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Senior and Post-Acute Healthcare News and Topics

Post-Acute Compliance 2015: OIG Targets

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

  • 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.

Home Health

  • 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).

December 10, 2014 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment

CMS Announces Final Rule for Hospice Payments for 2015

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.

August 5, 2014 Posted by | Hospice | , , , , , , | Leave a comment

Hospice and the Medicare Choices Program: A Follow-Up

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.

http://investing.businessweek.com/research/markets/news/article.asp?docKey=600-201405091340KRTRIB__BUSNEWS_9682_48750-1

 

 

May 14, 2014 Posted by | Hospice | , , , , , | Leave a comment

Hospice and the Medicare Care Choices Model: A Progressive Approach?

About a month ago (mid-March), CMS introduced a pilot program called the Medicare Care Choices Model.  Basically, this pilot program will allow Medicare beneficiaries to access, via certain participating hospice organizations, dual benefits; hospice and curative treatments, concurrently.  Under the current Medicare Hospice Benefit, a patient with a terminal illness or condition, certified likely to die in 6 months or less by a physician, can enroll into the Hospice Benefit but in doing so, forgoes the traditional coverage for curative treatments under traditional Part A.  Essentially, by electing the Medicare Hospice Benefit, the patient has decided not to pursue an aggressive path of cure or curative interventions or treatment (chemotherapy, radiation therapy, artificial hydration/nutrition, etc.) opting instead for palliative care, symptom management, and a progressive path toward natural death.

In the Medicare Care Choices Model, Hospices that apply and are selected to participate in the program will provide services available under the Medicare hospice benefit for routine home care and inpatient respite levels of care that are not separately billable under Medicare Parts A, B, and D.  The services must be available 24 hours per day and across all calendar days per year.  CMS will pay a $400 per beneficiary per month fee to the participating hospices for these services.  Providers and suppliers furnishing curative services to beneficiaries participating in Medicare Care Choices Model will  continue to bill Medicare for the reasonable and necessary services they furnish.  Per CMS, the ideal hospice applicants for program participation can demonstrate a history of providing care/case coordination to patients, across a continuum of providers and suppliers.

Returning to the title of this post: Is this progressive on the part of CMS?  The truth  is best answered – “not really”.  There are a number of current issues with regard to the Medicare Hospice benefit, care utilization, end-of-life care in general, and yes, the ACA at play.  Under the ACA/Obamacare, the Secretary of HHS has a mandate to implement changes to the Medicare Hospice benefit no earlier than October 1, 2013. Abt and Associates (consultants) has been gathering and analyzing data on lengths of stay, place of care, length of stays in hospice by diagnosis, costs of care, etc.  The Medicare Care Choices Model is in certain respects, a trial balloon element in the process of overhaul for the Medicare Hospice benefit.

Another operative element or issue and one that hospices are all too familiar with of late is the utilization pattern changes that are occurring across the spectrum of end-of-life care.  Hospice referral patterns haven’t changed much but the nature of the referral has.  Additionally, census trends for most hospices are flat and when viewed with/against lengths of stay, the trends are actually “down”.  In short, an evolving dichotomy for hospice referrals is occurring.  The referrals are modestly increasing in many urban/suburban regions but at the expense of the length of stay.  The patient is finally referred at the end of his/her life, after all curative options are exhausted.  Per CMS, 44 percent of Medicare patients use the hospice benefit at end-of-life but in a continuing pattern, at the end of life resulting in shorter and shorter stay increments.

Back to the question in the title of the post, this initiative is less about promoting or integrating hospice earlier, though the outcome of earlier intervention could occur.  What CMS is tinkering with or intending to impact, is the continued growth of very expensive medical care in the last months of life.  The two greatest drivers for Medicare spending in the U.S. are the cost of caring for “lifestyle” diseases (chronic diseases such as Type II diabetes) and care provided within the last six months of a person’s life.  The latter is the target for this program.  The premise is as such.  If, by integrating hospice into the equation sooner, having removed the curative or interventional obstacle, patients will transition earlier to palliative care, foregoing certain last rounds of inpatient, interventionist care and thereby, save the government money.  The patient and the curative care team (the physician, hospitals, etc.) will be less loathe to refer to hospice and address the prospect of treatment futility (even though that prospect is real) since, under this program, the patient may continue to pursue as much interventional and curative approaches as desired.

My quick analysis is that this program, while a novel approach, doesn’t really achieve any of the objectives intended (savings, better care, easier transitions, earlier transitions, more appropriate care, etc.). My reasons and conclusions are as follows;

  • The issue of when a patient chooses to opt for end-of-life care versus curative care is more an American cultural/social issue than a public policy issue.  As Americans, we are inculcated that death is bad, life is premiere.  Our health insurance, especially now with ACA reforms, has virtually no limits on the treatment we can access (no lifetime minimums and no pre-existing condition limitations).  Our media (television, print, other) is full of advertisements of procedures, drugs, providers that offer hope and cure.  Watch a Cancer Treatment Center of America spot – a prime example.  Physician specialists aren’t trained to forego what may clearly be futile care but instead, to press forward and to convey options and hope.  In fact, the number of physician specialty groups that I have spoken with over the years validates this point emphatically: “Hospice is futility. We provide hope”. This element is the leading cause of late stage referrals when in validation, futility is truly evident as the patient is nearly dead or the final rounds of whatever treatment have shown no result.
  • There is no financial incentive to change or alter the care provided.  In the Choices model, the patient may access curative care and receive hospice services.  The hospice receives $400 more per month (for care coordination) and all other provides bill Medicare for their interventions, services, etc.  If CMS is relying on the care coordination skills of the hospice to facilitate better choices by the patient, his/’her family and/or the other providers, they are truly foolish.  These groups have no financial incentive to partner on best choices and unless, CMS provides regulatory boundaries or payment incentives aligned to certain behavior, the savings will be minimal.
  • There isn’t a real incentive for patients to enroll in this pilot project, other than they can get routine home care, respite, etc. benefits from the hospice.  In reality, patients who are going to pursue curative options aren’t thinking hospice options.  Likewise, the providers offering the curative interventions aren’t talking hospice options at this point.  Our current healthcare system doesn’t function on this integrate plane.  Thus, there truly is no motivation across the actors (hospice, curative providers, patients, families) to change current behavior.  In fact, I see a risk for new avenues of improper utilization, qualification and abuse.  Enrollment in hospice under this program is going to be challenging to qualify and quantify as in theory, where is the point of terminality (without intervention, death is likely in 6 months).

It will be interesting to watch how this program rolls-out and how CMS addresses or attempt to address the nuanced and overt regulatory issues that today, are separate and distinct by benefit programs.  Likewise, it will be interesting to see how patient utilize, if they do to any extent, this hybrid model. The economist in me tells me that the concept and programmatic approach makes financial sense but operatively, this isn’t a slam-dunk in terms of ever working in the real world.  There are simply too many behavioral impediments today for this to be a truly successful model.

 

 

 

April 16, 2014 Posted by | Hospice, Policy and Politics - Wisconsin | , , , , , , , , , | Leave a comment

Boards of Directors: Success, Mediocrity and Sometimes, Failure

As a follow-up to a recent post on Boards of Directors and corporate governance (http://wp.me/ptUlY-gq), this post addresses how boards promote success, can often drive mediocrity and in some cases prompt organizational failure.  The take-away where success, mediocrity and failure occur isn’t structure, terms or committees rather, a consistent excellence or break-down in terms of structural clarity, roles, and organizational focus.  Governance which exists, regardless of the framework, to enhance and perpetuate corporate/organizational value, reputational integrity, and shareholder/stakeholder security and return is the foundation for success.

If there is a single condition more preeminent than another that drives mediocrity and failure for a board it is conflict of interest.  This condition is not unique to non-profits or for-profits but in my history, I encounter it more frequently in non-profits, likely due to the inherent lack of compensation available for directors.  The non or limited compensation component in non-profits is more ripe for a “quid pro quo” reward structure in which, the director is a de facto player in the organization’s business via a vendor relationship of some sort.  Even in the best of circumstances, the vendor representative on the board scenario defeats the concept of independence producing an air of duplicity and insider dealing.  If judgment is clouded, opinions suppressed or decisions focused on the inter-relationships among directors and the entity beyond the absolute best interest of the organization, governance cannot be optimal.

Effective governance requires independence and to the greatest extent possible, a board level series of tests and policies that promote independence and police conflict.  Below are the common tools I find most helpful in achieving and maintaining independence.

  • Recruitment of individuals that are unrelated in any regard, to the organization (not vendors, no familial employment, no familial relationships, etc.).
  • Policies that require annual disclosure of employment, board memberships for the director and director’s family, investments where applicable, etc.  This is to insure that directors don’t have relationships, ownership, investments that mask independence.  Note: Disclosure is not enough as once disclosed, remedy becomes the key.
  • An annual review of major vendor relationships such that the same is given to each director as part of his/her annual disclosure.  If a director is anything more than a passive investor in a vendor relationship, the director is no longer truly independent.
  • In healthcare organizations, annual background checks with the OIG, licensing boards (where applicable, DEA (where applicable), and criminal checks are warranted.
  • Policies that require reviews concurrent with major capital purchases, capital projects, mergers/acquisitions, etc. to assure that independence remains among the board.

The element second in importance to independence at the board level is role clarity and policies and organizational structure that clearly delineates the role of the board, the duties of directors, and the key performance elements for the board.  Again, these pieces lacking is a certainty for organizational mediocrity and/or, potential failure.  A board’s primary objective is to assure the viability, health and well-being of the organizational entity.  In this realm, its role is clear.  Where I have seen boards struggle and thus the organization, is when a lack of this clarity exists.  Below is my top seven item list that identifies where boards can assure role clarity for the board and each director.

  • The Board must have a job description or functional description and should each director.
  • Shareholders (and for non-profits, stakeholders) must be identified (not individually necessarily).  This element is where I see non-profits struggle mightily.  For example, for a non-profit CCRC shareholders/stakeholders are not residents.  Residents are customers, even in entry-fee communities.  Shareholder/stakeholders are for certain, any holder of public debt and any holder of mortgage paper.  Major vendors and insurers are stakeholders as well.  The definitional clarity begins at the “organizational level” in terms of where lies, for a board, the duty to assure organizational stability, reputational solidity and organizational viability and financial fluidity.  Yes, customers such as residents are tangentially impacted when things aren’t well-off but truth be examined, a debt failure causes irreparable harm to residents if a board isn’t engaged in securitizing organization viability.
  • A formal function, policy, etc. for board performance review and director performance review.
  • A formal function and structure at the board level for long-term planning – financial, strategic, etc.
  • A plan at the board level for CEO review, retention and succession.
  • A formal function for board development and education.
  • A communication element for discussions/feedback from/with shareholders/stakeholders.

Returning to the title: Success at the governance and thus, organizational performance level is when the board is truly committed and has put into place, the structural elements necessary to fulfill the boards primary duties;

  • Assure independence.
  • Focus on the financial, reputational and legal risks and the securitization thereto, of the organization.
  • Plan for and understand, the environment in which, the organization operates.
  • Assure plans for operating in this environment meet and exceed, the requirements in the second bullet above.
  • Understand and have policies and procedures in place, that clearly delineate the role of the board from that of management.  Maintain a fertile environment for a qualified CEO to garner appropriate feedback, support, reward, and security.  Boards need to assure, for the organization’s viability, retention of high-performing leadership and the succession thereof.
  • Be open and literally virtual, to shareholders/stakeholders.

When I encounter mediocrity and unfortunately, failure or the likelihood of failure, I see the same set of issues repeatedly.  As before, I have seen these most often among non-profits but not exclusively.

  • Lack of independence for directors.  In some circumstances, the conflict of interest is so clear (directors in high-level, influential posts with major vendors) and in some cases, subtle where familial relationship are involved.  Suffice to say, in non-profits this is one is the most prevalent.
  • Involved or have a tendency to become involved in operational issues.  This element is perilous in so many ways.  First, the board exists to function separate and distinct from management.  A board’s job is to procure and secure, competent capable management not to dabble in operations.  If management is underperforming, it is the board’s duty to identify the performance gaps and to assist management in achieving correction but not by becoming involved in operations.  Likewise, boards that find the need to meddle don’t empower management to take risks, drive performance and seek innovation.  Think about it: The presence of board members in operations creates sufficient tension for management and thus, management tends to guard what it does and how it does it.
  • Insufficient knowledge for the industry that the board operates within.  Boards need education sufficient to understand the key risks, shareholder interests, etc. in the applicable industry.  Uneducated boards equal poor decisions.
  • Lack of knowledge and engagement with stakeholders and shareholders.  Remember, this is a key issue even for non-profits. My non-profit clients goof this one all the time.  They believe that the shareholder/stakeholder is whomever they are serving (patients, residents, etc.) and thus, they lose sight of where the organizational risks and commitments (legal and other) truly lie.  Boards engage shareholders and stakeholders, management engages customers.  I can literally write dozens of pages of case studies where boards, especially non-profits, lost sight of (or never had in sight), the actual stakeholder/shareholder and ultimately, what happened and how painful it was.
  • Lack of a risk management structure at the board level.
  • Lack of a process and commitment to strategic and financial planning.
  • No or a deficient process for board recruitment, review and performance measurement.

In the final installment of this three-part series, I’ll cover best-practices for governance, specifically in the healthcare/post-acute care/seniors housing environment.  In so doing, I’ll cover the issues such that regardless of tax status (exempt or taxable), the information is relevant.

 

 

 

April 8, 2014 Posted by | Assisted Living, Home Health, Hospice, Senior Housing, Skilled Nursing | , , , , , , | Leave a comment

Boards of Directors: Outside Looking In

Over the course of many engagements plus my years as an executive, I’ve addressed and been asked to address, the theme of effective governance, particularly at the Board level.  To bring this topic into full context, one of my many “hats” that I wear (periodically), is as an advisor to graduate and post-graduate students working in the arena of health policy and healthcare management. One of my students currently, is researching this topic of governance especially as the same (effective v. not effective) correlates with organizational prosperity.  Her area of concentration in this research is non-profit health care organizations, though for-profit organizations are included as a contrast subject.

Her research and our conversations, reviews, etc. are fascinating as the content leads me across my many experiences serving on boards (non-profit, for-profit and publicly traded) as well as my many client engagements working with and/or in conjunction with, senior executives and their boards.  Upon further thought it thus occurred to me that I haven’t written anything as of late on this whole issue of governance – what it is, what it should be, where effective and ineffective collide in terms of organizational prosperity, etc.  Of course as always, my episodic journey (fits and spurts over a few weeks where time permits) led me through tons of stuff from my notes on engagements to former lectures and presentations to other research I have gathered.  Being brief: Wow.  I have a collection; quite a bit deeper than I thought/remembered.  The net of my review is that this topic of “governance” lends itself to a series of posts.  This is the first and for simplistic sake, it covers the core duties and the counterbalance of liabilities, for any Board (non-profit or for-profit).

To start, the core duties of a board are completely separate and thus, different from the core duties of management.  A board has a bifurcated role and responsibility.  The first duty is the advise and consult responsibility with management concerning the strategic and operational direction of the company.  The second and equally important duty is to monitor company performance at the macro level (financial, compliance, risk, etc.).  Topically, the latter element includes but is not necessarily limited to (not in particular order);

  • Approval of strategic plans and strategies.
  • Testing of performance measurements and oversight of risk management.
  • Succession planning for the top executive(s) and the process of selection, when required, thereof.
  • Audit – assuring the completeness, compliance and integrity of financial statements
  • Compliance – assurance that the company/organization complies with all federal, state and other related laws and regulations.
  • Approval of major capital investments
  • Protection of company assets and reputation, including tangible and intangible assets (intellectual property, trademarks, name, etc.)
  • Assure adequacy of executive compensation packages and develop and implement, the same in order to assure the security of key executive(s).
  • Represent the interest of shareholders and/or stakeholders (non-profits).

The key issue for a board is the concept of independence; the independent director.  In this regard, the ideal is that a board is solely interested in the welfare of the organization and thus, each director is free of self-interest such that the same would compromise his/her judgment and/or render him/her unable to take positions opposite of management when required.

The board is headed by the Chair(man or woman) who is responsible for agenda, meeting schedules and structure, committee coordination and overall communication within and across the board.  Boards make decisions on a majority rule basis unless specifically required otherwise (certain actions may require a super-majority) and such decisions are based on the information and input from management.

Board committees may exist in large numbers or in smaller numbers.  In healthcare, the following committee functions/board committees require specific attention.

  • Quality/Compliance: This is a major risk area and it is perhaps, the most critical oversight function for a healthcare board today.
  • Governance: Boards need to address new member recruitment, director performance, board performance, board education, etc.  This element also includes CEO performance and may/may not encompass compensation for the CEO.  Some organizations split compensation into another committee.  I have found both split and shared equally as effective if properly managed.
  • Audit/Finance; Second only to compliance in terms of risk, boards need to engaged in the review of investments (capital, other), financial statements, the engagement of auditors, the review/approval of financial plans, budgets, forecasts, and where applicable, any organizational financing activities from feasibility through completion/non-completion.  This function also encompasses financial risk management and review of public release information.

Board terms are all across the map today but the two best practice models I favor are one-year, annual election of members or staggered two or three-year terms.  Each have merit and each have flaws.  The true test of effectiveness of any “term” condition is how effective the governance function is in terms of director review, board review, etc. Boards that have effective director performance review, clear criteria and effective board performance review self-police and thus, make term conditions work regardless of length.

Finally and key for all boards and members to understand is that boards have specific legal duties, typically identified under their respective state laws or as embodied in case-law.  These duties are typically identified as “fiduciary” in nature.

  • Duty of Care: The requirement that decisions are made via deliberation and investigation/data.
  • Duty of Loyalty: The requirement that directors act in the best interest of the corporation or enterprise.  This duty has also been, in some case-law decisions and state laws, expanded to include the best interest of shareholders.
  • Duty of Candor: This is more applicable to publicly traded companies but I have found it universally applicable.  It essentially means that the Board provides all relevant and transparent information to any party where the organization solicits business, solicits investment, or is inclined to be or involved in transactional business.  Effectively, this is the full and honest disclosure rule or as I like to call it, the tell the truth”  principle.

In my next post, I’ll explain how the implications of board duties, structures, etc. play out in real life and how public vs. private (non-profit vs. for-profit) situations compare and contrast.

March 18, 2014 Posted by | Assisted Living, Home Health, Hospice, Senior Housing, Skilled Nursing, Uncategorized | , , , , , , , , | 2 Comments

Amedisys Today: A Cautionary Tale

Rarely do I write about a specific company as my work doesn’t focus on individual companies per se, more on industries and the policy/economics of health care industry segments.  Occasionally, a company’s story typifies an industry flaw or trend or the same is illustrative of an endemic issue (Vitas for example).  Amedisys’ continued saga of decline is an exception where a company’s story is illustrative of a series of missteps and failures in vision and leadership.  The latter is a trend I see altogether too often.

Yesterday, Amedisys announced its third quarter results (4th quarter 2013). In summary, for the quarter net revenues declined by 13.7%, net loss increased to $2.2 million a decrease of 135% compared to the same period in 2012 and annualized negative changes (from year to year) in EBITDA (negative 49.7%) and net income of 83.8%.  Comparatively, two years ago their margin was 7% (not good but not deplorable), -26% last year and for 2013, -5.6%.  Their aggregated profit margin in “real-time” is -16%.  In spite of any rhetoric from management (new leadership at the helm after the ouster all too late in my opinion of founder Bill Borne) about hitting bottom, improving fundamentals, etc. the future picture is “crystal”.  In fact, analyst surprise over yesterday’s results is illustrative of a lack of generalized understanding about health policy, health care/provider risk concentration, and sustainable operations.  Suffice to say, no surprise looks on my face.

I have written before somewhat on Amedisys and referenced them as a story that others insist on paralleling (Vitas again comes to mind).  So as the title reference applies, below is the cautionary tale.

  • Concentration of Risk: All too many providers get caught-up in following the “shiny object” syndrome.  They mine the reimbursement trend of greatest reward, using the most advantageous coding, and layering their plates with as many patients possible that fit the highest payment profile.  Some do this by stretching the very definitions of medical necessity.  Others do so by overly zealous and questionable referral methods; some overtly fraudulent such as pay-for-referral or incentive-for-referral arrangements with other providers.  The flawed belief is that effective lobbying, smoother lawyers, and a public persona campaign that focuses on “good, ethical, high quality care” imagery will somehow ward off intrusions that could burst the bubble.  All of the aforementioned is the flaw in how health care reimbursement and policy really works. The handwriting was on the wall for Amedisys as its book of business was feverishly high with Medicare patients and patient profiles by margin, concentrated in therapy.  All the signs of a crumble were present and no diversification strategy was even in the works when the OIG stepped-in, Congress following and CMS on the backend re-writing reimbursement rules.  The hey day ended and today, with no ability to re-tool quick enough away from the only business model Amedisys knows but generate visits under Medicare, their financial house is exposed.  They were too big, too reliant on a single element of business and not properly diversified to mitigate the risk exposure that comes with mining government reimbursement programs.
  • Short vs. Long Term: To be certain, publicly traded companies are driven by ever-increasing earnings and thus can lose quickly, the perspective of sustainability of business.  Like in mining, veins tap out quickly and the quest is always to find another “motherload”.  Unfortunately in health care, more of the same even widely diversified by geography doesn’t create sustainability it simply magnifies the concentration of risk.  Creating a sustainable platform of survival and thus success is all about leveraging core competency beyond the simple “how much per eaches can I bill”.  Innovation and multi-level capabilities crossing all lines of business and depth of payer diversification is how long-term earnings are made.  I refer to this, as do others, as system thinking.  Integrating pieces and constantly rolling-forward new lines of innovation allows for a pipeline of other service/product lines to build sustainable growth and profit.
  • Failure to Understand Policy and Economic Implications: Health policy is rarely illogical though it often in final form, is misguided and bureaucratically over-cooked.  Medicare and Medicaid are unsustainable entitlement programs and government’s response to structural funding problems is to reduce “spending” not sustain it or increase it.  Any provider segment today that believes more money for anything is forthcoming truly has suspended reality.  This isn’t to say that in components, Medicare and Medicaid can’t be viable business segments.  It does mean that the world has been changing for quite some time and anyone who pays attention to basic, easily accessible information from source like MedPac can see the change ahead.  The days of disconnect between quality and volume are over.  Excessive margins are eroding from all elements of Medicare.  Payments are heavily scrutinized.  Providers that haven’t been preparing for this shift across many prior years are today, rueing the lack of foresight.  This is true for all provider segments.  Home health fell earliest.
  • The Fraud Peril Disconnect: I lost track years ago of how many providers/executives/boards I have talked to and counseled regarding “too much success”.  There is an inherent disconnect that occurs when profits are rising, volumes the same, and life is “good”.  Instead of asking key questions and doing a little independent analysis around “why so good”, the push goes on to ramp-up even a tad more.  The incentives rise, the fever brews and no one seems willing to ask the pressing question of, “why are we doing so good”?  Instead of analysis to create justification, I counsel the alternative; analysis that questions any justification.  The latter is a discipline that focuses on matching trends elsewhere and demands a clear line of service to billing.  When the trends in any organization are simply so much better than any other organization logic demands inquisition as to why.  If others start following, I get even more nervous.  Conversely, if an organization suddenly finds a swell that arose simply by following an established industry trend, I also get nervous.  Systemic fraud occurs mostly because organizations justify their own results with rhetoric rather than clear analysis.  Any focus on why and how things are truly occurring, particularly via an external, non-invested source will quickly detect where the break-downs lie and the risks run deep.  Unfortunately and all too often, the executive level reaction is the “three monkey reaction”; hear no evil, see no evil, speak no evil.

The cautionary tale?  Amedisys exemplifies all of the above.  Today, Vitas the same and I fear Gentiva is on their heels.  Each has too much reimbursement concentration of risk, a business model that solely exists to gather certain types of patients and a cavalier regard for health policy and economic trends.  Their models are unsustainable without complete overhaul and an overhaul is not in the cards as doing so would require a planned shrinkage and a death spiral for their share price.  Oddly enough, their share prices will still hit the death spiral, as did Amedisys but not because of the prior comment.  This spiral will occur as a result of not having read the cautionary tale sooner.

Next for Amedisys?  Non-existence as a public company is my forecast and continued acquisition of their shares on behalf of KKR is the harbinger.  I predict, as I have in other posts, that Vitas is on the same path as Amedisys and nothing to date has eroded this opinion; its only stronger.  Vitas has enormous risk concentration, a disregard in operating philosophy from the real reimbursement and policy climate operative today and a focus almost entirely on reinvigorating volume and thus earnings.  The latter is anathema to where they sit on the Feds radar.

March 14, 2014 Posted by | Home Health, Hospice, Policy and Politics - Federal | , , , , , , , , | Leave a comment

Decline in Hospice Demand?

In the last month and across a series of analyst calls (investment firms) that I field on a regular basis, a question repeats: Why is the demand for hospice declining? Of course the economist in me wants to opine in great detail about “demand” and what factors increase or decrease demand or, shift demand among substitution products, etc.  For brevity, the demand lecture isn’t warranted and in actuality, the current hospice dynamics are less about an increase or decrease in demand, more about realizing where core “hospice” demand lies.

Point of fact: The demand for hospice services at the core hasn’t changed at all and in some markets, demand as expressed by referral volume is up.  The trend that is evident however is that the demand as expressed in overall lengths of service has changed.  This is the impact that most providers are seeing/feeling.  While for some, year over year volumes are flat to down for others, volumes in terms of referrals and encounters are rising but core census is flat.  The flat census expressed by the number of covered individuals on service at any one point, has flattened even with referral volumes increasing simply because stays are shorter.

What is happening in the industry is a bit like realignment of incentives and forces that as they congeal, are morphing demand as experienced by providers. Integrating these pieces paints a picture of now and near future demand  in the industry.

  • The Vitas Impact: Anytime the largest player in the industry is targeted by fraud and federal investigative activity, the spill-over to all providers of similar size (and the rest of the industry) shifts the market.  This impact can’t be directly quantified but it is of a large magnitude.  The behavioral aspects of the DOJ suit are a reminder to all providers to tread lightly in certain operational areas – namely marketing, certification and re-certification.  One need look no further than the home health industry and the Amedisys targeting to see how the entirety of an industry is ultimately impacted once the microscope is fixed on the largest provider.
  • Large vs. Small Providers: The substantial industry growth between 200o and 2011 (60%) occurred almost entirely in the proprietary (for-profit) sector and among large, multi-state, national scope providers. Across the same period, the non-profit and government providers shrunk in numbers.  The overt scrutiny from Medpac, CMS and the OIG/DOJ is on this segment of the industry.  Large False Claims actions and settlements have occurred in the “big” or “large” side of the industry, creating certain behavioral changes that shift elements of the industry demand profile.  Again, the largest impact all other providers in the space as fundamentally, these large providers account for fully half of the industry patient population at any given point.
  • CMS Changes and Diagnostic Scrutiny: Looking at demand and taking into account the drivers since 2000, one can easily be fooled that the core demand was larger than it is.  The laxity in certification definitions within the Hospice benefit created a wide playing field as providers entered the market.  Is this or was this an unveiling of pent-up demand?  Hardly.  It was an exploration of how demand could be quantified or in many cases created or justified to meet the supply of providers in the market.  Across this same ten-year period, the fastest growing diagnoses in terms of percentage increase and volume were Non-Alzheimer’s dementia, general debility and failure to thrive.  Not surprisingly, these same diagnostic (for lack of a better term) categories also profile the longest stays.  By 2014, CMS will eliminate these categories as suitable for certification and require additional diagnostic coding to substantiate initial and ongoing certification.  A quick review of the utilization data by diagnosis illustrates how such changes are playing out on the demand side (data courtesy of CMS – click on the link to open the media files and tab select the charts from the bottom of the spreadsheet).

Copy of Top_20_Charts_1998-2008

Reviewing the above and the attached data charts paints a clearer picture of the shifting demand components.  If, as CMS and Medpac suggest, that as much as 25% of the certifications in the dementia (non-Alzheimers), general debility and failure to thrive categories don’t have any other diagnostic comorbidities suggestive of imminent death (6 months or less), than a quarter of the “demand” is logically lost.  Because demand in all instances is impacted by behavior, market and individuals (single or collective), changes in behavior as a result of changes in incentives leads to adjustments in demand.  In the case of hospice, this is clearly evident today and will magnify going forward.  As I have stated before, the industry has too many providers chasing too few organically terminal patients.

The reality regarding the demand equation today for hospice is that the demand is still present and likely, growing.  What is changing however is the methodology for accessing the demand is different.  Demand for hospice providers is a function of two elements: patients with an appropriate diagnosis and length of stay.  If, as is the case, certain generalized diagnoses are no longer appropriate,  this doesn’t equate necessarily to a lack of demand.  It does equate to a shift in demand from current (today) to future as the overall condition of the patient deteriorates and demand quantifiable through coding, becomes evident.  As the market re-balances and the demand curve stabilizes along a new level of equilibrium between all providers (of which there will be fewer) and the new number of appropriately terminal patients (by definition), providers will see stability.  It is certain that average lengths of stay will decline as categorically, the drivers will no longer exist.  It is also certain that hospices that thrive will adjust behaviorally.  For example, nursing home enrolments will no longer be the “gold mine” for many providers.  Payment reform will adjust this element in the next year or two.  Additionally, greater regulatory scrutiny regarding place-of-care is a certainty as CMS is paying greater attention to the diagnostic qualifiers and matching SNF MDS submissions to hospice data (heads up).  The end: Volumes are flat and in some cases marginally increasing but the demand is for intense, shorter stays and more volatility in referrals.  This is the new norm and providers are feeling the shift toward this revised equilibrium point.

December 9, 2013 Posted by | Hospice | , , , , , , | 1 Comment

Reforming the Medicare Hospice Benefit

As a wrap to my two previous articles regarding recent fraud and False Claims Act suits and issues in the hospice industry, a concluding piece is warranted.  As I have written before, the fraud issues and cases in the Hospice industry divide (though not equally) between the providers committing the fraud and an inferior Medicare Hospice Benefit combined with CMS’ ability to effectively administer the benefit.  As with all provider programs under Medicare, the payment methodology provides increased levels of reimbursement for higher intensity or higher acuity care.  These higher payment levels are often dramatically out-of-sync with how patients utilize care and how providers deliver care and support operating realities simultaneously.  Additionally, the justification methodologies employed by CMS for a provider to grab a higher level of care and thus garner more reimbursement provide no effective screen to the event.  In short, the governmental recourse is post-claim reviews, often not completed, and when complete, years post the payment fraud.  Oddly enough, the government (CMS) doesn’t even effectively monitor current claim trends against normative utilization patterns. Perhaps this is why the Department of Justice and the CMS Office of Inspector General estimate annual fraudulent billings to Medicare of between $60 and $90 billion.

Since inception, the Medicare Hospice benefit has received the least amount of re-work, structurally in terms of definitional language and organically in terms of payment methodology.  For all intents and purposes, other than per diem payment machinations, the payment levels and definitions remain unchanged. Likewise, the eligibility and benefit structure remains fundamentally unchanged.  These two core elements are incongruous to the industry growth and general health policy trends that have occurred since the benefits origin. While the number of patients and providers has grown dramatically over the past decade (twice as many beneficiaries using the benefit today), the payment and eligibility plus coverage criteria remain fundamentally unchanged.

The Accountable Care Act includes a mandate for the Secretary of HHS to reform the Medicare hospice payment system and thus, a rounded benefit program (ideally) to mirror the payment changes.  In effect, the benefit will be substantively revised, at least from a payment perspective.  As go payment changes in these programs, so comes regulatory language that ultimately, configures in whole or in part, the related coverage and benefits (e.g., acute and post-acute PPS).  Prior to this forthcoming change, Congress in 2010 authorized a demonstration project for Medicare and the hospice industry, allowing Medicare payments for, in concert with the per diem hospice benefit, certain amounts of curative care.  To date, no movement on this initiative has taken hold.

The hospice hardline exists between curative and palliative care. Enrollees must forego any curative care options in order to garner the Medicare hospice benefit and the services of a hospice.  For all too many patients, this is an unacceptable choice.  For all too many physicians, this keeps hospice out of the discussion as an option; saving the futility implication for a point later.  The net effect of this hardline is that hospice utilization, while up in numbers, is increasingly driven to the last days of life.  It also increasingly occurs in an institutional setting as opposed to the “hospice goal” of dying at home.

The dilemma for economic policy consultants such as me is that hospice is an aspect of the care continuum that should see higher, appropriate utilization. By appropriate, I mean less of the “push the envelope” growth evidenced in the Vitas complaint and less of the very last days of life growth that come only after all other options exhaust.  Hospice or palliative care is an exceptional delivery system that can save the Medicare program significant dollars while offering qualified patients, comfort and access to appropriate resources.  Getting to the modernization and reformed program level however, requires a conceptual shift in the Medicare hospice benefit.

  • Best practice diagnostic screenings and assessments need to take the place of the ‘certification’ standard presently in-place.  Medicine is very capable today of approximating death by types of disease.
  • The benefit needs to integrate transitional periods of curative technology and care, allowing patients to transition earlier.  If recovery occurs, so be it.  This conceptually, will satisfy the barriers in the minds of patients and physicians and removed the “futility” stigma. A payment methodology needs to incorporate this care.
  • A PPS methodology needs creation with logical review periods and standards, analogous to home health, SNFs, etc.  Logically, the hospice system is simpler and can encompass far less criteria.
  • Within the PPS methodology, the “place of care” issue requires reform.  Payment must reflect the care needs of the patients, not the paradigm of “death at home”.  An aging society is less and less likely to “die at home” as integrated families and non-paid caregivers are less and less the norm.  More patients on hospice, will die in institutional environments and the payment methodology must incorporate this reality.
  • A flaw exists in the Medpac remedy of per diem payments (same model adjusted) correlated to length of stay  unless the same correlates to an assessment and a resulting PPS model.  In this approach, length of stay is not  a factor; care required is the sole factor. If Medpac believes intensity changes through the stay, this model addresses that issue generically.
  • The concept of benefit periods needs revamping.  Personally, from an economic perspective,  I prefer someone using a palliative benefit program for a year or more compared tot the present fee-for-service Medicare model.  In fact, the Hospice benefit should incorporate end-stage care and palliative care payments as opposed to the current paradigm which is truly, end-stage.

While I can’t guarantee the above changes eliminate the fraud activity in the industry, they certainly level the field and address the flaws in the Medicare hospice benefit that contribute to the fraudulent activity.  Provider behavior, especially when a profit element is at play, will always follow to a certain extent, the economic axiom of “what gets paid for gets done”.

May 16, 2013 Posted by | Hospice, Policy and Politics - Federal | , , , , , , | 1 Comment

United States v. Vitas: The Impact and What Next

On May 5, the U.S. Department of Justice released its most recent complaint (legal suit filed in Federal court) against Chemed, the corporate parent of Vitas.  The complaint is a False Claims Act suit.  Briefly for the uninitiated, a False Claims Act suit alleges that the Medicare provider knowingly (or unknowingly but once discovered, did not disclose) engaged in certain activity to cause payment to the provider for Medicare services that (not exhaustively listed);

  • Were not provided
  • Were provided but not necessary
  • Were provided improperly, through illegal or unethical means such as via a kick-back scheme, etc.
  • Were or are not substantiated by patient need
  • Were provided by a person or organization not in compliance with relevant Medicare Conditions of Participation
  • Were provided to patients that did not meet coverage criteria

The dominant False Claims Act suits relate to care not provided, care billed for at a particular level despite a related patient need (over-billing), or care provided by but not substantiated by assessment, documentation, or certification.  In the case against Chemed/Vitas, the Federal government is alleging that Vitas intentionally over-billed Medicare for higher reimbursement amounts by “up-coding” patient needs absent any real need and, admitted patients for care and billed for services where there was no definitional or certifiable need on the part of the patient.  In this case, each violation is alleged against Vitas as a hospice provider organization.

Through various cited examples to substantiate its case, the Federal government alleges three primary activities and/or schemes ( the support for the listed causes of action) that led to a series of False Claim Act violations, spanning from 2002 to current.

  • Coding a patient as requiring Continuous or Crisis Care where no such need existed.  Continuous Care or Crisis Care is the highest reimbursed care level within the Medicare Hospice Benefit; today, averaging just short of $1,000 per day. Because of the definition standards and requirements for a hospice to provide and therein bill for Continuous Care, the utilization across the industry averages less than 2% of all days of care. (Vitas averaged nearly 20% of its days in this category.) The requirement for a hospice is a patient’s current symptomatic needs are so complex and unstable that the hospice provide at minimum, 8 hours of licensed nursing care to the patient within a 24 hour period.  Typically, this care is rendered by RNs and somewhat less often, LPNs or LVNs.  Its rarity stems from two components.  First, the true need of a patient in crisis with an end-stage disease for 8 or more hours of licensed nursing care.  Second, the reality of hospice staff levels and the availability of dedicated, licensed nursing coverage for a single patient.  Medicare Conditions of Participation do not allow nursing services via agency contract.  All nursing, except for very episodic and highly unusual instances, must be provided by the hospice employees exclusively.
  • Enrolling patients and thus accepting the Medicare hospice per diem (presently averaging around $160 per day) that did not meet the hospice certification criteria of ‘likely terminal, sans curative interventions, within 6 months or less’.  Citing numerous examples, the complaint details a pervasive practice of increasing revenues and thus, patient volume via enrolling patients and fraudulently certifying the same as terminal, when the patient was not under any common review, proximal to death.
  • Employing aggressive marketing campaigns and incentivizing employees and agents, to knowingly misrepresent patient conditions and/or falsely enroll and then subsequently, code as appropriate for hospice including, at higher reimbursement levels such as Continuous or Crisis Care levels.

Reading the complaint, I was struck with a number of thoughts.  First, the magnitude of the complaint is huge.  It encapsulates the entirety of Chemed’s hospice holdings, collectively Vitas.  The majority of False Claims Act complaints are against a single provider or geographically and agency limited.  Additionally, the time period referenced encompasses over a decade of claims.  As I have followed False Claims Act cases in health care for years and paid close attention to the hospice activity, a reasonable estimate of the dollar amount (Vitas)involved is hundreds of millions of actual claims that are exposed to treble damages before the imposition of Civil Monetary Penalties.  There is also the shadow of criminal prosecution for certain Vitas actors and management looming. Finally, this complaint is in the midst of other complaints against Vitas, open or soon to be open.  A significant False Claims Act case is open against them in Texas and a newly opened complaint with a physician whistleblower in Los Angeles just broke and is today, wrapped in the broader complaint.  Shareholder suits, although relatively meaningless are popping (meaningless in damages, still damaging in costs to defend). As is always the circumstance in matters such as this, the complaint will have tentacles and I suspect there are many.

In an earlier post, I wrote how the parallel is striking between Vitas’ current problems and the investigations that crippled and continue to cripple Amedysis.  Amedysis was the “big dog” in the home health industry until it became the target of Department of Justice investigations and Senate inquiries.  Once trading at nearly $60 per share, Amedysis trades today around $10.  Their earnings estimates continue to shallow and at 10x projected earnings, their share price today should be around $5.  Once a billion dollar plus company, Amedysis today has shrunk by more than half.  They continue to close agencies and scramble to maintain market share.  Major network contracts have cut their exposure to Amedysis and thus, payments.  Their aggressive Medicare business is a fraction of what it once was and they remain today, under investigation.  The last likely play is to go private via a private-equity sale and simultaneously restructure, outside of the publicly traded arena.

Reading various investment analyst reports and Vitas’ disclosures, the “take away” on the part of Wall Street is more wait and see with some folks marking this up to “cost of doing business” and others trying to grasp the magnitude.  As I consult for a number of firms that invest in the health care industry, I understand the difficulties in wrapping one’s head around the complaints and the possible fall-out for Chemed/Vitas.  Because of my working knowledge of the health care industry, depth of experience with the regulatory process, etc., my view is more solid (not necessarily right perhaps) today than that of most investment firms. My view comes from thirty years of research, operational, and consulting work in the industry.

From my vantage point, Vitas is about to begin a slow and profound slide into an abyss that they will not recover from.  The complaints current and yet forthcoming, paint an overall picture of a business model that is grossly non-compliant and steeped in fraud at the core.  Retooling this model, just as occurred with Amedysis, will shrink revenue, market share, and company value expressed via price per share.  Unlike Amedysis, Vitas exists in the “hospice space” only.  They have no other revenue source or model.  Amedysis had and continues to have, some ability to ply the entirety of the home health industry and to a much lesser scale, the hospice industry. Their revenue model is sufficiently broader, though flawed in its reliance on exploiting Medicare and the therapy components thereto. Vitas exists in an industry where Medicare is the primary payer and the overall market for hospice by definition, is very narrow.  A significant “clip” to their volume and revenue streams resulting from having to adjust in response to current and future investigations will begin the shrinking process and as more is disclosed, the process accelerates.

True enough that the ultimate settlement may not be fully crippling even though the scope could be hundreds of millions of dollars.  The real damages lie in the go-forward world of continued compliance monitoring and being subject to a lengthy period of oversight by the Feds.  Again, I offer Amedysis as a reference.  The complaints won’t resolve timely and thus, the slow dance of revision begins.  Moreover, everything now public suggests a clear tone from the Department of Justice and CMS of a focused intent to shrink the prevalence of large, for-profit hospices and curtail dramatically, the incentive to suspiciously enroll non-terminal patients.  Their words in various locations, tell me straight-forward that the industry has a fraud pandemic and the day of reckoning has arrived.  Vitas, just as Amedysis on the home health side, is the poster-child face of the “bad actors” per the Feds.  Vitas is the example and the governmental intent is clear: get them compliant at any cost including the death of the company.  The Washington view is that ample providers exist to care for the organic demand (my view as well) and the loss of Vitas will have no negative impact on access (again, my view as well).

What next?  The implosion of Vitas begins and the hospice industry will bear some of the fall-out.  The Feds are ramping-up investigations and reviews across the industry and for the providers who think vulnerability doesn’t exist, I offer words of extreme caution. Mandated by the ACA, the Secretary of HHS must promulgate new payment methodology for the industry after October 1, 2013 and before September 30, 2014.  The cases against Vitas and others that have committed similar violations will form the backdrop for payment restructuring and associated rule-making.  As has happened across the health care industry, payment reform and restructured rules associated with the same, emanate from sector dynamics current.  My guess is that the next round of payment reform for the hospice industry will organically change provider business models and not toward greater profitability.

Note: Readers with subject level interest in hospice and/or separately, the topic of fraud and compliance in healthcare will find a number of prior posts on these topics, on this site.

May 15, 2013 Posted by | Hospice, Policy and Politics - Federal | , , , , , , , , | 7 Comments