SNFs Get Ready – Claims Audits Start Soon!
Recently, CMS announced that its Medicare Audit Contractors (MACS) would soon commence (June 5) a five-claim audit process for every nursing home in the nation participating in the Medicare program. The reviews are set to occur on a rolling basis whereby each MAC in its region, will begin by pulling five Medicare claims from each provider in their region, assessing the claims for billing errors. The genesis of this program is a Health and Human Services report that noted that (approximately) one-fourth of all SNF claims were improper as supported by documentation. In CMS language improper means overbilling vs. underbilling.
The goal of the claims review program is purportedly a combination of recoupment when payment is too high combined with education. It is likely that providers with prior bad history of ADR (Additional Documentation Requests) or probes, if their performance on this review is poor, will receive additional follow-up attention. The claim reviews are pre-payment vs. post-payment.
From the Medicare FFS (Fee for Service) Improper Payment Report (all provider types) for 2022, I included two pages with data, illustrative of the SNF improper payment issue and the reasons why. The pages are located here:2022 Improper Payment Report – SNF The most common cause of impropriety was insufficient documentation. Some of this continues to relate to PDPM as SNFs in many regards, lag in terms of MDS coding knowledge and billing education. COVID did not help. Other issues are as simple as improper certification times, illegible signatures, improper Section GG (therapy coding) and improper diagnosis codes. Per CMS, the improper payment amount for 2022 is estimated to be $5.8 billion.
My caution here for all post-acute providers but especially for SNFs and Home Health Agencies, claims audits are here to stay. According to Altarum’s Health Economic Sector Index, SNFs spending increased 11.6% YoY (March) and Home Health spending increased 8.7%. Outlays, within programs with known billing impropriety issues, beget claims reviews. The full Altarum brief is here: https://altarum.org/publications/may-2023-health-sector-economic-indicators-briefs
As I have written before, compliance is a fairly new requirement for SNFs. Within the ethics and compliance Condition of Participation found at 483.85 (F- 895) SNFs must, among a number of requirements, implement a system (reasonable with policies and procedures) to find and correct, improper billing practices such that the same, could be fraudulent or could be in violation of federal law. The last element, violation of federal law is tricky. It is against the law to bill Medicare for care that is rendered improperly or is sub-standard. Technically, care provided to a resident, billed to Medicare, later determined to be harmful via a survey (G level violation or worse) is a violation of federal law. A decent overview of the compliance requirement is available here ComplianceandEthics 483.85
Essentially, post-acute care providers, particularly HHAs and SNFs need to develop a comprehensive ethics and compliance program that INCLUDES regular claim audits. The difficulty, however, is for the audits to be useful and proper, the same should be conducted by an independent auditor. This can be costly and often, non-helpful when the auditor is not uniquely familiar to normal provider operations and typical survey and certification processes. The goal of the audit process is detection and then, education. Incorporated properly within a well-developed ethics and compliance framework, the audits can be completed efficiently and wrapped within a proper QAPI (Quality Assurance) function. Done right, the ethics and compliance program dovetails into a QAPI program and vice-versa. This reduces separate work, enhances process improvement, focuses on resident/patient care and how the same is effectively provided, properly documented, and properly billed. Watch this site for more on this topic and for additional tools that I have developed and effectively used with H2 Healthcare clients.
A bit of travel awaits so I will not offer new posts/updates until next week. Until then, Vaya con Dios!
Friday Feature: SNFs Still Make Sense
For some recent years, enhanced by the pandemic, the role of SNFs in the post-acute/senior living industry has tarnished. Residents and families often view the SNF as a “negative place” to reside, even if for short-term recuperation. Clinical staff take a dim view of the care complexity such that the SNF is a downgraded clinical setting, less than a hospital or outpatient setting. Providers, struggling with reimbursement inadequacy and advancing regulation, have reduced beds or closed locations. Some organizations like CCRCs, have minimized bed capacity or completely eliminated the SNF and moved to advanced Assisted Living care as the highest available care option for residents. Yet, in spite of these trends and the tarnish, SNFs have a place in the continuum and in some regards, and advancing place.
What challenges the SNF industry and thus, its reputation, are more external forces than flaws in the core purpose of an SNF. External forces such as onerous and increasing regulation, below cost reimbursement, and labor shortages are the most common forces providers deal with. Gone are the days where nursing homes were locations of long-term stays, typified by years of residency. Where and when this still occurs is for residents with early-age disabilities, or for residents that have minimal financial means such that Medicaid nursing home benefits are the primary level of support for care. With Medicaid supports via waiver programs expanding, long-term skilled nursing care includes primarily the most complicated residents, those with multiple conditions requiring skilled nursing interventions weekly or even, daily. Examples include ventilator care, dialysis, tube feedings, ostomy care, etc. While these services can be provided in the home or a non-SNF setting, location challenges often make an inpatient environment (SNF), the best place for consistent care when required.
The demographics forward, favor a post-acute, SNF setting. Despite the push for post-acute care to migrate to home settings with home health the reality remains, this is not the answer for every patient. The older the patient, the number of comorbidities involved, the nature of the comorbidities, the presence of an aging spouse with health challenges, etc. all are a predicate to whether or not, home care via home health is viable. Today, even access to home health can be challenging if not, impossible. The staffing challenges all health care providers face are particularly daunting for home health agencies where, acceptance of cases, especially complex cases, comes down to having available staff to meet patient needs. As home health care by its nature is inefficient, facility-based care can be more feasible when complexity of the case is at issue and the availability of staff is challenged. In other words, staffing one location that can accommodate say 60 residents, is easier than staffing a caseload of 60 separated by travel with distances expressed in miles.
The SNF industry and the facilities within tend to be some of the oldest classes of assets in the senior living industry. The cost of new construction is high and without access to a very high-quality payer mix, the returns are challenging. For providers than can maintain solid occupancy and high-quality payer mixes (Medicare, insurance, private pay), the returns are solid and the access to capital is there. Medicare Advantage plans are starting to create solid value-based care propositions for good providers with exceptional quality records AND great care coordination partners. For example, an SNF that has a relationship with a Home Health Agency, either owned or in partnership, has the ability to package price disease management approaches by common clinical conditions that include SNF care and HHA care, all bundled, and care coordinated. If the pricing is mapped with overall savings, reductions in re-hospitalizations, improved patient outcomes and satisfaction, the opportunities going forward are significant. I have a number of pathways/algorithms that fit this example. A few can be downloaded here.
What headwinds lie ahead fall mostly around staffing, regulation, and reimbursement. Oddly enough, the failures that will inevitably occur necessitating closures and bed reductions, will make good SNFs stronger going forward. The demand by demographics and patient needs is only increasing. There will be a significant role for SNFs to play in meeting the market needs. The questions that beg are around reimbursement keeping up with increasing costs and how disconnected will new staffing regulations be to the reality of the labor markets. As I have said in other posts, mandates make no sense when in all reality, the mandate cannot be met now, or anytime in the near future.
Bottom-line: Banks are still willing to lend to good providers. REIT capital is available as is private equity for facility improvements and modifications. Demand is decent and recovering. There is a lot of pent-up demand as well, post-COVID. Valuations have remained stable for SNFs as well. Plenty of partners exist, more so than other senior living segments (hospitals, Med Advantage plans, health systems, Home Health Agencies, etc.).
Litigation risk is still an issue but a recent court case in Washington involving Life Care Centers of America concerning COVID and the liability for infections obtained in an SNF was found favorably for Life Care Centers. One case, however, is not a trend but it is a good sign that perhaps, the SNF industry will not be overwhelmed by COVID litigation pertaining to outbreaks and occurrences in facilities. A synopsis of the case is available here: https://www.mcknights.com/news/life-care-centers-vindicated-in-early-covid-wrongful-death-case/?utm_source=newsletter&utm_medium=email&utm_campaign=NWLTR_MLT_DAILYUPDATE_052323&hmEmail=IjP1GPaY%2BJ2uvsLxTJ79bVeRWY7ycbnr&sha256email=aa4cb7c695037c31a216b9562788596b6fcd012145d566f31440b6fcd139c8a9&elqTrackId=2c80aade4c3647c8ab5b85f72fb85138&elq=8a824ff9b15249a9bf296d2d2c1be9e8&elqaid=4134&elqat=1&elqCampaignId=2746
Well-run, well-capitalized SNFs with more modern physical plants have a solid opportunity in the evolving post-acute industry. Challenges exist but opportunities do as well and, in my opinion, the opportunities outweigh the challenges for operators that understand value-based care models, are willing to develop partnerships, can maintain staff, and have great quality and service records.
Senior Housing/Senior Living Debt Review
Senior housing in the form of CCRCs, Independent Living and Assisted Living (including memory care) is a large user of debt financing. While equity has become more prevalent via increasing private equity interests in senior living, operators, especially non-profits, continue to rely heavily on bank and bond financing. Private equity and venture capital investment trends tend to curve toward newer projects, acquisitions, healthcare offerings on the post-acute side (home health for example) and other ancillary businesses (SNFists/intensivist physician practices, pharmacy, therapy). Given the current economic conditions and banking environment, now is a good time to take a look at where the senior housing/senior living industry is from a financing perspective.
Perhaps the largest current concern focuses on existing debt that comes due in 2023 and 2024. The industry will see billions of bank and bond debt that matures or has variable rate features that will reprice across the next twelve to eighteen months. Two challenges thus exist. First, the cost of capital, expressed as interest rates, is higher now than it has been for the last fifteen years. While the rate environment (expressed as climbing or falling) seems to tack to a stable point, inflation has yet to fall to Fed target levels. As long as inflation remains high, the risk of the Fed continuing to raise rates remains. Effectively, expiring debt that requires refinancing will cost more going forward. Debt that is variable and repricing will cost more. Depending on the rate increase level, providers may face significant margin erosion and/or operational drag as debt service costs increase. A chart of the last twenty years is below. More analysis is also available here: <a href=’https://www.macrotrends.net/2015/fed-funds-rate-historical-chart’>Federal Funds Rate – 62 Year Historical Chart</a>
The second challenge is capital access. While rate is a concern, accessing capital is also a concern as lending conditions have tightened due to bank capital structural changes and generalized commercial credit concerns – real estate in particular. Valuation challenges also come into play such that operators/owners may find the overall value of their projects has changed, negatively so. Credit access is not only a function of real property collateral (value) but also, the strength of operations to meet debt service requirements. With occupancy challenges remaining, though improvement is occurring, and costs rising faster than revenues in many organizations (labor, energy, supply), credit profiles for providers (owners) have changed – negatively. In short, the spigot of available capital is less open now than it was, pre-pandemic.
The pandemic slowed the pace of property improvement and to a certain extent, the deferred maintenance “bill” for needed improvement is now coming due. Per NIC (National Investment Conference), across 31 markets that they track for senior housing data, two-thirds of the communities in these markets are old and in need of improvement – redevelopment or major upgrade. This of course, begets a need for capital and today, the capital availability is not as prevalent as five years ago and the cost of the capital, three to five times more expensive.
When improvement is required, capital access and cost are relevant but so is the cost of the improvement. The industry is seeing a bit of a perfect storm (currently) as capital is more expensive and construction costs are as well. In this scenario. project feasibility and payback conditions become stressed. Infrastructure improvements or community updates and refreshment may be required just to retain occupancy or to manage market share BUT the same may beget no new revenue or minimal revenue increase opportunities, not proportional to the investment. For many of these older communities, market location and property composition are such that significant increased revenue opportunity is unlikely. Given this prospect, the alternative to improvement via financing may be for some, merger or affiliation. See my post on this topic here: https://wp.me/ptUlY-tH
Bank debt/lending continues to be the primary source for capital but recent banking failures have tightened lending activity. We saw a bit of improvement via mini-perm lending at FYE 2022 but even there, overall loan volumes remained down compared to pre-pandemic levels. Balances did stay near all-time highs for housing but nursing care balances reduced. Construction lending remained soft and I suspect, it will continue this trend for the balance of 2023 and into 2024. Nursing care construction lending remained suppressed and senior housing construction lending sat at a quarter of 2016 levels. A good overview from NIC is here: NIC_Lender_Survey_Report_4Q_2022_FINAL
What I’ll be watching are default levels and loan volume (new levels). If we see a condition of softening rates later this year, volumes will lag but loans in-queue will tick-up. There is definitely some pent-up demand for capital and any condition or combination, of softer rates and lower construction costs due to a recession or slower overall commercial activity will ignite senior housing capital access demand. I’ll also pay close attention going forward, to default or pre-default conditions that motivate additional acquisition and affiliation deals. Softer valuation levels are good for buyers that have existing capital capacity or in some cases, equity raised capital, ready for investment. The key is patience and market conditions that produce deals that have inherent, accretive value prospects.
Friday Feature: Three Trends to Watch
TGIF! This Friday, I’m focusing on three trends that I think, will have a major impact on healthcare and senior living for the balance of the year and likely, at least the first half of 2024. These trends are in no particular order.
Banking and Credit Struggles: This past week, the Federal Reserve provided some not too encouraging data and outlook on the banking sector via their regular Fed Survey. According to the quarterly Senior Loan Officer Survey, the number of banks increasing loan terms of industrial and commercial loans rose from 44.8% to 46% at the end of 2022. No doubt, this percentage is higher (still) for the first quarter of 2023. Among the conditions driving this tightening are lessening liquidity (deposit level shrinkage), credit quality deterioration (poor performance on loans issued/held), and significant reductions in borrower collateral positions. Loan demand, principally due to higher interest rates, is also significantly trending down for 2023.
Credit tightening and fallow credit demand are typically, signs of weakening economy and a possible recession. The challenge for senior housing and healthcare is that these industries tend to be almost recession proof and always, in need of credit for primarily, plant, property and equipment investment. The senior housing sector is a large consumer of credit for ongoing improvements and for expansion or merger/acquisitions. Likewise, the sector is vulnerable somewhat to rising interest rates as a significant amount of current debt is variable vs. fixed. Quick rate increases place loan covenants at-risk for default.
While I see an end to Fed rate hikes, I don’t see an end to inflation in the near term. With recent CPI (Core inflation too) running around 5% and the Fed funds rate, at 5% to 5.25%, we may see a “hold” period while the Fed waits for the lag effects to further diminish inflation. What is for certain, the current economic conditions will be significantly impactful for the healthcare/senior housing industries for the balance of 2023.
Employment/Labor: For all of healthcare, this is a major concern as demand exceeds supply in nearly all categories of employment and most acutely, for bedside/direct patient care staff. A possible recession and other industry slowdown will benefit healthcare and senior living via increased numbers of non-clinical staff needing work, but that same effect won’t move the supply “needle” on clinicians, especially nursing.
The trend here that I am watching is a bit nuanced. I’m watching the regulatory responses around staffing mandates, particularly in senior living/skilled nursing. The Biden administration has said, along with the 2024 SNF PPS rule that a staffing standard is forthcoming. We have yet to see it but states, such as Connecticut are somewhat ahead of the Feds. But, as of late, reality is beginning to settle-in; namely, the funding cost reality. Connecticut posed a per day increase in hours per patient from 3 to 4.1, along with ratios for certain positions. Both long-term care associations lobbied against the bill stating that while desirable for the industry to accomplish these levels, the reality is that supply won’t allow it. The state Office of Fiscal Analysis said the bill would require an increase in Medicaid spending by $26.6 million in 2025 and $15.5 million in 2026 and 2027.
Pennsylvania ticked-up staffing levels from 2.7 hours per day to 2.87, starting July 1. In July of 2024, the hours per day requirement jumps to 3.2 hours (direct care) per patient. Even though Pennsylvania increased its Medicaid reimbursement by 17.5% in 2017, funding woes for providers still persist. The genesis of the staffing level mandate is a report completed by the Pennsylvania State Government Commission. It noted that working conditions, training and career development were sorely needed to combat negatives about work in long-term care. The report further noted that long-term care spending needed an annual investment of $99.9 million to cover the cost of services which, translates to $12.50 per patient day increase or a Medicaid reimbursement rate of $263.05.
Finally, within the employment/labor trend, I’m watching legislative activity around staffing agencies and specifically, a move to cap the mark-ups that agencies can charge providers. Pennsylvania, in its report (noted) above, noted the rapid increase in agency costs to providers resulting from the pandemic and yet, the limited impact the fee increases matriculated to staff in the form of wages. A recently passed Indiana law includes a provision limiting “predatory practices” by agencies, specifically, price gouing. Minnesota is also working on legislation to increase funding and to in some ways, attempt to address staffing inadequacies.
Patient Transitions/Care Transitions: I’m continuing to watch the post-acute flow dynamics or the admission/transition referrals from hospitals to post-acute providers. My specific focus is on home health which seems to be struggling the most to sustain a referral dynamic that has home care preference but can’t be accommodated by home health agencies. The benefactor of this referral trend is the SNF industry. In a report from Trella Health for 3rd quarter 2022, the SNF industry saw a referral increase of 5.8% (YOY) and the home health industry saw a 8.6% decrease. Hospice referrals remained essentially unchanged. The data is for Medicare Fee-for-Service patients (traditional Medicare), excluding Medicare Advantage referrals. With the growth of Medicare Advantage, I expect to see a continued preference toward home/community discharges yet, staffing levels will dictate how this preference is realized. While home health has a distinct advantage in cost and desire by the patient typically, the setting has challenges to accommodate volume. Productivity levels are currently near the max for many agencies and thus, referral denials are at record levels.
Happy Mother’s Day to all moms and expecting moms, everywhere!
Senior Housing/Post-Acute Insurance Update
With so much going on in the industry post-COVID, challenging labor markets, rising interest rate costs, high inflation, and supply chain issues still somewhat bothersome, insurers are rightfully skittish about senior housing and the post-acute environment. Of course, good provides with solid track records, high quality records, low to no recent claims, and evidence of financial stability will achieve continued coverage, at the best rates. This said, rates are trending up and even the best providers will experience the industry drag effects that afflict all, some more and some less.
As I’ve written before, litigation is still a big issue and growing. Drivers include staffing shortages, COVID policies that caused isolation and physical/social decline, state laws without liability caps, and a generalized negative view of certain provider segments (e.g., SNFs). Three recent posts address some of these issues: https://wp.me/ptUlY-sg , https://wp.me/ptUlY-sp , https://wp.me/ptUlY-sC .
One developing trend has major forward ramification for liability coverage and worker’s compensation coverage – COVID litigation. A California Supreme Court case argued this week centers on “COVID take-home liability”. Formally, the case is Kuciemba, et.al., v. Victory Woodworks. It centers on the question of whether a spouse that is thought to have acquired COVID at work and subsequently, infected a family member at home, can sue his/her employer. The essential point is whether an employer (under California law) has the duty to exercise extraordinary care to prevent the spread of COVID. If the petitioner succeeds, the door is wide-open for extensive litigation, especially for SNFs, hospitals, and other healthcare settings where COVID outbreaks were prevalent, and staff infections, equally prevalent. The issue will no doubt hinge on the ability to prevent the spread of highly contagious, aerosolized viruses and the ability to detect where and when, the infection occurred. Studies of contact tracing during COVID illustrate the difficulty of identifying sources of COVID. More on this case is here: https://www.mcknights.com/news/employer-protections-in-spotlight-as-court-considers-take-home-covid-liability/
We are currently seeing a widening bifurcation of the industry segments between good performers and facilities/organizations that are more challenged. We are also seeing insurers becoming a bit more leery of location risks within states with litigious history and limited tort reform laws (e.g., California, New Jersey, New York). Greater focus is being placed on risk mitigation programs and compliance programs, so much so that providers without these programs are finding themselves in difficult positions when it comes to renewals (pricing and competition). The big watch of course is as identified in the prior paragraph, COVID litigation and litigation in general.
Below is the generalized trends for renewals, in the senior housing/post-acute industries. The data comes from WTW – Williams Tower Watson.
- General and Professional Liability: Flat to 15% for providers with good history/performance. Higher for poor performers and/or poor venues/locations.
- Property Insurance with high, stable census: Plus 10% to 20%.
- Property with challenged occupancy: Plus 25% to 40%.
- Worker’s Comp: Minus 5% to plus 2%.
- Auto: Plus 5% to 10%.
The challenges on the property side are driven by a number of factors. Recent hurricane losses and winter storm losses hit providers hard though, the driver is more about restoration costs and valuation difference than the actual loss numbers. Loss numbers are on a bit of an upward cycle but the economic conditions of tight supply chains (replacement building supplies), labor cost and shortages in construction trades, and the cost of money/capital are the primary contributing cost drivers. Insurers are wary that valuations are perhaps, significantly understated today and as such, policies are being written with higher retention levels and reduced overall limits to mitigate, valuation (understatement) risks.
Looking forward, I believe more of the same increase trend is on the horizon. It appears that we will begin to see some softer property renewals going forward as valuation risks abate and repair/replacement costs ameliorate. If a recession occurs in the latter half of the year and into 2024, supply costs will reduce even greater and labor costs, the same. The bigger horizon risk remains on the liability side and perhaps worker’s compensation due to COVID litigation. What happens in California will no doubt, have an impact nationwide. Some states and locales are reasonably well positioned with tort reforms in-place while others, are not, To date, absence precedent, COVID related litigation in the future, is unknown and unknowable.
May 11 and PHE: Provider Alert
On May 11, the COVID Public Health Emergency (PHE) is set to end and along with it, a whole slew of requirements end or change, and regulatory waivers applicable to the Public Health Emergency, the same (ending). The end of the PHE will have positive and negative impacts on providers of all types though some things that were applicable during the PHE will continue via CMS rulemaking (tele-health provisions for example). One of the most negative impacts of regulatory waivers ending is the return of the three-overnight rule (3 day stay) for patients entering an SNF and potentially, receiving Medicare coverage for their qualifying stay. I wrote a post on this waiver change here: https://wp.me/ptUlY-w5
Among the most notable changes that will occur for providers with the end of the PHE are the requirements around masking, testing, and vaccination mandates for staff. Each of these conditions are effectively, eliminated with the expiration of the PHE. While other countries across the world have eliminated all or most of their pandemic restrictions/requirements over the past year, the U.S. and its health system have been slow to relax requirements with the Biden Administration extending the emergency up until May 11. Similarly, the emergency patchwork has followed through to states, some long ago abandoning masking requirements, vaccination mandates, testing, etc. What has been confounding is the myriad of rule interpretations and requirements that varied from municipalities to counties, to states, and ultimately, to the Federal government. For Medicare/Medicaid providers, Federal requirements superseded all other provisions in any other jurisdiction.
Within the Public Health Emergency period, even providers not participating in Medicare or Medicaid were impacted by the Federal policies. Many states chose to follow the Federal PHE provisions, layering the same over providers within the senior housing industry (aka Assisted Living and some CCRC/Independent Living under state law). Illinois is an example. In contrast, other states chose to ignore the Federal PHE provisions when not applicable to providers such as hospitals, nursing homes, home health, etc. Iowa, Florida, Texas are examples of states that early-on in the pandemic created rules or as in the case of Iowa, passed legislation prohibiting vaccine or mask mandates within state control.
Come May 11, confusion will no doubt remain prominent on COVID infection control/public health requirements. For example, the only updated CDC guidance on masking requirements dates back to September of 2022. In this guidance, the recommendation for masking requirements for visitors, patients, and staff is conditioned on a CDC tracking mechanism for the level of community concentration of COVID infection. Reporting from health departments, hospitals, SNFs, etc., fed this mechanism. Masking recommendations were tied to this level (high recommending masking vs. low, recommending optional masking). COVID testing requirements were also tied to this measure.
Effective with the end of the PHE, CDC has indicated that it would no longer report on the level of community infection/transmission. The PHE has deferred consistently to various agency recommendations for requirements and then subsequently, enforcement as needed. Clearly, we will see extensive confusion unless the CDC issues new guidance clearing up, the masking requirements tied to community COVID prevalence. I’ve watched many providers already move to a “no mask required” status, regardless of updated guidance. I’ve also watched many providers stuck and confused by virtue of state requirements vs. CDC requirements vs. where the community COVID prevalence really was in their area. The CDC guidance for long-term care (fundamentally the same for hospitals) is here: https://www.cdc.gov/coronavirus/2019-ncov/hcp/infection-control-recommendations.html?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fcoronavirus%2F2019-ncov%2Fhcp%2Fnursing-home-long-term-care.html
I’ve seen some news coverage/reporting on the end of the Public Health Emergency, but it is very spotty. I also know by virtue of travel, etc., the awareness of COVID among providers and the community is varied. As I routinely traverse Illinois, Wisconsin, and Iowa, I see wide differences in COVID precautions, alerts, monitoring, requirements being applied, etc. Some of this due to region and state policy and some of it is due to provider behavior. Iowa as I mentioned, long ago took a stance against most PHE COVID related mandates and recommendations whereas Illinois, has followed the PHE Federal recommendations consistently. Iowa hospitals required to follow CMS COVID regulations, maintained vaccination and masking conditions though recently, I have seen most hospitals end masking requirements.
For providers, May 11 is very near. I suggest providers adopt the following strategies realizing, come May 11, regulatory confusion will likely remain.
- Update internal infection control policies regarding vaccination, testing, masking to conform to the changes that will occur with the end of the PHE.
- Communicate these changes to staff ASAP.
- Communicate these changes to patients and families, ASAP. Remember, the end of a mandate does not mean a change in behavior. It may be that staff will want to maintain their masks in some cases and patients/families the same. Allow for flexibility.
- State agencies that are required to survey and enforce compliance may also be slow to adopt. Trade associations are your best bet to help with regulatory transition. Recognize, state agency behavior will not adjust in some cases, as quickly as provider behavior.
- Conduct ongoing public communication via your website, via newsletters, etc. One and done won’t work.
- Definitely, DON’T, follow a path of resisting the end of the PHE and its requirements. I’ve watched provider sometimes, fail to adjust and in this failure, more problems occurred. I know the old “an ounce of prevention” thinking may still apply when it comes to vaccines or masking but be careful. If the regulation is not there, a forced or strongly urged condition, can lead to regulatory problems, labor law problems, community relations problems, and potentially, litigation.
SNFs: 3 Overnight Stay Requirement Returning
As the Public Health Emergency (COVID) ends, healthcare providers will revisit pre-pandemic policies as a slew of waivers expire. One waiver particularly impactful to hospitals and SNFs is the requirement of a 3 Overnight (3 Day Stay) for a patient to receive Part A Medicare benefits in a SNF. Recall, the rule pre-pandemic was that a person had to be admitted to an acute hospital with a stay of at least 3 overnights in the hospital prior to discharge to a SNF, in order to qualify for Medicare coverage applicable to the SNF stay. One little wrinkle, rarely experienced, is that the discharge could be to another location within a thirty-day window of the patient entering the SNF, and the patient still could qualify for Medicare benefits in the SNF. In other words, the patient could be sent home, and for whatever reason, subsequently enter the SNF within 30 days of the hospital discharge and still be eligible for Medicare SNF benefits.
While there has been support for the waiver of this requirement to remain via a continued policy change from CMS, it is now apparent that CMS will reinstitute the 3 overnight rule. The primary impetus for this? Of course, cost control. A study from the AMA, appearing in the JAMA Internal Medicine publication (released on Monday 4/24) basically provides CMS with its positional defense. The study is here for anyone interested: jamainternal_ulyte_2023_oi_230019_1681999138.05344
The study analyzed MDS data for patients admitted to a SNF between January 2018 and February 2020 (pre-pandemic) compared to admissions between March 2020 and September 2021 (pandemic period). During the pre- pandemic period, there were 130,400 care episodes per month, 59% of which were female. During the pandemic period, there were 108,575 episodes, again 59% were female. Per the study: “All waiver episodes increased from 6% to 32%, and waiver episodes without preceding acute care increased from 3% to 18% (from 4% to 49% among LTC residents). Skilled nursing facility episodes provided for LTC residents increased by 77% (from 15 538 to
27 537 monthly episodes), primarily due to waiver episodes provided for residents with
COVID-19 in 2020 and early 2021 (62% of waiver episodes without preceding acute care).”
What was interesting to me is where the predominant utilization of the waiver for non-prior hospitalized patients occurred. Per the study, the 80% v. 68% of the LTC waivers (non-prior hospitalized) were for-profit facilities. These facilities had lower overall star ratings on average with the for-profit average at 2.7 stars v. the non-profit average rating of 3.2 stars. The same kind of variance was found looking at the staffing star ratings – 2.5 v. 3.0. Skilled admission spending was $2.1 billion prior to the pandemic and $2.0 billion during but a big jump in LTC (Medicare covered) occurred from $301 million to $585 million. Hospital spending remained relatively unchanged, despite lower overall patient volumes (COVID incentive payments making up outlay differences).
Here is the key takeaway from the study:
Key Points
Question: Did skilled nursing facility (SNF) care volume and
characteristics change when the public health emergency (PHE)
waiver for 3-day qualifying hospitalization was introduced in March 2020?
Findings: In this cohort study of SNF care provided for 4 299 863
Medicare fee-for-service beneficiaries from January 2018 to
September 2021, waiver episodes without preceding acute care increased from 3% to 18% during the PHE in 2020 to 2021. Among long-term care residents, such waiver episodes increased from 4%
to 49%, with 62% of episodes provided for residents with COVID-19.
Meaning: This study found that the use of SNF care for long-term
care beneficiaries without a preceding qualifying hospitalization
increased markedly during the PHE, primarily for care for patients with COVID-19.
So SNFs will return to a pre-pandemic point where coverage for SNF skilled services under Medicare will require a 3 overnight hospital stay as the Public Health Emergency ends. The study cites cost as the main driver, but I also believe, that cost on an escalatory basis is more the concern. As the pandemic has ended and hospital volumes are normalizing, we’ve seen SNF referrals increase. I noted this trend in a post on Monday…link is here: https://wp.me/ptUlY-vL What this means is that a shift toward more expensive post-acute care is happening and may be more longer-term in trend than not. In other words, while a bias toward discharge to home health was prevailing pre-pandemic, the factors of reimbursement policy, staffing dynamics, and increasing patient acuity on discharge have moved the needle (so to speak) toward SNF discharge. Staffing is of course, the main driver.
What does this mean for hospitals, if anything? Maybe a bit of shift in consciousness about length of stay, inpatient admission, and discharge planning will occur. The growing use of observation stays vs. inpatient admits was always a sore spot for SNFs and patients and families. I saw lots of confusion a few years ago among SNFs and, then unfortunately families, when a patient arrived for admission and lo and behold, the majority of the stay was classified as observation vs. an inpatient admission, not meeting the 3-day inpatient admission requirement.
Medicare Advantage plans will also need to rethink some approaches in their care coordination. While the preference may be a discharge to home health, admission acceptance is still on the lower side (lots of rejections). it may just require a shift in focus from Med Advantage plans toward better coordinated SNF stays.
For SNFs, the loss will be felt among facilities that were able to “skill” typically, long-term care Medicaid patients. The missing revenue will be felt without a counterbalance pick-up readily available. For good performing SNFs that have focused on building strong value propositions and positioned themselves well for value-based care, options are plentiful, but they had been prior to the pandemic. Staffing remains the challenge. My advice for these folk? Get your care pathways together and your algorithms and be efficient in cost and length of stay. Use your data to drive partnership referral bases with hospitals and in particular, Med Advantage plans. Now is a good time to take advantage of the shifting policy dynamics.
SNFs and HHAs: A Common, Concerning Trend
Current economic and government policy conditions have converged to create a concerning trend for home health and SNF providers. The trend for both segments is loosely known as “referral rejection”. The number of referrals that both provider types are rejecting is up considerably since the start of the pandemic and for now, I see no change in direction.
The chart above is a snapshot of the issue across the predominant pandemic periods of 2020 through January 2022. One would expect referral rejections to escalate during this period as outbreaks would necessitate, caution and temporary admission holds, especially for SNFs. Yet, even without a winter breakout of COVID, rejection rates in home health increased to 76% for January 2023. Interesting, during this same period SNF referrals increased by 113%. During the pandemic, the referral lines/patterns crossed as home health from hospital referrals increased and SNF referrals, dipped. COVID period hospitalizations also changed and therefore, overall post-acute discharge volumes during 2020 – 2022 dropped. An in-depth look at hospital volumes and discharge patterns is here: COVID-FFS-Claims-Analysis-Chartbook_2022Q1
SNFs are now garnering more referrals at the expense of home health yet, we are seeing shifted patterns around a number of factors. COVID policy and Medicare policy during the height of the pandemic created a preferential shift from SNF to home and hospital admissions (non-COVID related) were down substantially (elective and other procedures). As hospital admission patterns are recovered to near pre-pandemic levels, discharges have shifted to SNFs, not due to a preferential change but due to policy (reimbursement) and staffing.
Though both provider types share staffing and reimbursement concerns, home health has had the biggest negative impacts from the two. SNFs have certain economies of scale in terms of staffing whereas, home health typically, cannot maximize efficiencies with a caseload spread among various locations. In some instances, smaller caseload blocks are possible but in rural and suburban areas, cases are typically spread such that productivity for therapists and nurses is hampered by travel times. Home Health received a pittance of an increase in their PDGM rates for 2023 and CMS is targeting potential reductions going forward to offset programmatic growth and what it believes, is a rich fee schedule for providers.
Acuity on discharge is also up and thus, home health rejection rates seem to correlate. While home health may remain the preferred discharge location for Med Advantage plans and physicians (and patients), finding an agency that can staff the case let alone deal with a higher acuity patient is problematic in most markets. SNFs tend then, to be the beneficiary of the home health rejection.
One thing is certain in the current environment, the 2o ton gorilla in the room is staffing levels – ability to have sufficient number in sufficient roles (RNs, LPNs, CNAs, etc.) to meet patient needs on referral. Similarly, restrictive Medicare rate increases, with staffing costs rising and costs of doing business the same (insurance, supplies, energy), SNFs and HHAs will both be vigilant on patient needs vis a vis, reimbursement. Small margins can quickly get eaten-up by higher wage cost, agency staff, and patient care supply requirements.
As we approach mid-year, I’ll continue to watch this referral trend and how it manifests in terms of rejections and ultimately, care access. I’m afraid that continuation of these patterns will cause access problems if not for post-acute care services in general, but for preferred care locations (home v. facility based). And while it may be nice for SNFs to see a rebound in referrals, I don’t know too many SNFs these days that are able to occupy full capacity (staffing) and to accept without condition, every referral that comes their way.
Top 5 Tips for Recruiting in a Tough Labor Market
I’ve done a number of presentations on the staffing challenges facing providers and how, certain strategies work and others don’t in terms of recruitment and retention. Over my 30 plus years in the industry, I’ve had reasonable (ok, very good) success in building and retaining high-performing teams, including direct care staff. I’ve been fortunate to have many folks who have worked with me, follow me from assignment to assignment, some across the country. Leadership is no doubt key to recruiting successfully as people want to work with winning organizations. Likewise, really good recruiting strategies don’t use the same methodology as the past – namely advertise, incent (throw money at it), repeat. Steve Jobs said it best: “Innovation is the only way to win”.
Most healthcare providers can’t financially compete for staff, consistently. In reality though, staff only work for money when they see no long-term value in the employment proposition. I know travel nursing and agency nursing catch lots of news and sound sexy and high paying. I also know nurses (really, really well as the same are throughout my family) and, the lure of travel nursing is short, regardless of the money. Stability, home base, regularity, working with good colleagues and peers has more value to most nurses.
Before I offer my five “DOs” for recruiting, let me offer a few “DON’Ts” and a reminder. The reminder is recruiting is like marketing – it requires constant, incremental effort to achieve success. Superb marketing campaigns and brands build year-over-year. One misstep, however, can damage a brand significantly (see Bud Light). The “don’ts” mostly focus on money as in don’t think you can buy staff and don’t think, sign-on bonuses buy anything other than applications and temporary workers. Don’t focus on the economic alone but on the goal of recruiting. Like marketing, it’s about positioning the organization to attract workers. The sale or close comes via an H.R. specialist or someone exceedingly good in the organization of convincing people of the value of working for the organization.
My Top 5 tips for recruiting are….
- Focus on recruiting introductory, PRN workers first. Stop advertising for shifts, full-time, part-time, etc. Focus on people who are interested in flexible work and are willing to take a role and see how it goes. This is the “dip your toe in the water” insight. Be prepared to pay well but not necessarily crazy. You won’t be dealing with many if any benefits for this group other than some soft stuff (meals perhaps, incentive rewards like a gift card now and then, t-shirts) so hourly rates can be decent. Likewise, be prepared to pay weekly if not even more frequently.
- Have a killer, multi-media/onboarding/orientation program. Little investment here but not much. YouTube, Tik Tok (can’t believe I wrote that), a website, and other applications can be used to recruit (what it’s like to work for us) and to onboard and orient. The more new staff, even your PRN, feel comfortable walking in the door, the easier it will be to get them and keep them. Giving them a stack of policies and procedures, a big manual, a drone-on HR speaker or a computer-based checklist is a certain turnoff.
- Give the Bonus to the Staff. Turn your own staff into recruiters and pay them for it. Nurses know nurses, CNAs know CNAs, etc. Comp and incent them to bring referrals and comp them well. Sign-on bonuses really don’t work but referral bonuses do. Heck, do individual and team and create a bit of competition and fun.
- Create a Marketing Campaign and Have Accountability. Recruiting is marketing. Stop thinking otherwise. Sure, many think it’s an HR function but most who do, are wrong. It’s an organization function today requiring the best talent. For people to join your organization as employees, they need to know “why” – what are the tangibles and intangibles. Why should I work for you? This is not about pay and benefits but about the value and benefit internally, of a person working for XYZ organization. What’s the value proposition? What’s the real reason people work and stay for an organization (trust me, it’s not money). Build the case and sell that case.
- Get out of your own way. I watch organizations fail as their message is all wrong – tired, non-descript, sounding like everyone else. I watch organizations fail as their environment and their culture are all the same. Stop and align the incentives. Reward what matters and differentiate. Remember the Jobs quote in the first paragraph. Innovate. Stop looking externally at what everyone else is doing and stop going to the same conference sessions. Direct care staffing has certain red rules but not as many as providers think. In other words, stop the “can’t, regulations won’t let us” and start with WHAT can we do. Maybe even bend a rule or two if the same doesn’t jeopardize patient care or quality. Worklife for nurses and CNAs in terms of direct care has lots of negatives but many that I see are driven by provider foolishness – too much paperwork not necessary, too many meetings not necessary, and very few positive touches and rewards. If your culture and the work create fun, ownership, and staff love their work and their company, recruiting others to join the team just got that much easier.
Upcoming, I’ll touch on the opposite of recruiting – retention.
Executive Order – Staffing and Medicare Implications Update
Yesterday I wrote a post regarding a significant (and large) Executive Order coming via the Biden Administration concerning long-term care, child care, staffing in nursing homes, expanded supports under Medicaid for long-term care and childcare, etc. The post is here: https://wp.me/ptUlY-uM . While I have yet to obtain the text of the order, I have watched and read various reports on the Order, the most direct being the White House Press Release on the order. It is here, in case anyone is interested: https://www.whitehouse.gov/briefing-room/statements-releases/2023/04/18/fact-sheet-biden-harris-administration-announces-most-sweeping-set-of-executive-actions-to-improve-care-in-history/
What fascinates me about Biden’s Executive Order is how disconnected from reality it truly is. For example, it comes with no projected additional funding. Biden claims no additional money is needed; in fact, his quote is: “The executive order doesn’t require any new spending. It’s about making sure taxpayers will get the best value for the investments they’ve already made.” I for one would argue that he is half-right as there is ample money in Medicare and Medicaid to improve direct care reimbursement for staff wages, etc. The problem, however, is that both programs are so bureaucratically mired in politics and regulatory agenda that money is misallocated. Unless both programs undergo significant reform, the reality is, additional funding is necessary to improve access and staffing.
The other major disconnect Biden/Washington has is at the provider level, community level. I’ve written about this disconnect before. Mandates don’t make reality change. There simply are not enough staff (supply) to meet demand. If increased access is desired, mandates that are anathema to more provider capacity, are a drag to progress. In other words, more access can only be achieved by creating more staff to care for people yet, the Executive Order offers no incentive or policy initiative to increase supply (nurses, nursing assistants, etc.). Further, penalizing providers by reducing reimbursement for turnover when most turnover is out of their control, will further worsen the staffing crisis. I’m truly perplexed at this Order and the logic (if any) behind it.
Below is an excerpt from a statement issued by LeadingAge’s CEO, Katie Smith Sloan, on the Executive Order. I think this sums up the industry view fairly well.
“LeadingAge has long advocated for an all-of-government approach to ensuring greater access to aging services—and addressing the workforce crisis must be the top priority. Today’s announcement shows that the Biden White House has been listening—but, sadly, the order does not meet the ever-growing needs of America’s older adults and families.
- The focus on home and community-based services is too limited and must extend beyond care in the home to address the breadth of the aging care continuum. It doesn’t provide support for other care settings like adult day programs, assisted living, hospice and more, on which millions of older adults and families rely.
- What’s worse, the administration’s approach favors one part of the continuum over another. The order bolsters the home care workforce, while punishing nursing home providers for shortages—despite the reality that employers in both care settings navigate the same challenges in a competitive labor market.
- The administration is still getting it wrong on nursing homes. Over a million older adults rely on the specialized care only nursing homes provide. Already, nursing homes around the country are closing or limiting admissions due to staffing shortages. Why take that option away from the people who need it by implementing punitive policies that potentially worsen, rather than remedy, the ongoing staffing crisis? We are particularly concerned by the threat of withholding Medicare payment if providers don’t have workers – when workers simply don’t exist.
Without staff there is no care. We still desperately need to remedy the severe workforce crisis in long-term care. In addition to increasing reimbursement and wages, the country must address immigration to build a pipeline of new workers through proven programs and pathways for those ready and willing to work in our field”.
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