Reg's Blog

Senior and Post-Acute Healthcare News and Topics

Post-Acute Issues Worth Watching

In my recent work and across recent discussions, phone conferences, etc., I’ve encountered a thematic trend; a circle of issues or as in reference to geese, perhaps a gaggle. Doing a bit of research and sifting through notes written over the past few weeks, here is what is trending.

Pharmacy: In October of last year, CMS issued a proposed rule with a provision inserted which, if published within a final rule, would prohibit consulting pharmacists in SNFs to be employed by or contracted with, the dispensing pharmacy.  The theory is that when consultations are performed by pharmacists employed by or affiliated with, the dispensing pharmacy, there exists a greater potential for SNF residents to have as part of their medication regime, higher levels of anti-psychotic drugs, psychoactive drugs, and an increased level of unnecessary or unwarranted drugs.  Of concern to most of us working in the post-acute/healthcare arena is that CMS can point to no specific data or research to support this theory, save a well-known fact (historically) that seniors in SNFs use far more anti-psychotic and psychoactive medications that seniors in non-instiutional settings.  Drawing a bright-line conclusion that consulting pharmacists related to dispensing pharmacies are the cause is boneheaded to say the least. 

Despite this flawed view on the part of CMS and the comments generated during the comment period, my sources inside the D.C. beltway are saying that CMS will publish a final rule soon including a provision requiring SNFs to use independent consultant pharmacists, effective January 1, 2013.  Assuming this does occur as I am hearing, SNFs today should begin to work to develop a plan to source possible options ASAP.  The inherent difficulty of course is;

  • Insufficient supplies of pharmacists, particularly those that have current clinical consulting experience.
  • In light of the point above, pharmacists with access to clinical consultation software applications.
  • Knowledge – Geriatrics and chronic disease is a specialized field.
  • Time and efficiency – getting to know the residents and their respective drug regimens will take a non-affiliated consultant longer.
  • Cost – finding a source will not come cheap.

Some options do exist for SNFs in the right market areas.  My best advice is to approach hospital systems, work with universities with pharmacy schools, band together with other SNFs, and start now to build a consultant’s package with your current consulting pharmacist, assuming he/she is working with your dispensing pharmacy.  It is likely the dispensing pharmacy will work with its SNF clients to a great degree, trying as best possible not to lose the current dispensing business as a result of being a barrier in a transition period.

Hospice and Fraud: Most people who are close to the hospice industry either foresaw or should have seen, the current investigative and crack-down activity from OIG and CMS. The industry in terms of providers and benefit utilization, grew substantially over the past decade, despite overall health care utilization remaining on a relatively slow-growth to no-growth plane. For people like me who watch the industry closely, it was illogical to assume that a growth of terminally ill individuals suddenly sprouted and maintained the growth rate recently evident.  The same logic concerns were expressed by Medpac and the OIG with the OIG specifically warning of forthcoming investigations where the bulk of a hospice’s patient encounters arose from nursing home contracts.  Just last July, the HHS OIG indicated that it found that hundreds of hospice agencies relied on nursing homes for over two-thirds of their case load. Other reports from Medpac and the OIG found that literally half if not more of these proto-typical nursing home patients under the hospice benefit, did not meet one or more of the qualifying criteria for coverage/certification.

While the large agencies, predominantly investor-owned will be on the radar, even smaller and regional agencies are coming under scrutiny. CMS reports, and I have encountered this first-hand, that claim denials are up, particularly at re-cert periods.  Diagnoses are being scrutinized carefully, with CMS looking at re-certs and probing for some evidence of deterioration or movement toward death.  CMS knows that certain diagnoses and patient locations correlate to longer stays and as such, the audit focus is squarely on this relationship.

For hospices, the direction is clear – be wary and cautious of certain patient types and the “nursing home/assisted living” patient flow.  Nursing homes and assisted living facilities are not necessarily gold-mines of potential referrals,  In fact, the true number of organically terminal patients that would/will fit the hospice benefit criteria is not much greater from an overall ratio perspective, than the number found in the general population.  While the business relationships between a hospice and a SNF or assisted living facility appear attractive, it is the attractiveness that also makes the same perilous today unless smartly coordinated and managed.

For the past couple of years or so, the hospice growth trend in terms of referrals has been slow to flat.  Nothing regarding the recent fraud cases in the industry suggests this trend to arrest.  If anything, I expect to see the trend marginally down for a period with the industry actually contracting in terms of the number of providers.  Some will simply call it quits while others will sell or merge.  Either way, expect fewer total providers and a stable to decreasing referral pattern shift.

Qui Tam, Me Too: The latest round of major fraud actions and False Claims Act identified violations arose out of Qui Tam actions or more commonly, Whistleblower actions.  While the Federal government is clearly targeting certain post-acute segments (see OIG 2012 workplan), equally as profound an impact on the industry is the proliferation of former employees and/or contractors willing to disclose less than scrupulous provider behavior.  While this element of the law always existed (enforcement and recovery via a private citizen for a portion of the recovery settlement), it has clearly grown to a new level in recent years. The reasons?  First, down economies bring forth certain behaviors on the part of businesses pressured to generate earnings and revenue growth.  If no organic growth exists within the business sector or market(s) a business occupies, it is incumbent upon the business to find new ways to mine potential market niches.  This is very apparent within the hospice sector and in the Medicare component of the SNF industry.  The pressure to build revenues in non-growth periods inherently leads to some corner-cutting or machinations that run afoul of the False Claims Act.  Shrinking or saving to a profit while a short-run strategy, is nearly impossible to maintain over a longer term horizon without shedding fixed costs as well; very difficult.

The problem inherent with manipulation of Medicare coding, billing, referral requirements, etc., is that what seems good or plausible at a 20,000 foot level must also seem good and plausible at the ten foot level; a level where multiple people must buy-in to the same structural arguments, beliefs and incentives.  As the folks existing at the ten foot level rarely see the same level of incentive nor have perhaps, the same level of “skin” in the game, any level of apprehension arising on their part or disgruntlement can be quickly structured into a Qui Tam action. Mix equal parts news coverage with employees disgruntled by certain practices with a growing element of the bar (lawyers) seeking Qui Tam actions with a government willing to pursue these actions and you have a fairly fertile tract of ground for more Qui Tam events.

The moral of this story is that organizations need to be very vigilant concerning their compliance activity, removing any incentives tied to new revenue growth without some counter-balance of audit and scrutiny.  Too many times I have heard providers tout abnormally good results in segments or sectors that are flat to under-performing.  This is a red flag simply from the standpoint of “why you and not everyone else” logic.  If for example, an SNF has an inordinately strong, high paying rehab case-mix and therapy productivity, my counsel is always around “red flag”.  Any facility’s profile should match close to the national case-mix distribution and when it doesn’t, either abnormally low or high, its time to delve deeper.  The same is true with hospice growth, nursing home days, length of stay and percentage of continuous care designations.  Remember the age-old economic axiom – “what gets rewarded or paid for, gets done”.  Incentives perversely aligned within the boundaries of False Claims Act risk areas are ripe for peril and thus, someone within the organization or tangentially connected to this process, to cry foul with today, the expectation of a decent future pay-day.

Revenue and Earnings Cautions: In light of some of my comments regarding Qui Tam above, certain post-acute sectors are seeing revenue reductions and thus, earnings shortfalls resulting from Medicare payment reductions and fraud/probe activity.  Hospice is a segment that I predict will continue to under-perform as growth is truly non-existent and where growth was attainable via SNF relationships, clearly constrained by federal oversight. Additionally, the SNF industry will suffer as well.  Kindred’s recent earnings announcement showed this quite clearly.  Medicare cuts impacting therapy RUGs primarily will impact SNF organizations that relied on “mining” certain RUG categories for revenue and margin.  Without a more streamlined and balanced revenue model, the Medicare reduction comes faster than the trailing operational improvements possible via rebalancing the business enterprise. Kindred announced as much as it intends to shrink its facility holdings via non-lease renewals and concentrate on building a more efficient revenue/expense equation. Remember, fixed costs are the most difficult to shed and variable costs, tough to align in tight labor markets and markets where patient populations flux daily.  In short, only so much can be gained via trimming variable expenses and typically, the amounts are less than adequate to offset revenue reductions and protect margin.

Quality or Quit: The final issue and one that has been lurking in the shadows and unfortunately, ignored by too many providers, is the issue building around “quality”.  The frank reality is that from all my sources in Washington and around the various policy arenas is that quality is what matters.  There is a prevailing and growing belief that payment must be tied to quality and that government must do everything within its power, regulatory and otherwise, to push providers to deliver better outcomes, more efficiently.  This is the genesis of the ACO movement.  I have heard directly from important policy and political figures, directed at provider organizations and industry segments, produce “Quality or Quit” the business.  Providers have longed believed that quality was the furthest thing linked directly to payment, even though lip service was given to the subject.  For post-acute providers and industry segments, the recent release of proposed outcome measures by the National Quality Forum (anyone wishing a copy, e-mail me and I will forward) is a good place to start grasping what is coming, and in a big hurry.  Providers across the post-acute spectrum that are not presently, directly and seriously engaged in measuring key care outcomes, need to get up to speed quickly.  Reimbursement will be tied to quality measures and more important, providers that are not jointly participating up-stream and down-stream in quality improvement across industry segments, will not see the level or quality of referrals necessary to stay in business.

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March 6, 2012 - Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , ,

3 Comments »

  1. Ok… so how do you view the fact that Omnicare made over $600 million in rebates from the Pharmaceutical companies by forcing their pharmacists to recommend a certain drug to be switched out with one they got the kickback from? They were handed a $280 million fine….

    Comment by John | April 6, 2012 | Reply

    • John:

      Thanks for reading and for the comment. I view your Omnicare example the same way that I view lots of things that are inherently broke in health care. Your Omnicare example is no different than incentives, de facto kickbacks, pay for play, etc that I see daily across health care. As I am an economist by training, an age old addage applies: “What get’s rewarded (paid for), get’s done”.

      The pharmaceutical issues in health care are enormously deep and complex. A CMS conclusion that dispensing pharmacies integrated with consulting pharmacies equals increased drug use of a certain type (primarily psychoactive medications) is wholly unsupported. As I have been in and around the post-acute industry for almost 30 years, I know the issue about unnecessary drugs in SNFs is far deeper and the actors causing the problem multiple, starting with the facilities themselves not wanting to invest the time or money in clinially capable staff to mitigate drug use for behaviors, to phsyicians, to the SNF staff, to the payment systems, to families that demand drugs with no clinical efficacy for the patient or his/her diagnoses. Alas, this one is less about the pharmacies involved, not that I support them in any way shape or form, but the systemic issues involving all of the parties. This issue isn’t fixed by prohibitive regulations.

      Comment by Reg Hislop III | April 6, 2012 | Reply

  2. I have first hand experience of what HOSPICE Doctors are cabable of.
    They DO overbill…The DO use ‘sales” pitches that leave out important words….
    Using the word Pallative and no mention of the word HOSPICE or ‘dying’ is a sneaky way to have a family member put into the PALALTIVE/HOSPICE facility….
    And once the patient is in the ‘quiet, nicely furnished’ facility the doctors put these patients on BAD DRUGS without the knowldege of the family members…
    A family member often does not realize the ‘trickery” UNTIL they get the health records..
    Records and be changed…They can be added or disappear…

    The HIPPA law does Nothing to protect the ‘patients’ .It does nothing to protect the ‘elderly’…HIPPA only protects the Dishones and Unethical medical personel.
    There is no need for HIPPA for the Honest medical personel….

    I h

    Comment by mary | August 8, 2013 | Reply


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