.

As long as lenders see potential softness and losses within even their “vanilla” commercial portfolios, they will remain extremely gun shy about lending for healthcare real estate projects.

October 15, 2009 Posted by | Uncategorized | Leave a comment

OIG Reports Published on Hospice

In a post I wrote at the end of July concerning CMS’ 2010 rate announcement and compliance and regulatory trends, I indicated how the OIG was becoming more vigilant in reviewing hospice utilization, lengths of stay and in particular, the correlation between lengths of stay and hospice patients in an SNF.  This past month, in mid-September, the OIG released two reports on the coverage and utilization characteristics of hospice patients in an SNF.

The first report concentrated on whether hospice patients residing in the SNF actually met the coverage criteria for hospice benefit eligibility.  In order for a patient to receive hospice coverage, the following criteria must be met;

  • Services are reasonable and necessary
  • The Patient or his/her designated, legal representative elects care per the regulations
  • Prior to service commencing,  a plan of care is developed
  • Hospice services are provided in accordance with the plan of care
  • Patient has a terminal condition(s) and is certified as such

Within the report, the OIG indicated that a substantial percentage of claims by hospices for patients within an SNF failed to meet the above criteria.  For example, of the claims reviewed by the OIG, 82% did not meet the criteria resulting in erroneous payments of $1.8 billion.    Within the 82%, the OIG indicated that 63% failed to have a plan of care established, 33% did not meet the election requirements, 31% failed to provide care as detailed in the plan of care and 4% did not meet the terminal condition requirement.  As a result of these findings, the OIG recommended that CMS implement new methods for educating hospices on the requirements as well as conduct routine, targeted reviews as well as additional oversight work to improve hospice compliance with the requirements.

In the second report, the OIG examined the nature of hospice care provided with SNF settings.  The report found that the average claim for hospice care amounted to $960 per week for a total of $2.59 billion in 2005 – 2006.  During this same period, the number of hospice patients residing in an SNF increased by 3%. The OIG also indicated that the average hospice patient in an SNF received 4.2 visits per week with 96% of the claims receiving professional nursing services, 73% received aide services and 68% receiving medical social work services.  The report was intended as informational for CMS.

What the next steps from CMS will be as a result of this report are unknown.  As I have written before, it is likely that CMS will continue to conduct more reviews, probes and audits of claims, particularly those arising within an SNF setting.  It is also more likely than not, that CMS will begin to deny all or portions of stays for the same technical reasons that the OIG found.  I have seen more scrutiny being paid by CMS on probe reviews to diagnoses and more denials as a result of insufficient support (documentation) of terminal status.  I think it is fair to say that regulatory activity will assuredly increase for the Hospice industry.

October 15, 2009 Posted by | Hospice, Policy and Politics - Federal | , , , , | Leave a comment