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IMPACT Act, VBP, Care Coordination and the SNF Landscape

Now into February, its time to take stock of the Post-Acute/SNF landscape, particularly as the same pertains to the evolutionary policy initiatives in-play and moving forward.  To start, there is little evidence on the horizon of an all-out retreat on the policy changes begat by the ACA.  While some framework is building to “Repeal and Replace” the ACA/Obamacare, the same will leave fundamentally intact, the changes started and wrought by Bundled Payments, Value-Based Purchasing, and the IMPACT Act.  The Republican majority, a smattering of Democrats, and the incoming Secretary of HHS have signaled support for these initiatives.  Should a Repeal strategy move forward any time soon, these elements, skeletal perhaps or whole in-flesh, will likely remain.

Reviewing thematically, these policy initiatives are centered on an intentional focal shift from episodic, fee-for-service payments to payments based upon performance.  Performance in each element is tied to cost and quality.  The objective is to create better outcomes (quality) in a more efficient manner.  Because these things are government policy, they are clunky – less than simple.  In some cases such as with Value Based Purchasing and readmission measures, the methodology is so cumbersome and disjointed (some diagnoses are OK, some are not) that a layman, even one well-educated, could have a hard time qualifying and quantifying an appropriate readmission (by diagnoses, by risk, etc.).

Below is a quick review of the current policy initiatives and what they mean for 2017 for SNFs.

IMPACT Act: The purpose of the Act is to create standardized reporting of quality measures and cost measures across the post-acute domain (HHAs, SNFs, LTCaH, IRF).  The objectives are to reduce avoidable readmissions to acute care settings and to create standardized, comparable quality measures to identify federal policy improvements and payment consistencies.  CMS of course, uses more floral language regarding the objectives and intent.  Ultimately, the translation of the standardized data allows CMS to target regulatory changes and payment initiatives that reward provider performance and streamline (a bit oxymoronic for government) payment systems (rate equalization models).  Below are the pertinent domains under the IMPACT Act

Quality Measures

  • Skin integrity and changes in skin integrity
  • Functional status, cognitive function, and changes in function and cognitive function
  • Medication reconciliation
  • Incidence of major falls
  • Transfer of health information and care preferences when an individual transitions

Resource Use and Other Measures

  • Resource use measures, including total estimated Medicare spending per beneficiary
  • Discharge to community
  • All-condition risk-adjusted potentially preventable hospital readmissions rates


  • Functional status
  • Cognitive function and mental status
  • Special services, treatments, and interventions
  • Medical conditions and co-morbidities
  • Impairments
  • Other categories required by the Secretary

As is common in current health policy, reimbursement policy and other policy interweaves with laws such as the IMPACT Act.  Value Based Purchasing and  Quality Reporting for SNFs, integrates quality measure reporting and results along with readmission performance with incentives or penalties imputed via Medicare reimbursement for 2018.  Beginning in October of 2016, SNFs began to submit QRP (Quality Reporting) data via the MDS.  The first data collection period concluded on 12/31/16.  The Quality Measures reported and applicable under the IMPACT Act (cross setting measures) are:

  • Part A stays with one or more falls with major injury (fracture, joint dislocation, concussion, etc.)
  • Percent of residents with new or worsened pressure injuries
  • Percent of Long-Term Care Hospital patients with an Admission and Discharge Functional Assessment and a Care Plan that addresses function

The Claims Measures are:

  • Discharge to community
  • Potential preventable, 30 day post SNF discharge, readmission to hospital events
  • SNF Medicare spending per beneficiary

The Quality Measures are the elements that impute, based on performance, a reimbursement penalty in 2018 up to 2% of Medicare payments via a reduction in the SNFs reimbursement (rate) update.

Value Based Purchasing (VBP): SNFs are a tad late to this party as other providers such as hospitals, physicians and home health agencies already have reporting and measurement elements impacting their reimbursement.  Hospitals for example, have DRG specific readmission penalties (penalties applicable to common admitting diagnoses).  For HHAs, a nine state demonstration project is under way linking a series of measures (process, outcomes, claims) from the OASIS with customer satisfaction from the HHCAHPS to reimbursement via an accumulation tied to a Total Performance Score.  The measurement years (data gathered) beget payment changes (plus or minus) in outlying years – 2016 data nets payment adjustments in 2018.  The payment graduation increases over time (2018 = 3%, 2022 = 8%).

For SNFs, the VBP measure is 30 day, all cause, unplanned readmissions to a hospital. The measurement reflects a 30 day window that begins at the point of SNF admission from a hospital.  The 30 day window of measurement spans place of care meaning that the patient need not reside in the SNF for this measurement to still have an impact.  For example, a patient admitted to an SNF, subsequently discharged after 14 days to a HHA and then  readmitted to the hospital on day 22 (post hospital discharge) is considered a “readmission” for SNF VBP purposes.  CMS has offered guidance here regarding diagnoses that are excluded from the readmission measure.  Readers that wish this additional information can contact me via my email (on the Author page of this site) or via a comment to this post.  In either case, please provide a valid email that I can use to forward the information.

To avoid getting too technical in this post, a quick summary of how VBP will work is below (readers with greater interest can contact me as provided above for a copy of a Client Alert our/my firm produced last fall on VBP).

  • A SNFs readmission rate is calculated in separate calendar year periods – 2015 and 2017.  The 30 day readmissions (rate) applicable to an SNF is subtracted from the number 1 to achieve the SNFRM (Skilled Nursing Facility Readmission Measure).
  • The 2015 rate is called the Improvement Score and the 2017 rate is called the Performance Score.  Both scores are compared against a benchmark for the period applicable.
  • The benchmark equals 100 points.  The difference between the two (Improvement and Achievement) correlate to points plotted on a range – the Achievement range and the Improvement range.  The higher of the two scores is used to calculate reimbursement incentives or withholds – performance score.
  • Performance scores in terms of points correlate to reimbursement incentives/ withhold.  The maximum reduction or withhold is 2%.  CMS has yet to identify the incentive amount but under law, the amount must be equal in total value to 50-70% of the total withheld.  In effect, we envision a system that imputes a floor of minus 2% with points up to the threshold limit equaling a net of zero (plus 2%) and then climbing above the threshold to the benchmark (national SNF best readmission (average) decile).  This maximum level (and above) is likely to equal 100% of the available incentive.

The 2015 data is already “baked” but 2017 is just beginning. SNFs need to be diligent on monitoring their readmissions as this window is the Improvement opportunity.  Reimbursement impact isn’t until 2019.

Care Coordination: This catch-all phrase is now in “vogue” thanks to the IMPACT Act and VBP, along with the recently released, new Conditions of Participation.  The implication or applicability for Care Coordination is found in the new COPs.  Care Coordination elements are located in 483.21 (a new section) titled Comprehensive Resident-Centered Care Plans.  Specifically, the references to  Discharge Planning (Care Coordination) in this section are implementation elements for the IMPACT Act requirements.  Below are the regulation elements for Care Coordination.

  • Requires documentation in the care plan of the resident’s goals for admission, assessment of discharge potential and discharge plan as applicable
  • Requires the resident’s discharge summary to include medication reconciliation of discharge meds to admission meds (including OTC)
  • Discharge plan must incorporate  a summary of arrangements for post-discharge care including medical and non-medical services plus place of residence
  • All policies pertaining to admission, transfer, discharge, etc. must be uniform, regardless of payer source
  • Requires the facility to provide to resident/resident’s representative, data from IMPACT Act quality measures to assist in decision-making regarding selection of post-acute providers

The above elements are in Phase 1 meaning providers should be in-compliance by now (regulation took effect 11/28/16).

February 15, 2017 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , , | 1 Comment

SNF M&A: The Provider Number Trap

Over my career, I have done a fair amount of M&A work….CCRCs, SNFs, HHAs, Physician practices, hospice, etc. While each “deal” has lots of nuances, issues, etc. none can be as confusing or as tricky to navigate as the federal payer issues; specifically, the provider number.  For SNFs, HHAs, and hospices, an acquisition not properly vetted and structured can bite extremely hard post-closing, if provider liabilities existed pre-close and were unknown and/or unknowable.  Even the best due diligence cannot ferret out certain provider number related liabilities.

The Medicare provider number is the unique reference number assigned to each participating provider.  When initially originating as a provider, the organization must apply for provider status, await some form of accreditation (for SNFs it is via a state survey and for HHAs and hospice, via private accreditation) and then ultimate approval by Medicare/DHHS.  As long as the provider that has obtained the number, remains in good standing with CMS (hasn’t had its provider status/agreement revoked), the provider may participate in and bill, Medicare and Medicaid (as applicable).

Provider numbers are assignable under change of control, providing the assuming party is eligible to participate in the Medicare program (not banned, etc.).  Change of control requires change of ownership or control at the PROVIDER level, not the facility or building level.  The building in the case of an SNF, is not the PROVIDER – the operator of the SNF is.  For example, if Acme SNF is owned and operated by Acme, Inc., then Acme, Inc. is the Provider so long as the SNF license in Acme’s state is to Acme, Inc.  Say Acme decides to sell the SNF property to Beta REIT and in turn, Beta leases the facility back to Acme.  Acme no longer owns the building but remains the Provider as it continues to hold the license, etc. consistent with the operations of the SNF.  Carrying this one step further.  Acme decides it no longer wants to run the SNF but wishes to keep the building.  It finds Zeta, LLC, an SNF management/operating company, to operate the SNF and leases the operations to Zeta.  Zeta receives a license from the state for the SNF and now Zeta is the PROVIDER, even though Acme, Inc. continues to own the building.

In the example above regarding Zeta, the typical process in such a change of control involving the operations of a SNF is for Zeta to assume the provider number of Acme.  The paperwork filed with CMS is minimal and occurs concurrent to the closing creating change of control (sale, lease, etc.).  What Zeta has done is avoid a lengthier, more arduous process of obtaining a new provider number, leaving Acme’s number with Acme and applying as a new provider at the Acme SNF location. While taking this route seems appealing and quick, doing so comes with potential peril and today, the peril is expansive and perhaps, business altering.

When a provider assumes the provider number of another entity at change of control, the new provider assumes all of the former provider’s related liabilities, etc. attached to the number.  CMS does not remove history or “cleanse” the former provider’s history. The etc. today is the most often overlooked;

  • Star ratings
  • Quality measures including readmission history
  • Claim error rate
  • MDS data (submitted)
  • Federal survey history
  • Open ADRs
  • Open or pending, probes and RAC audits

The above is in addition to, any payments owed to the Federal government and any fines, forfeitures, penalties, etc.  The largest liability is or relates to, the False Claims Act and/or allegations of fraud.  These events likely preceded the change of control by quite a distance and are either impossible to know at change of control or discoverable with only great, thorough due diligence.  The former in my experience such as whistleblower claims may not arise or be known until many months after the whistleblower’s allegation.  During the interim, silence is all that is heard.  Under Medicare and federal law, no statute of limitation exists for fraud or False Claims.  While it is possible via indemnification language in the deal, to arrest a False Claims Act charge and ultimately unravel the “tape” to source the locus of origin and control at the time of the provider number, the same is not quick and not without legal cost.  Assuming the former provider is even around or can be found (I have seen cases where no such trail exists), winning an argument with CMS that the new provider is blameless/not at fault is akin to winning the Battle of Gettysburg – the losses incalculable.  Remember, the entity that a provider is dealing with is the Federal government and as such, responsive and quick aren’t going to happen.  Check the current status of the administrative appeal backlog as a reference for responsive and quick.

Assuming no payment irregularities occur, the list preceding is daunting enough for pause.  Assuming an existing provider number means assuming all that goes with it.  On the Federal side, that is a bunch.  The assuming party gets the compliance history of the former provider, including the Star rating (no, the rating is not on the SNF facility but on the provider operating the SNF).  As I have written before, Star ratings matter today.  Inheriting a two Star rating means inheriting a “dog that doesn’t hunt” in today’s competitive landscape.  It also means that any work that is planned to increase the Star rating will take time especially if the main “drag” is survey history.  The survey history comes with the provider number.  That history is where RAC auditors visit and surveyors start whenever complaints arise and/or annual certification surveys commence.

The Quality Measures of the former provider beget those of the assuming provider.  This starts the baseline for Value Based Purchasing.  It also sets the bar for readmission risk expectations, network negotiations and referral pattern preference under programs such as Bundled Payments.   Similarly, all of the previous MDS data submissions come with that same provider number, including those that impact case-mix rates under Medicaid (if applicable).  And, not exhaustively last but sufficient for now, all claims experience transfers.  This includes the precious error rate that if perilously close to the limit, can trip with one more error to a pre-payment probe owned, by the assuming provider.  Only extreme due diligence can discover the current error rate – perhaps.

Avoiding the peril of all of the above and rendering the pursuit or enforcement of indemnification (at the new provider’s expense) a moot issue is simple: Obtain a new provider number.  It is a bit time-consuming and does come with a modicum of “brain damage” (it is a government process) but in comparison to what can (and does) happen, a very, very fractional price to pay.  In every transaction I have been directly involved with, I have obtained a new provider number.  In more than one, it has saved a fair amount of go-forward headache and hassle, particularly on the compliance end.  Today, I’d shudder to proceed without a new provider number as the risks of doing so are enormous, particularly in light of the impact of Star ratings, quality measures and survey history.  Additionally, the government has never been more vigilant in scrutinizing claims and generating ADRs.  Inheriting someone else’s documentation and billing risks genuinely isn’t smart today.

While inappropriate for this post, I could list a plethora of examples and events where failure to obtain a new provider number and status has left the assuming provider with an absolute mess.  These stories are now, all too common.  Even the best due diligence (I know because my firm does it), cannot glean enough information to justify such a sweeping assumption of risk. Too much cannot be known and even that which can, should be rendered inconsequential by changing provider status.  Reliance on a definitive agreement and litigation to sort responsibilities and liabilities is not a prudent tactic. Time and resources are (always) better spent, applying for and receiving, a new provider number and provider status.

February 1, 2017 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , | 3 Comments