May 11 and PHE: Provider Alert
On May 11, the COVID Public Health Emergency (PHE) is set to end and along with it, a whole slew of requirements end or change, and regulatory waivers applicable to the Public Health Emergency, the same (ending). The end of the PHE will have positive and negative impacts on providers of all types though some things that were applicable during the PHE will continue via CMS rulemaking (tele-health provisions for example). One of the most negative impacts of regulatory waivers ending is the return of the three-overnight rule (3 day stay) for patients entering an SNF and potentially, receiving Medicare coverage for their qualifying stay. I wrote a post on this waiver change here: https://wp.me/ptUlY-w5
Among the most notable changes that will occur for providers with the end of the PHE are the requirements around masking, testing, and vaccination mandates for staff. Each of these conditions are effectively, eliminated with the expiration of the PHE. While other countries across the world have eliminated all or most of their pandemic restrictions/requirements over the past year, the U.S. and its health system have been slow to relax requirements with the Biden Administration extending the emergency up until May 11. Similarly, the emergency patchwork has followed through to states, some long ago abandoning masking requirements, vaccination mandates, testing, etc. What has been confounding is the myriad of rule interpretations and requirements that varied from municipalities to counties, to states, and ultimately, to the Federal government. For Medicare/Medicaid providers, Federal requirements superseded all other provisions in any other jurisdiction.
Within the Public Health Emergency period, even providers not participating in Medicare or Medicaid were impacted by the Federal policies. Many states chose to follow the Federal PHE provisions, layering the same over providers within the senior housing industry (aka Assisted Living and some CCRC/Independent Living under state law). Illinois is an example. In contrast, other states chose to ignore the Federal PHE provisions when not applicable to providers such as hospitals, nursing homes, home health, etc. Iowa, Florida, Texas are examples of states that early-on in the pandemic created rules or as in the case of Iowa, passed legislation prohibiting vaccine or mask mandates within state control.
Come May 11, confusion will no doubt remain prominent on COVID infection control/public health requirements. For example, the only updated CDC guidance on masking requirements dates back to September of 2022. In this guidance, the recommendation for masking requirements for visitors, patients, and staff is conditioned on a CDC tracking mechanism for the level of community concentration of COVID infection. Reporting from health departments, hospitals, SNFs, etc., fed this mechanism. Masking recommendations were tied to this level (high recommending masking vs. low, recommending optional masking). COVID testing requirements were also tied to this measure.
Effective with the end of the PHE, CDC has indicated that it would no longer report on the level of community infection/transmission. The PHE has deferred consistently to various agency recommendations for requirements and then subsequently, enforcement as needed. Clearly, we will see extensive confusion unless the CDC issues new guidance clearing up, the masking requirements tied to community COVID prevalence. I’ve watched many providers already move to a “no mask required” status, regardless of updated guidance. I’ve also watched many providers stuck and confused by virtue of state requirements vs. CDC requirements vs. where the community COVID prevalence really was in their area. The CDC guidance for long-term care (fundamentally the same for hospitals) is here: https://www.cdc.gov/coronavirus/2019-ncov/hcp/infection-control-recommendations.html?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fcoronavirus%2F2019-ncov%2Fhcp%2Fnursing-home-long-term-care.html
I’ve seen some news coverage/reporting on the end of the Public Health Emergency, but it is very spotty. I also know by virtue of travel, etc., the awareness of COVID among providers and the community is varied. As I routinely traverse Illinois, Wisconsin, and Iowa, I see wide differences in COVID precautions, alerts, monitoring, requirements being applied, etc. Some of this due to region and state policy and some of it is due to provider behavior. Iowa as I mentioned, long ago took a stance against most PHE COVID related mandates and recommendations whereas Illinois, has followed the PHE Federal recommendations consistently. Iowa hospitals required to follow CMS COVID regulations, maintained vaccination and masking conditions though recently, I have seen most hospitals end masking requirements.
For providers, May 11 is very near. I suggest providers adopt the following strategies realizing, come May 11, regulatory confusion will likely remain.
- Update internal infection control policies regarding vaccination, testing, masking to conform to the changes that will occur with the end of the PHE.
- Communicate these changes to staff ASAP.
- Communicate these changes to patients and families, ASAP. Remember, the end of a mandate does not mean a change in behavior. It may be that staff will want to maintain their masks in some cases and patients/families the same. Allow for flexibility.
- State agencies that are required to survey and enforce compliance may also be slow to adopt. Trade associations are your best bet to help with regulatory transition. Recognize, state agency behavior will not adjust in some cases, as quickly as provider behavior.
- Conduct ongoing public communication via your website, via newsletters, etc. One and done won’t work.
- Definitely, DON’T, follow a path of resisting the end of the PHE and its requirements. I’ve watched provider sometimes, fail to adjust and in this failure, more problems occurred. I know the old “an ounce of prevention” thinking may still apply when it comes to vaccines or masking but be careful. If the regulation is not there, a forced or strongly urged condition, can lead to regulatory problems, labor law problems, community relations problems, and potentially, litigation.
Top 5 Tips for Recruiting in a Tough Labor Market
I’ve done a number of presentations on the staffing challenges facing providers and how, certain strategies work and others don’t in terms of recruitment and retention. Over my 30 plus years in the industry, I’ve had reasonable (ok, very good) success in building and retaining high-performing teams, including direct care staff. I’ve been fortunate to have many folks who have worked with me, follow me from assignment to assignment, some across the country. Leadership is no doubt key to recruiting successfully as people want to work with winning organizations. Likewise, really good recruiting strategies don’t use the same methodology as the past – namely advertise, incent (throw money at it), repeat. Steve Jobs said it best: “Innovation is the only way to win”.
Most healthcare providers can’t financially compete for staff, consistently. In reality though, staff only work for money when they see no long-term value in the employment proposition. I know travel nursing and agency nursing catch lots of news and sound sexy and high paying. I also know nurses (really, really well as the same are throughout my family) and, the lure of travel nursing is short, regardless of the money. Stability, home base, regularity, working with good colleagues and peers has more value to most nurses.
Before I offer my five “DOs” for recruiting, let me offer a few “DON’Ts” and a reminder. The reminder is recruiting is like marketing – it requires constant, incremental effort to achieve success. Superb marketing campaigns and brands build year-over-year. One misstep, however, can damage a brand significantly (see Bud Light). The “don’ts” mostly focus on money as in don’t think you can buy staff and don’t think, sign-on bonuses buy anything other than applications and temporary workers. Don’t focus on the economic alone but on the goal of recruiting. Like marketing, it’s about positioning the organization to attract workers. The sale or close comes via an H.R. specialist or someone exceedingly good in the organization of convincing people of the value of working for the organization.
My Top 5 tips for recruiting are….
- Focus on recruiting introductory, PRN workers first. Stop advertising for shifts, full-time, part-time, etc. Focus on people who are interested in flexible work and are willing to take a role and see how it goes. This is the “dip your toe in the water” insight. Be prepared to pay well but not necessarily crazy. You won’t be dealing with many if any benefits for this group other than some soft stuff (meals perhaps, incentive rewards like a gift card now and then, t-shirts) so hourly rates can be decent. Likewise, be prepared to pay weekly if not even more frequently.
- Have a killer, multi-media/onboarding/orientation program. Little investment here but not much. YouTube, Tik Tok (can’t believe I wrote that), a website, and other applications can be used to recruit (what it’s like to work for us) and to onboard and orient. The more new staff, even your PRN, feel comfortable walking in the door, the easier it will be to get them and keep them. Giving them a stack of policies and procedures, a big manual, a drone-on HR speaker or a computer-based checklist is a certain turnoff.
- Give the Bonus to the Staff. Turn your own staff into recruiters and pay them for it. Nurses know nurses, CNAs know CNAs, etc. Comp and incent them to bring referrals and comp them well. Sign-on bonuses really don’t work but referral bonuses do. Heck, do individual and team and create a bit of competition and fun.
- Create a Marketing Campaign and Have Accountability. Recruiting is marketing. Stop thinking otherwise. Sure, many think it’s an HR function but most who do, are wrong. It’s an organization function today requiring the best talent. For people to join your organization as employees, they need to know “why” – what are the tangibles and intangibles. Why should I work for you? This is not about pay and benefits but about the value and benefit internally, of a person working for XYZ organization. What’s the value proposition? What’s the real reason people work and stay for an organization (trust me, it’s not money). Build the case and sell that case.
- Get out of your own way. I watch organizations fail as their message is all wrong – tired, non-descript, sounding like everyone else. I watch organizations fail as their environment and their culture are all the same. Stop and align the incentives. Reward what matters and differentiate. Remember the Jobs quote in the first paragraph. Innovate. Stop looking externally at what everyone else is doing and stop going to the same conference sessions. Direct care staffing has certain red rules but not as many as providers think. In other words, stop the “can’t, regulations won’t let us” and start with WHAT can we do. Maybe even bend a rule or two if the same doesn’t jeopardize patient care or quality. Worklife for nurses and CNAs in terms of direct care has lots of negatives but many that I see are driven by provider foolishness – too much paperwork not necessary, too many meetings not necessary, and very few positive touches and rewards. If your culture and the work create fun, ownership, and staff love their work and their company, recruiting others to join the team just got that much easier.
Upcoming, I’ll touch on the opposite of recruiting – retention.
Merge/Affiliation in the Cards?
I pay close attention to economic trends and to the health care industry in general, as the same are applicable. One trend I’m watching quite closely is business consolidation and mergers/affiliations. In the general economy, a lot of consolidation is occurring post-pandemic. Restaurants are closing outlets (Red Lobster, Krispy Kreme, Burger King, etc.), retail outlets too like Bed Bath and Beyond and even, Wal Mart are closing stores in various locations. The drivers? Simplistically, supply chain issues (increased costs and inability to pass along the same via price) and labor costs plus worker shortage. There is another driver in some closures and that is environment as restaurants and retailers are leaving communities with high-crime and homelessness as they simply cannot generate a sustainable retail climate amidst theft (inventory loss), customer erosion (customers staying away from certain locations, etc.). Whole Foods leaving San Francisco is an example.
Health care and senior living/housing are not immune to these same pressures. Labor is a huge issue facing all providers today. Changing environment, particularly for urban providers is an issue. Supply chain issues and supply costs are additional motivators or drivers. And let’s not forget the impact of COVID (yet to totally abate in health care and senior living) and increasing regulatory costs. Below are some examples of consolidation and affiliation moves that I have seen recently.
- Diversified Healthcare Trust (REIT) merging with Office Properties Income Trust. This is really an access to capital play as Diversified is constrained from refinancing debt due to covenants. It has a pretty large capital need to improve its senior living facilities (primarily IL, AL and CCRC). Like most REITs with senior living holdings, the occupancy levels remain below targets/desired levels.
- Good Samaritan Lutheran/Sanford is offloading a large amount of skilled nursing facilities and other senior living centers across 15 states (primarily western states). Good Samaritan was the second largest chain provider of senior living.
- Sanford, which merged with Good Samaritan, is in the process of affiliating with Fairview Health. Fairview includes Ebenezer (senior living) which, is the largest non-profit manager of senior living projects in the country.
- Theda Care health system in Appleton, WI announces an affiliation plan with Froedtert/Medical College of Wisconsin health system. The two, primarily hospital and clinic-based organizations will offer services along with locations throughout the eastern corridor of WI, primarily Milwaukee metro area and the Fox Valley area (Appleton and Green Bay as the metro reference).
Looking at the press releases and then, reading other disclosure information and knowing players in each of these scenarios, a similar series of factors are driving the affiliation/merger/consolidation activity. Not surprising, these factors are not unique to health care/senior living. They are the same factors in many cases, driving decisions across all businesses/industries.
- Labor availability and cost. Affiliations and outlet reductions reduces labor cost and vulnerability to staff shortages.
- Stagnant volumes and revenue shortfalls. Senior living is not back to pre-pandemic occupancy levels and frankly, while the trend is improving, it could be a while before we see pre-pandemic occupancy levels.
- In the case of senior living, further movement toward home and community-based care options is eroding demand. This means, provider capacity is impacted. Closing outlets or selling them to more localized providers such as the case with Good Samaritan, make sense. Local providers have inherent market advantages that large, national or regional players simply don’t have.
- Supply chain improvements are possible with a larger platform though by experience, they are not as large and impactful as often forecasted. Single-source buying is good and can achieve discounts but often, the reliance on one source may challenge quality targets and innovation. I’ve seen this definitely occur with food and food service supplies.
- Overhead reduction is the biggest gain or biggest possible gain. Reducing management layers and consolidating overhead functions can cut millions of dollars of duplicative positions. In really good mergers/affiliations, bureaucracy is also reduced netting more efficiency and better care/service. This however, comes over time.
- Access to capital can improve as scale improves. In other words, larger organizations have more opportunities and outlets to raise capital when needed, especially if the scale achieved is margin positive.
- Increased market share and increased market opportunities can occur. For example, in the case of the Theda Care and Froedtert affiliation (if it closes), both systems get access to new markets via their affiliation and new customers without having to “build new” or “start new”. New building and starting new locations/outlets is expensive and time consuming. Leveraging the business footprint with a synergistic partnership is much faster and in theory, less expensive.
More mergers/affiliations to come? No doubt. While the economy is moving toward a recession and labor remains challenging, providers will have to look toward possible strategic opportunities that include adding services, becoming more efficient, building/improving capital access, and accommodating rising costs without concurrent increases in reimbursement or additional rate. Affiliations make sense for some providers, especially when selling is not a real or viable option (non-profits).
I’ll provide a merger/affiliation strategy document/post soon!
Hospice Proposed Rule – 2024
Just about a week ago, CMS released their proposed payment rule for hospices, effective for the Federal Fiscal Year of 2024, beginning October 1, 2023. As readers likely know, these proposed rules are more than just payment rates, incorporating certain regulatory requirements that pertain to the program and Medicare participation (for providers). The rules are subject to change and often, end-up somewhat modified. In most cases however, one can get a pretty good feel for the final “macro” events – rate and programmatic changes to getting a provider, reimbursed for the work it did.
As has been the trend with all Medicare programs, rate is noted as “gross” then subject to certain offsets. The offsets are typically, changes in the labor regions, market baskets (inflation), and the dreaded “multi-factor productivity adjustments”. Each of these elements singular or in combination can influence the final rate providers receive. Note: Initial payment rate updates are basically internally modeled CMS rates, times the market basket calculated inflation.
For Hospice, the market basket inflated rate projected for 2024 is 3.0% – increase. The net rate, after the productivity factor adjustment of .2% is applied is 2.8%. The aggregate cap (max payable to a hospice patient per year) inflates as well by 2.8%, from $32,486.92 to $33,396.55.
Now, the rub for 2024 in this proposed rule is the penalty hospices will receive for failing to meet quality reporting requirements. CMS is recommending that the penalty move from 2% to 4%. This would provide a deficient hospice (not meeting quality reporting requirements) with a rate reduction equal to -1.2% (2.8 – 4.0). CMS indicates that it will provide updates to the HQRP (quality reporting) data reporting periods along with updates on new quality measures and the HOPE patient assessment (Hospice Outcomes and Patient Evaluation) development.
Part of this proposed rule incorporates the end of the COVID -19 public health emergency, slated for May 11. As such, certain elements within the emergency are updated within the proposed rule. Telehealth is one such element impacted. In the rule, CMS is proposing to end the allowance of telehealth routine visits on May 12, 2023, but continuing the allowance of routing home care certifications via telehealth until 12/31/2024 (yes, through the end of 2024).
In an effort to address what is believed to be, on the part of CMS, increasing hospice fraud, CMS is proposing that physicians or permitted providers that can certify patients for hospice, be participating Medicare providers or have validly opted out of the program for the certification period of the patient.
The proposed rule incorporates a fair amount of statistical data on utilization and program growth. Without questions, CMS is concerned about program integrity and in particular, the growth of for-profit agencies. States that have raised suspicion with rapid growth are Texas, Arizona, California, and Nevada. California took action to restrict new agency growth, creating a moratorium. At issue? Hospices where the license location includes more than one hospice, management working at more than one agency simultaneously (a no-no) and concerns about legitimacy of certification of cases. To note however, this issue is not new within the hospice industry as even the large providers (e.g., VITAS) have come under scrutiny for inappropriate certifications, long-lengths of stay within institutional settings, etc.
The fact sheet for the proposed rule is here: https://www.cms.gov/newsroom/fact-sheets/fiscal-year-fy-2024-hospice-payment-rate-update-proposed-rule-cms-1787-p
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.).
SNF Fortunes, HCR/Manor Care and Salient Lessons in Health Care
Long title – actually shortened. In honesty, I clipped it back from: SNF Fortunes, HCR/Manor Care, Five Star, Value-Based Payment, Hospitals Impacted Too, Home Health and Hospice Fortunes Rise, and all Other Salient Lessons for/in Health Care Today. Suffice to say, lots going on but almost all in the category of “should have seen it coming”. For readers and followers of my site and my articles and presentations/speeches, etc., this theme of what is changing and why as well as the implications for the post-acute and general healthcare industry has been discussed in-depth. Below is a short list (not exhaustive) of other articles I have written, etc. that might provide a good preface/background for this post.
- https://rhislop3.com/2017/05/04/snf-outlook-reits-kindred-and-where-to-from-here/
- https://rhislop3.com/2017/03/28/health-systems-hospitals-and-post-acute-providers-making-integration-work/
- https://rhislop3.com/2017/02/15/impact-act-vbp-care-coordination-and-the-snf-landscape/
- https://rhislop3.wordpress.com/wp-admin/post.php?post=1323&action=edit
- https://rhislop3.com/2016/09/14/post-acute-providers-and-narrow-networks-join-form-or-wait/
- https://rhislop3.com/2015/05/12/snfs-a-new-era-in-post-acute-care-begins/
- https://rhislop3.com/2016/10/13/conference-presentation/
Maybe a better title for this post is the question (abbreviated) that I am fielding daily (sometimes thrice): “What the Heck is Going On?” The answer that I give to investors, operators, analysts, policy folks, trade association folks, industry watchers, etc. is as follows (in no particular order) HCR/Manor Care: This could just as easily be Kindred or Signature or Genesis or Skilled Healthcare Group…and may very well be in the not too distant future. It is, any group of facilities, regardless of affiliation, that have been/are reliant on a significant Medicare (fee for service) census, typified by a large Rehab RUG percentage at the Ultra High or Very High level with stable to longer lengths of stay to counterbalance a Medicaid census component that is around 50% of total occupancy. The Medicaid component of census of course, generates negative margins offset by the Medicare margins. For this group or sub-set of facilities in the SNF industry, a number of factors have piled-on, changing their fortune.
- Medicaid rates have stayed stable or shrunk or state to state conversions to Managed Medicaid have slowed payments, added bureaucracy, impacted cash flows, etc. This latter element in some states, has been cataclysmic (Kansas for example).
- Managed Medicare has (aka Medicare Advantage plans) increased in terms of market share, shrinking the fee-for-service numbers. These plans flat-out pay less and dictate which facilities patients use via network contracts. They also dictate length of stay. In some markets such as the Milwaukee (WI) metro market, almost 50% of the Medicare volume SNFs get is patients in a Medicare Advantage plan.
- Value-Based Care/Impact Act/Care Coordination has descended along with bundled payments in and across every major metropolitan market in the U.S. (location of 80 plus percent of all SNFs). This phenomenon/policy reality is dictating the referral markets, requiring hospitals to shift their volumes to SNFs that rate 4 Stars or higher. The risk of losing funds due to readmissions, etc. is too great and thus, hospitals are referring their volumes to preferred environments – those with the best ratings. The typical HCR/Manor Care facility is 3 stars or less in most markets.
- Overall, institutional use of inpatient stays is declining, particularly for post-acute stays. Non-complicated surgical procedures or straight-forward procedures (hip and knee replacements, certain cardiac procedures, other orthopedic, etc.) are being done either outpatient or with short inpatient hospital stays and then sent home – with home health or with continuing care scheduled in an outpatient setting. Medicare Advantage has driven this trend somewhat but in general, the trend is also part of an ongoing cultural and expectation shift. Patients simply prefer to be at home and the Home Health industry has upped its game accordingly.
Adding all of these factors together the picture is complete. Summed up: Too much Medicaid, an overall reduction in Medicare volume, an overall reduction in length of stay, and a shift in the referral dynamics due to market forces and policy trends that are rewarding only the facilities with high Star ratings. That is/will be the epitaph for Manor Care, Signature, etc.
Five Star/Value-Based Care Models, Etc.: While many operators and trade associations will say that the Five Star system is flawed (it is because it is government), doesn’t tell the full story, etc., it is the system that is out there. And while it is flawed in many ways, it is still uniformly objective and its measures apply uniformly to all providers in the industry (flaws and all). Today, it is being used to differentiate the players in any industry segment and in ways, many providers fail to realize. For example, consumers are becoming more savvy and consumer based web-sites are referencing the Five Star ratings as a means for comparison. Similarly, these same consumer sites are using QM (quality measure) data to illustrate decision-making options for prospective residents. Medicare Advantage plans are using the Five Star system. Hospitals and their discharge functions use them. Narrow networks of providers such as ACOs are using them during and after formation. Banks and lenders use the system today and I am now seeing insurance companies start to use the ratings as part of underwriting for risk pricing (premiums). Summed up: Ratings are the harbinger of the future (and the present to a large extent) as a direct result of pay-for-performance and an ongoing shift to payments based on episodes of care and via or connected to, value-based care models (bundled payments, etc.). Providers that are not rated 4 and 5 stars will see (or are seeing) their referrals change “negatively”.
Home Health and Hospice: The same set of policy and market dynamics that are adversely (for the most part) impacting institutional providers such as SNFs and hospitals is giving rise to the value of home health and hospice. Both are cheaper and both fit the emerging paradigm of patients wanting options and the same being “home” options. Hospice may be the most interesting player going forward. I am starting to see a gentle trend toward hospices becoming extremely creative in their approach to developing non-hospice specific, delivery alternatives. For example, disease management programs evolving within the home health realm focused on palliative models, including pain and symptom management. Shifts away for payment specific to providers ala fee-for-service will/should be a boon for hospices. The more payment systems switch to episode payments, bundled or other, the more opportunity there is for hospices to play in a broader environment, one that embraces their expertise, if they choose to become creative. Without question, the move toward less institutional care, shorter stays, etc. will give rise to the home care (HHA and hospice) and outpatient segments of the industry. As fee-for-service slowly dies and payments are less specific (post-acute) to place of care (institutional biased and located), these segments will flourish.
Hospitals Too: The shift to quality providers receiving the best payer mix and volume and payments based on episodes of care, etc. is impacting hospitals too. This recent Modern Healthcare article highlights a Dallas hospital that is closing as a result of these market and policy dynamics: http://www.modernhealthcare.com/article/20170605/NEWS/170609952?utm_source=modernhealthcare&utm_medium=email&utm_content=20170605-NEWS-170609952&utm_campaign=dose
REITs, Valuations, M&A, and the Investment World: As we have seen with HCR/Manor Care and Signature (likely others soon), REITs that hold significant numbers of these SNF assets have a problem. These companies (SNF) can no longer make their lease payments. Renegotiation is an option but in the case of Signature, the coverage levels are already at 1 (EBITDAR is 1 to the lease obligation). IF and I should say when, the cash pressure mounts just a bit more, the coverage levels will need to fall below 1. This significantly impacts the REITs earnings AND changes the valuation profile of the assets held. What is occurring is their portfolio values are being “crammed” down and the Return on Assets negatively impacted. And for the more troubling news: there is no fluid market today to offload underperforming SNF assets. Most of the Manor Care portfolio, like the Genesis and Skilled Healthcare and Kindred portfolios, is facilities that are;
- Older assets – average age of plant greater than 20 years and facilities that were built, 40 years or more ago. These assets are very institutional, large buildings, some with three and four bed wards, not enough private rooms and even when converted to all private rooms, with occupancy greater than 80 or so beds with still, very inefficient environments. Because so few of these assets have had major investments over the years and the cash flow from them is nearing negative, their value is negligible. There are not buyers for these assets or operators today that wish to take over leases within troubled buildings with high Medicaid, low and shrinking Medicare, compliance (negative) history, etc. Finally, the cost to retrofit these buildings to the new paradigm is so heavy that the Return on Investment (improved cash earnings) is negative.
- Three Star rated or less with fairly significant compliance challenges in terms of survey history. Star ratings are not easy to raise especially if the drag is due to survey/compliance history. This Star (survey) is based on a three-year history. Raising it just one Star level may take two to three survey cycles (today that is 24 to 36 months). In that time, the market has settled again and referral patterns concretized – away from the lower rated providers.
- In the case of Manor Care, too many remain or are embroiled or subject to Federal Fraud investigations. While no one building is typically (or at all) the center of the issue, the overhang of a Federal investigation based on billing or care impropriety negatively impacts all facilities in terms of reputation, position, etc.
As “deal” volumes have shrunk, valuations on SNF assets are getting funky (very technical term). The deals that are being done today are for high quality assets with good cash flow, newer buildings or even speculative deals on buildings with no cash flow (developer built) but brand-new buildings in good market locations. These deals are purchase and operations (lease to operators and/or purchased for owner operation). Cap rates on these deals are solid and range in the 10 to 12 area. Virtually all other deals for lesser assets, etc. have dried up.
Final Words/Lessons Learned (or for some, Learning the Hard Way): As I have written and said ad nausea, the fee-for-service world is ending and won’t return. Maximizing revenue via a focal opportunity to expand census by a payer source, disconnected from quality or services required, is a defunct, extinct strategy. That writing was on the wall years ago. Today is all about efficient, shorter inpatient stay, care coordination, management of outcomes and resources and quality. The only value provider assets have is if they can or are, corollary to these metrics. By this I mean, an SNF that is Five Stars with modern assets and a good location within a strong market has value as does the operator of the asset. An SNF that is Two Stars with an older building, a history of compliance problems, regardless of location, 50 percent Medicaid occupied has virtually no value today…or in the future. Providers that can network or have an integrated continuum (all of the post-acute pieces) are winning and will win, especially if the pieces are highly rated. Moreover, providers that can demonstrate high degrees of patient satisfaction, low readmission rates, great outcomes and shorter lengths of stay are and will be prized. The world today is about tangible, measurable outcomes tied to cost and quality. There is no point of return or going back. And here’s the biggest lesson: The train has already left the station so for many, getting on is nearly impossible.
Hospice, Hospital Readmissions and Penalty Implications
Late yesterday, a reader (who also happens to be a client from time to time), posed this question to me. “When hospitals discharge to hospice and if the hospice has to readmit to the hospital, the hospital doesn’t get penalized for the readmit? Is this true?” Since this question is not one that I have been asked, to my recollection, ever before my guess is that others may have a similar query or interest. My answer to him/the question, follows.
The short answer is that the readmission penalty issue is not applicable for a hospice to acute hospital transfer/admission. There is one single caveat that must be present, however: The patient in question must be on the Medicare Hospice benefit rather than traditional Part A and receiving services under some other Hospice offered program such as a Palliative Care program (a home health care style offering). Below is the reason and regulatory/legal construct why the readmission penalty is not applicable.
- When a patient elects and is qualified under the Medicare Hospice benefit, the patient opts (effectively) out of his/her traditional Medicare benefit structure – including the assumed coverage for inpatient hospital coverage offered under Medicare Part A.
- The issue or applicability for readmission penalties for hospitals is only under traditional Medicare fee-for-service or qualified Medicare Advantage plans It is also only applicable to certain originating DRGs (not all readmissions qualify for a penalty).
- When a patient enrolls in the Medicare Hospice benefit, the assumptive relationship under Medicare with regard to the patient and his/her provider relationship changes. The assumption becomes that the patient is effectively, now the “property” (bad word choice but illustrative nonetheless) of the Hospice. This is so much so that no patient can receive the Hospice benefit under Medicare without becoming a patient of a qualified, certified Hospice provider. Unlike the relationship under traditional or managed Medicare, the patient care is thus the property and coordinated responsibility of the Hospice. Prior to enrollment, the patient had no connective relationship to any provider – free (for the most part) to seek care from any qualified provider (Med Advantage networks notwithstanding).
- By his/her enrollment in the Hospice benefit with a Hospice, the patient agrees to a set of covered benefits tied to his/her end-of-life care needs. He/she also elects to have his/her care effectively provided by or through the Hospice exclusively. In fact, the patient can’t really show-up at a hospital for an admission and expect to be admitted, without the approval of the Hospice. The only option a patient has to receive care in this fashion is to “opt out” of the Hospice benefit.
- Once a patient is enrolled in Hospice, there effectively is no “hospital” benefit left. The use of a hospital by a Hospice patient is through the Hospice exclusively and any hospital or inpatient use is (only) technically via a GIP or other contracted event/need. In fact, the hospital has no DRG or admission code nor records the GIP stay as a “hospital” admission. It (the hospital) can’t create a bill to Medicare for this event and must seek all payment through the Hospice. As no bill is generated to Medicare Part A with a corresponding DRG and billing code, no inpatient admission occurred and thus, no readmission occurs either applicable (or not) for a penalty.
Like most things Medicare, you won’t find a succinct “memo” to this effect. Instead, you have to know and go through the detail on the program benefit side and understand how billing, coding and benefit eligibility/program payments work for each provider segment.
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.
The Election is Over….Now What?
We knew that sooner or later, the first Tuesday in November would arrive and with that, a new President and changes (many or few) to Congress. The outcome certain, we move to uncertainty again concerning “what next”?…or as applicable here, what next from a health policy perspective.
With Donald Trump the incoming President-Elect, only so much from a policy perspective is known. Hillary Clinton’s path was easier to divine from a “what next” perspective as fundamentally, status quo was the overall direction. Trump’s likely direction and thus, changes to current policy, etc. are hazy at best. Thematically, there are points offered throughout the campaign that give some guidance. Unfortunately, much that drives current reality for providers is more regulatory begat by legislative policy than policy de novo.
Without divining too much from rhetoric, here’s what I think, from a health policy perspective, is what to expect from a Trump Administration.
- ObamaCare: Trump ran on a theme of “repeal and replace” ObamaCare aka the Affordable Care Act. This concept however, needs trimming. Repealing in total, existing federal law the magnitude of the ACA is difficult if not nearly impossible, especially since implementation of various provisions is well down the road. The ACA and its step-child regulations are tens of thousands of pages. Additionally, even with a Republican White House and Republican-majority Congress, the Congressional numbers (seats held) are not enough to avoid Democratic Senate maneuvers including filibuster(s). This means that the real targets for “repeal and replace” are the insurance aspects namely the individual mandate, Medicaid expansion, certain insurance mandates, the insurance exchanges, a likely the current subsidy structure(s). The other elements in the law, found in Title III – Improving the Quality and Efficiency of Health Care, will remain (my prediction) – too difficult to unwind and not really germane to the “campaign” promise. This Section (though not exclusively) contains a slew of provisions to “modernize” Medicare (e.g., value-based purchasing, physician quality reporting, hospice, rehab hospital and LTACH quality reporting, various payment adjustments, etc.). Similarly, I see little change made, if any to, large sections of Title II involving Medicaid and Title IV involving Chronic Disease. Bottom line: The ACA is enormous today, nearly fully intertwined in the U.S. health care landscape and as such, too complex to “wholesale” eliminate and replace. For readers interested in exploring these sections (and others) of the ACA, a link to the ObamaCare website is here http://obamacarefacts.com/summary-of-provisions-patient-protection-and-affordable-care-act/
- Medicaid: The implications for Medicaid are a bit fuzzier as Trump’s goals or pledges span two distinct elements of the program. First, Trump’s plan to re-shape ObamaCare (repeal, etc.) would eliminate Medicaid expansion. As mentioned in number 1 prior, this is a small part of the ACA but a lipid test for Republican governors, especially in states that did not embrace expansion (e.g, Wisconsin, Kansas, etc.). Second, Trump has said that he embraces Medicaid block-grant funding and greater state autonomy for Medicaid programmatic changes (less reliance on the need for states to gain waivers for coverage design, program expansion, etc.). It is this element that is vague. A series of questions arise pertaining to “policy” at the federal level versus funding as block grants are the latter. The dominant concern is that in all scenarios, the amount of money “granted” to the states will be less than current allocations and won’t come with any matching incentives. With elimination of the expansion elements, how a transition plan of coverage and care will occur is a mystery – federal assistance? state funding mostly? What I do predict is that Medicaid will only suffer the setback of a restructure and replacement of the Medicaid expansion elements under the ACA. I don’t see block grants happening any time soon as even Republican governors are opposed without a plan for wholesale Medicaid programmatic reform. Regardless of the approach, some initial Medicaid changes are in the offing, separate from the Block Grant issue. The Medicaid Expansion issue is no doubt, a target in the “repeal and replace Obama Care”. The trick however is to account for the large number of individuals that gained coverage via expansion (via eligibility increases due to increased poverty limits) – approximately 8 million impacted. This is less about “repeal” and more about “replace” to offset coverage lapse(s) for this group.
- Related Health Policy/ACA Issues: As I mentioned earlier, the ACA/ObamaCare is an enormous law with tentacles now woven throughout the health care industry. The Repeal and Replace issues aren’t as “clean” as one would think. The focus is the insurance mandate, the subsidies, the mandated coverage issues and to a lesser extent, Medicaid. That leaves fully 80% of the ACA intact including a series of policy changes and initiatives that providers wrestle with daily. These issues are unlikely to change in any substantive form. Republicans support alternative delivery projects, value based purchasing, etc. as much if not more than Democrats. Additionally, to repeal is to open a Pandora’s Box of agency regulations that tie to reimbursement, tie to other regulations, etc. For SNFs alone, there exists all sorts of overlap between Value Based Purchasing, Bundled Payments, new Quality Measures and quality reporting (see my post/presentation on this site regarding Post-Acute Regulatory Changes). The list below is not exhaustive but representative.
- Value Based Purchasing
- CMS Center for Innovation/Alternative Delivery Models/Bundled Payments
- Additional Quality Measures and Quality Reporting
- Inter-Program and Payment Reform – Rate Equalization for Post-Acute Providers
- IMPACT Act
- ACO Expansion
As providers watch the inauguration approach and a new Congress settle in, the wonder is around change. Specifically, what will change. My answer – bet on nothing substantive in the short-run. While Mr. Trump ran partially on a platform that included regulatory reduction/simplification, the lack of overall specifics regarding “which or what” regulations on the health care front are targets leaves us guessing. My guess is none, anytime soon.
The Trump focus will be on campaign specific agenda first: ObamaCare, Immigration, Taxation, Foreign Trade, Energy, etc. – not health policy per se. There is some flow-through gains providers can anticipate down-the-road that can be gleaned from the Trump campaign but these are a year or more off. If Trump does deal with some simplification on drug and research regulation (faster, cheaper, quicker approvals), funding for disease management and tele-medicine and a fast-track of some Republican policy “likes” such as Medicare simplification, Medicaid reform at the program level, and corporate tax reduction (will help for-profit providers), then gains will occur or opportunities for gains will occur.
From a strategic and preparatory perspective, stay the course. Providers should be working on improved quality outcomes, reducing avoidable care transitions/readmissions, looking at narrow networks and network contracting/development opportunities and finding ways to reduce cost and improve care outcomes. Regardless of what a Trump Administration does first, the aforementioned work is necessary as payment for value, bundles/episodes of care, and focus on quality measures and outcomes is here to stay and to stay for the foreseeable future.
The Supreme Court, False Claims Act, and Implications for Providers
Nearing the end of the Supreme Court session, the Court issued an important clarification ruling concerning the False Claims Act in cases of alleged fraud. In the Universal Health Services case, the Court addressed the issue of whether a claim could be determined as fraudulent if the underlying cause for fraud was a lack of professional certification or licensing of a provider that rendered care related to the subsequent bill for services. In the Universal case, the provider submitted claims to Medicaid and received payment for services. The services as coded and billed implied that the care was provided by a licensed and/or qualified professional when in fact, the care was provided by persons not properly qualified. In this case, the patient ultimately suffered harm and death, due to the negligent care.
The False Claims Act statute imposes liability on anyone who “(a) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; or (b) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” It defines “material” as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” And it defines “knowingly” as “actual knowledge; … deliberate ignorance; … or reckless disregard of the truth or falsity of the information; and … no proof of specific intent to defraud is required.” The last element is key – no proof of intent to defraud is required.
Though providers sought a different outcome, the initial review suggests the decision is not all that bold or inconsistent with other analogous applications. The provider community hope was that the Court would draw a line in terms of the expanse or breadth of False Claims Act “potential” liabilities. The line sought was on the technical issue of “implied certification”; the notion that a claim for services ‘customarily’ provided by a professional of certain qualifications under a certain level of supervision doesn’t constitute fraud when the services are provided by someone of lesser professional stature or without customary supervision, assuming the care was in all other ways, properly provided. The decision reinforces a narrow but common interpretation of the False Claims Act: An action that would constitute a violation of a federal condition of participation within a program creating a condition where the service provided is not compliant creates a violation if the service was billed to Medicare or Medicaid. Providers are expected to know at all times, the level of professional qualifications and supervision required under the applicable Conditions of Participation.
The implications for providers as a result of this decision are many. The Court concretized the breadth of application of the False Claims Act maintaining an expansive view that any service billed to Medicare and/or Medicaid must be professionally relevant, consistent with common and known professional standards, within the purview of the licensed provider, and properly structured and supervised as required by the applicable Conditions of Participation. Below are a few select operational reminders and strategies for providers in light of the Court’s decision and as proven best-practices to mitigate False Claims Act pitfalls.
- One of the largest risk areas involves sub-contractors providing services under the umbrella and auspices of a provider whereby, the provider is submitting Medicaid or Medicare claims. In these instances the provider that is using contractors must vet each contractor via proper credentialing and then, provide appropriate and adequate supervision of the services. For example, in SNFs that use therapy contractors the SNF must assure that each staff member is properly licensed (as applicable), trained to provide the care required, and the services SUPERVISED by the SNF. Supervision means actually reviewed for professional standards, provided as required by law (conditions of participation), properly documented, and properly billed. The SNF cannot leave the supervision aspect solely to the therapy contractor.
- Providers must routinely audit the services provided, independently and in a structured program. Audits include an actual review of the documentation for care provided against the claim submitted, observations of care provided, and interviews/surveys of patients and/or significant others with respect to care and treatment and satisfaction.
- Establish a communication vehicle or vehicles that elicits reactions to suspicious activity or inadequate care. I recommend a series of feedback tools such as surveys, focus groups, hotlines and random calls to patients and staff. The intent is to provide multiple opportunities for individuals, patients, families and staff to provide information regarding potential break-downs in care or regarding outright instances of fraud.
- Conduct staff training on orientation and periodically, particularly at the professional level and supervisory level. The training should cover organizational policy, the legal and regulatory framework that the organization operates within, and case examples to illustrate violations plus remedy steps.
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