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.
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.
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.
The bulk of my work centers around gathering data, analyzing trends and working with the leadership of various organizations to implement strategy or more centered, strategies. The process is iterative, interactive and always fascinating. Throughout my career, I’ve worked within (virtually) every health care industry segment and seniors housing segment. I also counsel and have worked with entities that buy, sell, invest in, consult with, account for, finance, and research health care and seniors housing businesses. Its my work with the latter that is the genesis of this post and my decades of work with the former that is the “content”.
There are two fundamental reasons why health care leadership is hard and different from leadership duties in other industries: 24/7 demands and the immediacy of the customer to the enterprise. Health care and seniors housing (regardless of the segment specific) never closes, has no true seasonality, and demand can increase and decrease with equal force and equal pace, almost entirely related to external factors and forces. Pricing for the most part, other than seniors housing, is almost immaterial and unrelated to revenue. No other, non-governmental, business is as regulated and scrutinized and mandated transparent than health care. Likewise, no other business has the mandate that the full array and intensity of all services must be available 24/7, on immediate demand, with no ability to defer, fallow, or limit. Even a 24 hour PDQ won’t have all services available constantly (if the hot dogs run out, they are gone!).
While other industries will have close customer contact, health care has a unique, and intimate relationship with its customers. In SNFs, Assisted Living Facilities, Seniors Housing, etc. the customer is present for long-periods (years). In hospitals, the customer is present for hours, days, up to weeks at a time (the latter rare unless we are talking LTAcH). In the health care setting, the enterprise has total responsibility for all needs of the customer – great to small. The quality of care and service to all needs matters and is measured, reported and today in many regards, tied to compensation. Back to the PDQ, the over-done hot dog costs the same and there is no governmental entity that maintains a hotline for customer reports and investigations regarding the quality of the hot dog.
In health care, there is a very unique and in many ways, perverted twist concerning the customer relationship. The customer today is a Dr. Jekyll/Mr. Hyde manifestation. No other industry has customers that are bifurcated as such – the payer being a consumer unique and separate from the actual present being. Health care entities, to be successful, must satisfy both and manage the expectations of both, seamless and fluid to each party. I know of no other industry where on any given day in a hospital for example, where it is likely that of 300 individual inpatients there are dozens more of the payer/insurer consumers requiring unique attention, simultaneously. Miss a step, miss a form, etc. and the payer consumer refuses to pay for the human consumer that is receiving or received the care.
Because of the “constant” nature and customer relationships (coupled with many other reasons of course), health care leadership is hard. It is hard because these two fundamental components are nearly, completely, out of the control of the leader. The leader can only react or respond but truly, never change the paradigm or structure and always, in terms of the payer customer, sit beholding to the rule changing process and bureaucracy of the payer customer. This last element can be unbelievably insidious. For example, in the State of Kansas, dozens of SNFs face grave peril in terms of solvency because the State cannot efficiently certify eligibility for Medicaid for qualified seniors. The delay has left dozens of facilities with Medicaid IOUs at six digits and climbing – the human customer receiving care, the paying customer bureaucratically inept and unwilling and incapable of paying its bills, and the SNF sitting with no real recourse.
Given the above, its frankly easy to see why so many leaders fail or simply, give up. The deck is stacked toward failure. On the expense side of the equation, because of mounting regulation, fewer elements are within a leader’s control. With a rare exception, revenue is completely beyond control in terms of price and reimbursement for services provided. With RAC and other audits, revenue initially earned can be retrospectively recast and denied. (The PDQ six month’s later decides to recoup payment for the hot dog because, in its infinite wisdom, you didn’t need to the eat the hot dog or you should have made a wiser food choice). The overwhelming variables that can contribute to failure in a micro and macro sense for a leader are not lessening. His/her organization is open and under scrutiny, 24/7. He/she must oversee and be accountable for the health outcomes of a human customer that in turn are interpreted by the payer customer (remotely), subject to alteration, and retroactive scrutiny. Today, success isn’t just based on what occurred at the point of service but after the service concluded. The enterprise is at-risk for human behavior (compliance and non-compliance) of the consumer for not just days post service but months. Further, the enterprise is at-risk for the satisfaction of a consumer whose behavior and lifestyle may have significantly contributed to his/her need for care and service initially. As one executive told me recently; “We have to tell people the truth about their disease, figure out how to make it sound good and nice, and hope that we have done so in such a life affirming fashion that the patient will give us 5 stars for service. Figure that one out”. Alas, perhaps failure is inevitable.
Aside from failure correlating to burn out or shear “giving up” (the average large system executive tenure is less than 10 years), the failure in leadership that I see resides primarily in two areas. The first is an inability or lack of willingness to realize that the paradigm is constantly changing today and the pace of which, is accelerating. It is human nature to seek equilibrium; to pursue elements of stasis and calm. The same ( is) anathema to leading a health care enterprise. The second area is aversion to risk. Precisely because of the first point, taking risk or being capable of tolerating large elements of risk is imperative today in health care. The best leaders are true entrepreneurs today. They see opportunity and are willing to pursue it with vigor. They find the niches and pursue them. Every bureaucracy and rapidly changing industry paradigm begets opportunity with equal pace and ferocity. For example, the growing “private, non-reimbursed” service sectors in health care that continue to grow and flourish because of and in-spite of the heavily regulated, price tied market. I know of and have consulted for, provider groups that have moved further away from Medicare and managed care to private payment with phenomenal success. Was the strategy a risk? Yes. Most would not take this type of risk. I am harkened however by the notion that at times, the greatest risk present is the risk of doing nothing.
Successful leadership and leaders today, those that I know, have the ability to think systematically and algebraically – to solve the industry polynomials with all of the variables. They are inquisitive by nature and unwilling to accept the status quo, regardless of where and why. They embrace the famed Pasteur quote: “Chance (luck) favors the prepared mind”. They also have the soul and panache (tempered) of Capt. Jack Sparrow (from Pirates of the Caribbean). They like risk and have the entrepreneurial heart and mind to innovate and move fluidly through problems and challenges such that the same are opportunities. They don’t allow their enterprises to become complacent or bureaucratic.
Today, success is about better – better products, better service, and better care. Payers are demanding accountability and want an increasing level of care and service for lower levels of payment. That is the paradigm and it is moving to higher levels of accountability and lower levels of overall payment. The best execs know this and don’t quibble with it (much). They realize that success if about adapting the enterprise accordingly while finding the pliable spots that such an environment creates. These spots are service lines, system enhancements, productivity improvements, and different levels of patient engagement. Similarly, they realize the risk limits of concentration – too much exposure to certain payers. They have seen this trend coming and have already moved. For those still trying to reverse or slow the trend, this is where failure first begins ( the search for stasis in a rapidly changing world).
The second most important function an executive and/or a governance board conducts (second only to planning) is risk management. This key leadership function is evolving rapidly primarily due to the evolutionary movement around compliance (ACA, CMS, etc.) and the payer focal shift from episodic, procedural care to outcome or evidenced based care, pay-for-performance, etc. Similarly, as government policy shifts so does commercial market dynamics with like movements toward pay-for-performance and disease management. While the core concept of “enterprise” protection remains the same, the scope today is different, the breadth wider and the responsibilities and tasks more structured than say, ten plus years ago.
Risk management is the term that encompasses a series of activities, programs, policies, etc. that work (ideally) together to protect and secure the overall enterprise/organizational identity, value, market share, legal structure and by downstream relationship, the stakeholders/shareholders. Its activities, etc. are passive and active. Passive activities (examples) include the purchase of insurance and implementation of firewalls and data security systems. Active activities include audits, training of staff, QA/QI activities, customer/patient engagement programs, etc. The purpose of this post is to focus on the “active” elements and in particular, the most important elements today given the evolving environment and the new risks emerging. The purpose is to frame a model of risk prevention culture rather than an environment fraught with rule deontology and protectionism. The latter tends to breed its own kind of risk(s) in addition to the risk(s) it seeks mitigate.
I like to think of effective risk management plans today as having six key elements. Importantly, the plan is not operative while the elements are. The plan is what the organization uses to monitor the completion (activities), ongoing improvement (identification and address of organizational weakness and vulnerability), and accountability of management in identifying and managing risk. Remember, these elements are the “active” side. I, for sake of the theme of this article, will assume that providers acquire adequate insurance policies utilizing industry professionals in their development plus that they maintain modern IT infrastructure to secure patient data, etc.
- Organizational Focus on Patient Care Quality and Service: This isn’t about slogans or marketing rather, it is about having an overall and deeply integrated culture around patient care outcomes and satisfaction. In a pay-for-performance, competitive, ACO world, this element is key.
- Executive and Board involvement in QA/QI, especially at the highest organizational levels.
- Compensation for management and executives incorporating (heavily) patient outcomes and satisfaction to the degree that all other elements are dwarfed by the weight given to this measure.
- Monitoring in-place of key patient outcome data and benchmarking of the same.
- Monitoring of response and wait times. This element is key as the goal is to create response times as near as possible/practical to immediate or to minimize wait times wherever possible.
- A program of patient/family engagement that includes surveys, focus groups, etc.
- A grievance resolution system that is open, accessible and seeks to address concerns as instantaneous as possible. The approach must be around resolving concerns without delay and bureaucracy.
- Staff training focused on customer service, QA/QI, communication and dealing with patient/family stress, trauma, etc.
- Engagement of staff in a “bottom-up” program or approach whereby lower level line staff are engaged in all training, QA/QI processes, mentoring, etc.
- Audit Contractors and Sub-Contractors: The use of contractors such as physician intensivists (hospitalists) and therapy companies, imaging companies, lab providers, environmental service providers (laundry, housekeeping, etc.) is on the rise as organizations seek to control costs and improve efficiency. Contractors, etc. yield new risk as their conduct, care, service, etc. create a risk transferable directly to the parent organization. The risk of course, is multi-fold. First, as applicable, is care risk (outcomes, service, competence, qualifications, insurance, etc.). Second, is labor risk (legal status, background checks, etc.). Third, is billing risk and compliance risk. If the contractor is involved in any element of care that is billable to a payer (Medicare, Medicaid, commercial insurance), the organization must assure complete compliance with billing and care provision rules in order to negate billing fraud or inappropriate claims risk (risk of non-payment or worse). Summarized, organizations must monitor and audit, externally, the work of contractors. Immunization clauses within contracts cannot supplant audits of risk areas proportional to the scope of the service agreement. For example, the organization must audit its medical staff, the care provided, documentation, billing as applicable, patient contact and satisfaction, response times, etc. The same is true for any care service contractor.
- Billing Audits: This element is particularly crucial for government programs such as Medicare and Medicaid. Providers today must get in the habit of reviewing their claims submitted to payer sources, particularly the government. Two huge risk areas are present today. First, focused fraud actions against providers under the False Claims Act. Audits here are all about making sure that what was billed was actually provided, documented, necessary and compliant. Second, billing accuracy such that claim submissions are “clean” and “accurate”. Denials for inaccuracy, etc. can lead to imbalances in error rates and thus, probes and claims held for review. The latter negatively impacts cash flow and staff productivity as extra work to justify payment is required. I also recommend that organizations be very, very careful about compensation programs tied to revenues and claims, especially without counter-balancing elements and a strong audit program. I like billing audits that are third-party conducted, benchmarked against regional and national data (our business should look like others in the region and nationally) and occur episodically and randomly as frequent as monthly and certainly, no less than quarterly.
- Organizational Transparency and Staff Engagement: A huge risk area providers continue to face is the mixed message and incongruent messages sent to staff from leadership and at the highest levels of the organization. The impetus behind so many False Claims investigations and actions undertaken by the DOJ (Department of Justice) isn’t smart federal auditors – its disgruntled staff. Whistleblowers are the fundamental impetus behind False Claims allegations and actions. Mitigating this risk is simple (beyond doing the right things of course). Organizations, especially leadership, must be transparent and as open and candid as possible. The point here is that there really is no reason to not share goals, plans, operating data, etc. with staff. When I was a CEO, my office was never locked and thus, work and files on my desk and credenza. My compensation was open and I did not hide what I made or how I made it. Not too surprising, across decades of running large healthcare organizations, I never had a fraud allegation or an allegation of any impropriety. Staff knew what the corporate plans were, how they achieved compensation and bonuses, etc. We gain-shared so staff had opportunities to reap reward as the organization grew and performed. Staff engagement means at the planning and implementation levels. It also means active programs of training and a large amount of dialogue regarding why the organization does what it does and where the right and wrong lie. The same Whistleblower mentality is also fundamentally sound when it is used to police bad internal behavior, including that of management.
- Focus on Competence: A simple thing but rarely do I see this element boldly, prominently emphasized. Competence is about the ability to do what is required at the professional, validated level. It is about validation of core skills and abilities within a framework of education and testing. Organizations that focus on developing and maintaining staff and managerial competence limit risk inherently. All together, risk is often a byproduct of incompetence and protection of a weak, status quo. If excellence and competence is demanded and the systems engaged and in-place to assure it, then there is little room for marginal, sub-standard and incompetent to remain. How does an organization focus on competence? First, eliminate old, worn out HR policies and job descriptions and performance evaluations and replace the same with competency and behavioral standards. Competency standards are the elements one must demonstrate and perform as part of the job at a repetitive, proficient level. Behavior standards are the elements of personal conduct and accountability that the organization demands (uniforms, attendance, inservice attendance, etc.). Evaluate standards routinely, move in new skills, refine old skills, educate and test. Require ongoing passage and demonstration and be intolerant of employees and managers that can’t/won’t meet the competency and behavioral requirements. Competency standards are required for ongoing employment; reward for performance thus can only and should only occur when the base standard is consistently exceeded.
- Be Public: By employing all of your constituents in oversight, the likelihood of getting surprised or being caught off guard is minimized. Be public as possible with standards, expectations, contact information, grievance steps, etc. Be open to all criticism and frankly, demand (as much possible) feedback regarding just about anything in the business. No reason that business goals can’t be public and yes, even margin goals. Heck, explain why margins are necessary. Engage the broader universe and community and ask for input and reactions. People will tell you the good, the bad and the ugly – the latter being where potential risk lies. Force the conversation and the accountability and in doing so, limit a large area where risk can fulminate.
Over the last six months or so, I’ve written a number of articles on the issue of SNFs, therapy contracts/contractors, and recent fraud settlements. I’ve also given a few presentations on the same subject, covering how fraud occurs, the relationships between therapy contractors, SNFs and Medicare, and the keys to avoiding fraud. A reader question based on this subject area is the genesis (the answer is anyway) of this post. The questioned shortened and paraphrased is;
“If we (the SNF) conduct an audit of our therapy contractor and our Medicare claims as you suggest and we find abnormalities that appear to be fraudulent claims, what do we do next? We know we have to correct the practices that allowed the claims to happen but is there something else we need to do?”
Not only is this an excellent question given the subject area, the answer or outcome is likely the reason so many providers don’t or won’t audit their therapy contractors and Medicare claims (afraid of what they might find). The answer to the question is YES, there is something else to do and it is a federal requirement if a provider wishes to potentially avoid Civil Monetary Penalties and other remedies. This key step is known as Self Disclosure.
Starting at the beginning: If the results of the “audit” determine that Medicare was billed inappropriately, the provider is in potential violation of the False Claims Act. The False Claims Act describes violations as ‘any entity or person that causes the federal government to make payments for goods or services that are a) not provided b) provided contrary to federal standards or law or, c) provided at a level or quality different than what the claim was submitted for (summarized)’. For Medicare, providers are in violation of the False Claims Act if bills are/were submitted to Medicare (and paid) for care that was inappropriate, unnecessary, falsely misrepresented (upcoding, documentation etc.) or not provided. Assuming, as the questioner poses, that the audit found abnormalities (improper bills and payments) to Medicare (Parts A, B, or C) for any of these reasons, a False Claims Act violation (liability) has been identified. The provider has obligations as a result, under federal law.
The “obligation” once the activity is discovered is to self report. The OIG maintains a Self Disclosure Protocol policy that can be accessed here ( http://oig.hhs.gov/compliance/self-disclosure-info/files/Provider-Self-Disclosure-Protocol.pdf ). Self Disclosure is a methodology that providers can use to potentially avoid Civil Monetary Damages, other remedies and extensive legal costs. Self Disclosure however, cannot be used to mitigate criminal penalties if the activity that is part of the Medicare False Claims violation was/is criminal. Self Disclosure also is not relevant for overpayments. Overpayment issues are handled via the Fiscal Intermediary directly.
Per the OIG Self Disclosure Protocol:
“In 1998, the Office of Inspector General (OIG) of the United States Department of Health and Human Services (HHS) published the Provider Self-Disclosure Protocol (the SDP) at 63 Fed Reg. 58399 (October 30, 1998) to establish a process for health care providers to voluntarily identify, disclose, and resolve instances of potential fraud involving the Federal health care programs (as defined in section 1128B(f) of the Social Security Act (the Act), 42 U.S.C. 1320a–7b(f)). The SDP provides guidance on how to investigate this conduct, quantify damages, and report the conduct to OIG to resolve the provider’s liability under OIG’s civil monetary penalty (CMP) authorities.”
Below are some key points providers need to know prior to and in connection with, a self disclosure process. Again, I encourage all providers that are conducting a billing audit or considering a billing audit, to access the PDF from this post and review the OIG Self Disclosure Protocol.
- A current regulatory process or audit from Medicare (or a contractor such as a ZPIC audit) does not mean that the provider cannot self disclose, provided the disclosure is in good faith.
- Further investigations and reviews are part of the process and providers need to be aware that the OIG will direct the provider’s investigative process as part of the self disclosure. In other words, the audit the provider conducted which may have identified the false claims is not the end nor will it suffice to resolve the matter once disclosed.
- Providers that wish to self disclose need legal counsel as the initial disclosure requires a succinct identification of the legal violations applicable and the scope of the activity and dollar amounts (potential) involved.
- Self disclosure should only be made after corrective action has occurred. The disclosure does not suffice as a remedy for conduct going forward nor can it absolve liability in scope that predates the disclosure or the period disclosed (see the point prior).
- Providers need to be aware that this process is not quick nor does it alleviate or mitigate any requirement for repayment of improper claims. Additionally, providers need to recognize that resolution will require mitigation steps including potential agreement to a compliance program/plan and commitment to additional monitoring/auditing, depending on the scope of the violations disclosed.
I encourage providers to read the Protocol and to pay particular attention to 5 – 9. While I know the information may seem daunting and discouraging, don’t use this post or the information in the Protocol as a reason to not conduct a Medicare billing/claims audit and/or to not report, if violations are found. I assure you, having worked extensively with providers caught by the OIG, DOJ and/or in a Qui Tam action, prevention and self disclosure, while onerous is far better and cheaper than what occurs if the violations are discovered federally.
With the hospice market (in most areas) fairly well saturated and the core (source) demand from traditional referral sources “flat”, growing census is a challenge for agencies. Some agencies have experienced referral growth but alas, length of stay has shortened. Others have experienced erosion as, while improper, the “skilled to death phenomenon” erodes days and referrals. Recall, the “skilled to death” concept is the SNF referral/discharge where the patient meets the 3-day prior inpatient criteria and “may” require a skilled service by Medicare SNF definition (nursing or therapy) even though the same is imprudent or not truly related to the patient’s condition. I have written about this issue before: It is fraudulent by all indications and merely a ploy to avoid out-of-pocket costs (applicable under hospice) for institutional care (at least for the first 20 days, if such meet the “skilled’ definition under the Medicare SNF benefit). The question oft asked of me is where can growth or additional days be found? My answer is at the “institutional” end (sort of). The reaction I soon get is “too much risk” or “been there, done that, got probed” or “those places won’t deal with hospice”. The last comment is why I say “sort of”.
To start; Hospice is a perfect complement for an SNF, and Assisted Living Facility, a Memory Care facility or a Seniors Housing complex (including CCRCs). As I have written before, I encourage all of these groups to partner with a (yes one) agency or perhaps two (no more). By the way, and I have beat this issue to death with numerous people, it is perfectly legal and appropriate for an SNF or any other of the aforementioned provider types to partner with just one Hospice (you will find ample reference on this site and explanations as to why in the comments section, other posts, etc.). For an SNF, hospice is clear survey risk-reduction and efficiency enhancement for any patient/resident that is simply trending toward end-of-life, naturally. The SNF COP (Medicare federal requirements) loathe patient/resident decline and thus, as patients/residents naturally trend toward death, the ante to prove all things interventionist to stave-off decline or at the least, justify that decline occurs despite best efforts to prevent, falls to the SNF. As ridiculous as this is, it is the SNF reality. Hospice and palliation, done right, resolve this issue and release (though not totally) the SNF, and the patient/resident, from the illogical burden (the patient/resident no longer bothered with weights, lab tests, etc.). The benefit in the Assisted Living/Memory Care environment, while less regulated, is the ability of hospice to elongate a stay where perhaps, the resident has exceeded the regulatory care parameter (boundaries) set by the State. In short, most states will allow residents to remain in the Assisted Living environment, even when the care required exceeds the regulatory boundary, if the purpose is to facilitate natural death in the environment rather than relocate the resident.
The risk for hospice today lies within the focus the CMS/Department of Health OIG and Department of Justice have placed on the industry, for agencies with large caseloads in institutional care settings. The reason for such scrutiny is the large (rather) amount of inappropriate enrollment and care provision exhibited by certain agencies (predominantly national agencies such as Vitas) in SNF and Assisted Living environments. Bluntly: These environments are the locus for a great deal of fraudulent activity in the industry. For those interested, the January OIG report on hospice activity in Assisted Living environments is available here: http://oig.hhs.gov/oei/reports/oei-02-14-00070.pdf Understanding the level of scrutiny the Federal government is placing on hospices with a large institutional caseload is key to building a proper risk management model/approach. To be sure, the agencies that play heavily in the SNF and Assisted Living environments will be audited more frequently. When audit frequency increases, the risk for claim errata and mistakes increases (mathematically logical). Knowing and understanding this risk is imperative to building a proper “institutional” care program. The risk of improper enrollment/certification and insufficient care isn’t worth a comment as no agency should ever breach these risk areas as doing so is clear fraud.
(There is one additional somewhat looming risk and that is a possible payment reduction in the future as CMS continues to look at revamping and modernizing the Hospice benefit. A concept within the discussions is a per diem reduction for any patient residing in an institutional care setting like an SNF or Assisted Living. As I have no solid information, nor does anyone else, as to what (and when) CMS will do regarding a change in the Hospice benefit, I won’t integrate any additional comments regarding payment changes into this post).
Taking the risk into account as discussed prior, how would or should an agency integrate additional institutional patients into its caseload and build a risk management model. The assumption is that a greater focus on an additional caseload will trigger scrutiny from the Medicare intermediary or perhaps, a CMS contracted auditor. Below I have outlined the approaches and recommendations I provide to hospice agencies.
- Limit the settings and in advance, perform due diligence on the provider setting and the provider. Partner with providers that have high quality, solid compliance histories (CMS 5 star, good survey history, well-regarded, etc.). Lots of data sources for an agency to use exist to determine the quality of any setting, formal and anecdotal.
- Understand the compliance/code requirements of the institutional setting. Hospices know their own requirements but all too frequent, don’t know the SNF requirements or Assisted Living requirements. Become knowledgeable or acquire talent that is. This will make discussions and planning and ongoing internal auditing much more effective and efficient.
- Build a strong interface agreement with each institutional setting. I have resources here if anyone needs. The key point is define in writing, everything to the best of each parties ability – who does what, who is accountable for what, etc. Focus on key risk areas such as documentation.
- Know the setting documentation and integrate the setting documentation into the hospice documentation/record. For example, in an SNF make sure the hospice has copies of the MDS, care plans, pain and other assessments, ADL information/records. Fundamentally, both parties should be seeing, recording and saying the same things.
- Structure your IDG/IDT process to incorporate a review of the institutional care setting’s documentation. Make certain institutional care staff are part of the process. I like to see the same representative group.
- Train key personnel – Hospice, the SNF, the Assisted Living, etc. on what each party is looking for in terms of care delivery, documentation, etc. Implement an ongoing program of inservice education. I like to see, on the part of the hospice, the same individuals tasked to a site – limit rotation of staff.
- Develop institutional care pathways and algorithms for common disease states found in SNFs, Assisted Living. Many hospices use Local Coverage Determination criteria – I am not a huge fan unless the same are tweaked or updated recently. CMS has clamped down on failure to thrive, generalized neuro, end-stage dementia as appropriate diagnosis/reasons for certification. This is not to say that the same are irrelevant reasons for certification merely, more elaboration is required. Look beneath the surface to find what is going on. Institutional setting patients, particularly SNF patients, generally have a good medical record with tons of data. Likewise, AMDA is a great pathway source. Local universities with medical schools can help with identifying criteria for end-stage Parkinson’s, post stroke (CVA, hemorrhagic, etc.), heart failure, end stage diabetes with/without renal failure, etc. Build your algorithm to assure key definitional points/milestones and share it with the institutional care setting.
- Utilize an external source to perform quarterly audits of your institutional caseload. Have this individual/organization sit through an IDG/IDT and then review records, particularly focused on certifications/re-certifications and charting – both Hospice and the institutional site. I like to have a focus on continuity of charting/documentation and clear role congruence between the parties (their staffs particularly).
As is customary in late fall, the Office of the Inspector General (OIG) of the Department of Health and Human Services released its Fiscal Year work plan. As a reminder or preface, the work plan is the summary of investigations and focal areas the OIG plans to undertake in the upcoming fiscal year and beyond to ensure program efficiency and integrity and to identify and prevent fraud, waste and abuse (the latter is the most relevant activity). Each provider segment reimbursed by Medicare is covered, some more so than others depending on the prevailing nature of program expenditures. As of late (most recent years), the post-acute sector is targeted principally due to the outlay/expenditure growth (Medicare) for hospice, home health and skilled nursing care.
Below is the categorical highlights (not exhaustive) found within the 2015 Work Plan (the full plan can be found here ( https://oig.hhs.gov/reports-and-publications/archives/workplan/2015/FY15-Work-Plan.pdf ;
Skilled Nursing Facilities
- Medicare Part A Billing: Scrutiny on claim accuracy and appropriateness of billed charges, particularly focused on therapy utilization and RUGupcoding. Recent False Claims Act cases withExtendicare illustrate how the OIG views Medicare payments for inappropriate utilization and for care that is clearly inadequate. This is a major risk area for providers and no SNF should discount the exposure, particularly if any of the following elements within the organization’s operations are present.
- Therapy services provided by an outside contractor. The OIG has identified previously that there exists a correlation between certain therapy agency contractors and patters of upcoding.
- Disproportionately higher (as a percentage of census/payer mix), Medicare utilization. The common threshold level is 30% or lower of total census. Higher Medicare days as a percent of overall payer mix is a red flag for the OIG or an outlier.
- Low overall Part B therapy utilization.
- Skewed RUG distribution where the majority of days are falling the highest paying therapy RUGs (particularly ultra-high with moderate to minimal ADL scores – minimum/moderate assist levels)
- Longer length of stays at higher RUG levels – minimal or infrequent Change of Therapy without corresponding Change of Conditions or vice-versa.
- Medicare Part B Billing: The converse to the point previous is enhanced focus by the OIG on over-utilization or inappropriate utilization of Part B therapy services when Part A is exhausted or unavailable. The OIG has noticed a trend for providers wary of Part A scrutiny to shift utilization to Part B. Again, the focus is on inappropriate billing patterns and utilization trends above or beyond, the historical norm.
- State Agency Survey Reviews: The OIG plans to review how frequently and how well, state survey agencies reviewed and verified, facility plans of correction for completeness and compliance. The gist: enhanced/additional federal look behind visits and desk reviews.
- Hospitalizations: The OIG intends to review the hospitalization trends of SNF patients, identifying patterns of utilization for manageable or preventable care issues. A 2011 review found that 25% of Medicare SNF patients were hospitalized in a given year and the OIG is of the opinion that a percentage (likely sizable) is preventable and potentially, indicative of quality problems at the SNF level.
- Hospice in Assisted Living: The OIG will monitor the continued growth trend of hospice care provided in Assisted Living facilities. Part of this initiative is couched in the requirement within the ACA for the Secretary (of HHS) to reform the hospice payment system. The OIG indicates that it will gather data on hospice utilization, diagnoses, lengths of stay, etc. for residents in Assisted Living facilities. Medpac has noted that for many providers, particularly the larger national chain organizations, that hospice care in this setting is typified by longer stays and thus, monitoring is warranted.
- General Inpatient Care: OIG will continue to monitor the utilization of General Inpatient Care within the hospice benefit for appropriateness and potential abuse. As General Inpatient Care pays a higher per diem and many hospices maintain their own inpatient units, the concern on the part of OIG is misuse or abuse for payment or, to mitigate (agency) staffing shortages where the better alternative for the patient is Continuous Care.
- Reimbursements/Payments: The OIG will continue to monitor payments made to agencies principally for accuracy. Prior investigations by the OIG identified that at least on in four claims were incorrect and potentially, fraudulent. This initiative is a continuation of ongoing concerns by the OIG of excessive fraud and or waste in the Home Health sector principally due to improper application of the Medicare benefit and lack of substantiated medical necessity and/or supported clinical documentation of appropriateness of care (e.g., therapies particularly).
LTAcHs and Inpatient Rehab Facilities
- Adverse Events: The OIG is targeting both settings for an analysis of adverse events/temporary harm circumstances to patients in the setting (falls, infections, etc.). Inpatient Rehab Facilities provide 11% of post-acute inpatient therapy services and growth over the past decade or so has been consistent and steady. Questions however have arisen regarding the actual value of such care compared to the care received in an SNF. The SNF is reimbursed substantially lower than the IRF even though many SNFs staff sufficiently to provide the same level of therapy services (up to 3 hours per day). Similar concerns have risen within the LTAcH setting as to cost vs. outcome and quality, particularly as compared other setting comparable, lower cost settings such as SNF. There continues in Washington, a generalized view that post-acute payment reform is overdue, particularly given the rapid expansion of the sector. Within the payment reform movement is the growing view that setting differentiation and thus payment differentiation at the inpatient level is no longer warranted and consolidation is required to rid the excess capacity and reward economically efficient providers that demonstrate higher quality outcomes (SNFs in particular as well as rural swing bed hospitals and to a lesser extent, home health providers and outpatient providers).
Yesterday, CMS confirmed the details of an earlier published proposed rule (May) set for publication on August 22, 2014 (final rule) regarding FY 2015 hospice payments. Anyone wishing a copy of the Federal Register text, please contact me as provided on this site (either via comment or contact info. in Author page). As is always the case with these final rules, CMS addresses multiple components of the programmatic rules, not just payment. In other words, the “benefit” (coverage, eligibility, payments, etc.) are often adjusted or modified to codify other legislation (the ACA for example) or recommendations for congressional hearings and Medpac. Such again is the case for Hospices.
A summary of the key provisions in the final rule are as follows.
- Payment: Hospices will receive on average, an increase of 1.4% in reimbursement. This is a function of a 2.1% increase in the market basket (inflation) minus a .7% in overall payments resulting from the 6th year of the 7 year phase-out of the BNAF (Budget Neutrality Adjustment Factor). The 1.4% is applied to daily home care rate and the resulting rates for GIP and Continuous Home Care are $708 and $930 per day respectively.
- Quality Reporting: Introduced in 2014, hospices are required to report certain quality measure data to CMS. Failure to report the data equals a 2% reduction in payments. For 2015, no new quality measures are forthcoming although CMS is requiring that all hospices participate in the CAHPS (Hospice Survey)/Hospice Quality Reporting Program for one month in the first quarter of 2015 and then monthly for April through December for payment implication in 2017 and then collect survey data Payment implications in 2018 require data collection for every calendar month in 2016.
- Attending Physicians: Hospices will be required to identify the patient’s attending physician on the Election Form – at the time the patient elects the Hospice Benefit.
- Notice of Eligibility/Notice of Termination: CMS defines prompt filing as 3 days after election or 3 days post revocation/termination.
- CAP Determinations: CMS is requiring all hospices to finalize their aggregate cap calculations within 5 months after the CAP year-end (March 31) and re-pay any overages accordingly. They are not issuing any requirement for such calculations on the inpatient cap.
- Guidance on Hospice Eligibility: CMS issues further guidance on how a hospice should determine eligibility for hospice; essentially the determination of terminality. The benefit requires the patient to be terminally ill and death to most probably occur within 6 months or less. The guidance is that the Hospice Medical Director should consider the terminal diagnosis, the health conditions of the patient related or unrelated to the terminal condition and all other current clinical data relevant to the diagnoses. The point in this provision is CMS stating that physician’s must use clinical relevancy as the means for determining appropriate/inappropriate by “terminal” likelihood.
Finally, the ACA requires the Secretary of DHHS to make recommendations regarding benefit reform and begin the same thereto, no earlier than October 31, 2013. Nothing in the rule gives any indication of wholesale movement toward payment reform. The glimpses remain the same in the discussion sections of trends in utilization patterns; primarily declining Continuous Care stays and increasing live discharges. As before, the outlook appears to be for a payment system that is bell-shaped – higher in the first days of the stay, moderating at stability, and again higher at the end or near death. CMS shows nothing about how this might work other than to continue to make vague references to a system similar.
Below is a link to an article from Bloomberg Business Week regarding the Hospice industry and the Medicare Choices Program. My last post covered the elements of this CMS demonstration project. The link comes from the original piece written by Charles Elmore and published in the Palm Beach Post this weekend. Readers will note my interview comments appear on pages 2 and 3.