Home Health and Assisted Living: Compliance and Litigation Tips to Note
A growth, if you will, opportunity for many Assisted Living facilities is caring for a more clinically complex resident or resident group. The clinical complexity is very much tied to additional medical and physical frailty, necessitating access at times to skilled nursing and therapies. Most Assisted Living facilities, especially those not affiliated with a national or regional organization with infrastructure services such as therapies, seek services from Home Health Agencies when required. In this manner, the Assisted Living core staff are for resident ADL needs and care primarily, and the intermittent skilled needs of certain nursing interventions and therapies (OT, PT, etc.) are provided by the Home Health Agency.
What occurs when an Assisted Living and a Home Health Agency work collaboratively to serve certain residents with skilled needs, is a bifurcated relationship where roles and responsibilities for resident care and service can get murky. Briefly, here are the two organizational duties for resident care.
Assisted Living Facility:
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- Room and Board accommodations including (typically) common areas, dining/meals, some level of furnishings, utilities, access/egress, outside areas, etc.
- Staff supervision of residents in general and the facility including maintenance and cleaning of the environment
- Resident assistance or direct provision of ADL cares such as dressing, toileting, bathing, mobility/transferring, eating but not generally, feeding assistance.
- Social activities for residents and certain social services.
- Medication management and administration. Facility may/may not accommodate medication ordering via a pharmacy relationship.
- Other services such as religion/pastoral care, beauty/barber, transportation, dietetics, physician, banking, etc. may/may not be available.
Home Health Agency:
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- Physical, Occupational, and/or Speech Therapy as assessed by need and as ordered by a physician.
- Skilled nursing services if required, as assessed by need and as order by a physician. These services typically include education, various wound treatments, complex catheter care, IV services, ostomy care, pain management, etc.
- Services are provided as needed by the resident.
- The Agency must provide training/education to the Assisted Living Facility staff regarding the skilled services/care it is providing.
- The Agency is responsible for care coordination between the two organizations such that, its orders and services are reflected as required by law, in the resident Service/Care Plan.
- The Home Health Agency is also responsible for billing insurance or Medicare and for keeping its own medical record.
- The Agency is responsible for patient supplies as the same pertain to their provision of skilled services.
- The Agency is responsible for maintaining compliance with Medicare Conditions of Participation and it cannot delegate any related tasks or duties to the Assisted Living unless permitted by regulation. Examples include obtaining orders for care, updating physicians as needed, documenting service provision, reconciliation of medications, etc.
Think of the relationship this way. The Assisted Living serves as the resident/patient’s home. This is no different than if the resident/patient lived in the community, in their own residence. One could easily create the relationship via a mental picture of the Assisted Living staff as familial caregivers.
The Home Health Agency’s relationship is then, no different than if the patient resided in their own home. The Agency must assess, develop a plan of care, coordinate visit schedules, document the care, share info. with the patient and the family (Assisted Living staff), and when appropriate, discharge plan and coordinate care for any additional services.
The compliance and litigation perils occur when the relationships between the two become blurry or, when either entity fails to properly meet its separate obligations. Here are the common risks that I routinely see/encounter.
- The Home Health Agency fails to incorporate the Assisted Living in its plan of care and to educate the Assisted Living of the same, especially if follow-through is required on ADL education or support.
- The Assisted Living fails to update its Service Plan for Home Health services, as required. The biggest error I see here is typically with regard to therapy services and the introduction of any new devices (e.g., walkers, canes, support bars, adaptive equipment).
- The Home Health Agency delegates physician and family contact to the Assisted Living for Home Health related service needs.
- The Assisted Living fails to notify the Home Health agency of changes in resident care, conditions, etc. such as noticing a change in skin condition, a change in a medication order unrelated to the Agency’s skilled services.
- The Home Health Agency fails to coordinate care via discharge planning, even though the resident will remain at the Facility.
- The Home Health Agency does not do med reconciliation on each visit, believing that the Facility should update the Agency with any new medications or order changes.
- The Agency is not responsive on a timely basis to resident condition changes including, hospitalizations. The Agency must be on-call and connected to resident condition changes, documenting and addressed service/care plan updates as required, especially post-hospitalization.
The risks associated with caring for a more complex resident/patient in an Assisted Living environment when Home Health services are initiated are many, as indicated above. I suggest Assisted Living Facilities try to coordinate their Home Health offerings, where possible, with a few or even, one agency. With good collaboration between providers, the risks can be minimized. In any regard, both providers need to understand their roles in resident care and make sure, staff are well-versed in their respective responsibilities. I advocate tools/cheat sheets if you will, especially for AL staff, delineating “who does what” and where, resources can be sourced if need be.
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!
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.
Litigation and Staffing: What to Know, What to Control
Following up from my last post regarding staffing and litigation risks, this post concentrates on “what we know” and “what we can control”. For example, what we know is that there simply is not enough staff (clinical and even non-clinical) to fill a provider’s vacant positions. The world in general knows this and the press, is oft to repeat a narrative where staff shortages cause negative outcomes, long service waiting times, delayed or deferred admissions, etc. Not a week goes by where I don’t see a news story, on-line, in-print, or on television focused on a health care staffing concern of one level or another.
As I mentioned in the prior post, the heightened alarmism and focus is not helpful, for the most part. For example, I’ve watched Union organizing activity in a number of markets, seeking to organize nurses, based on the staffing issue – not enough and thus, unsafe for nurses and patients. I get the issue, but I don’t see a solution. Raising the issue to a fever pitch, demanding that providers hire more staff that don’t exist, pay more for staff that does exist, etc., isn’t solving the problem. I get that management may even seem callous to the issues and some may be but most senior leaders I talk with are truly trying to do everything they can to improve bedside/patient-centric staffing levels. The simple reality is that there are more openings than bodies capable and willing to fill the positions.
A case in point is recent organizing activity in Wichita, KS (Sedgwick County). Union activity in health care in this area/community has been historically, very low. For professional nurses, it’s been virtually non-existent. At two Ascension hospitals (national Catholic health system) nurses voted within the last nine months, to organize. Here’s a short quote from the Union regarding the push for organization: “We need better staffing, we need Ascension to get serious about recruiting and retaining nurses and we need to have a better safety workplace violence program,” said registered nurse Sara Wilson. “Nurses are in danger when we go to work and Ascension needs to take care of their nurses.” As one would expect, there is truth within that statement but also, to be frank, very little that Ascension can do to create more staff. Provider resources are simply not robust enough to just see the staffing issues as economic. More money isn’t the answer. Ascension closed 2022 with a negative 3.1% margin on losses of $1.8 billion. Among the major health care bankruptcies, one quarter were senior care providers (last several years).
Knowing what we know regarding staff supply, the concern is can some things be done and what can we control. We know money won’t solve the staffing problem as this too, is of finite quantity. Likewise, we also know that money is a substitute concern for the real core issue of simply, not enough bodies for the tasks demanded in patient care. In other words, money becomes the tangible point, but we also know, that money won’t employ more bodies or staff. I know many providers that have RN openings that offer $100K in wage opportunities plus sign-on bonuses and benefits with no takers for these opportunities. A quick Indeed search of Chicago, IL using the job title “nurse” produced 9,133 positions within a 25-mile radius. Similarly, Google searches for nursing positions provide multiple, big dollar references, for travel positions ($5,500 to $7,850 per week). And, according to the Bureau of Labor Statistics, over 203,000 openings will occur every year for at least, the next decade (https://www.bls.gov/ooh/healthcare/registered-nurses.htm).
What can be done primarily, for any provider, is first and foremost, a concentration on retention. The second thing is to listen to staff, not as a show, but as a real effort in understanding what their concerns truly are. Some are fixable, some are not but all providers should be honest. Open the books so to speak and share the economics. The third, as I have discussed repeatedly, is improve management and reduce bureaucracy wherever possible. An organization can significantly improve its bedside hours (actual) by reducing as many tasks as possible, that have nothing to do with patient care. Trust me, there are many things that health systems and providers require staff to do that has nothing to do with patient care or regulatory requirements. Fourth, analyze the work-flow and make sure that proper duties are assigned to proper staff. I have seen all to many environments where RNs are doing work that could and should be handled by techs, social workers, chaplains, therapists, etc. For example, I can’t even begin to count how many times I have heard about therapists dropping a patient back into his/her room and putting on the call light for nursing to come and toilet the patient or have other care needs met. Crazy. Unless the need was a medication administration, the therapist can and is qualified to assist the patient with a toileting need to get fresh water, transition the patient to bed, etc.
When I see litigation and I see a lot as my firm (H2 healthcare) has an active compliance practice and a nationally known expert in litigation support (defense, not plaintiff), the focus is nearly always on “nursing” not doing something or being somehow, the causation for the bad outcome. Now, with staffing coming to the surface as a root cause (not enough bodies), the question begs, what kind of staff and in what amount. No doubt the focus will be on nursing but perhaps, that focus is rather shallow. As I pointed out in the paragraph above, maybe the staff numbers are better than thought just poorly organized and used (health care is notorious for “silos”) and layers of management.
What a provider can control, aside from numbers of staff which, we know is difficult to totally control, is how staff are allocated especially in relationship to patients and their needs. Below are my top six things providers can control/do with regard to staffing and to reduce litigation risk.
- Make sure staff in number and capability, match the generalize facility census trend. This means in number (patients) and care needs. I know providers like full beds with patients that garner high reimbursement but, there is a balance. Strike the balance as much as possible and let staff know it.
- Work as teams – not just as nursing, and therapy, and social work, etc.
- Stop employing managers that were the “best” clinicians. Employ managers that actually know how to manage, Likewise, give these managers true accountability and authority. They must be able to do their job and not have to “punch up” to get things done. Good management reduces litigation risk.
- Put staff in positions where decisions are made and give them real results and a “piece of the pie”. Gain share for reduced call-ins, turnover, staff referrals (new).
- Keep staff apprised of staffing levels and make sure they know how staffing decisions are made, etc. Don’t whitewash the issues. Staff complain about being short-staffed which is the “killer” when it comes to litigation. Too many depositions of nursing staff start with staffing level discussions. Focus on real conversations, daily, about team and everyone being engaged not just “CNAs and Nurses”.
In my next post, I’ll dig a bit deeper into this concept (risk and what can be done), especially concerning the evolving and expanding trend of litigation in Assited Living Facilities.
The Real Impacts of Poor Quality, Inadequate Compliance and Weak Risk Management
A number of interesting information drops occurred this past week or so reminding me that from time to time, the obvious isn’t always so obvious. The seniors housing and skilled care industry today is going through a rocky patch. A solid half of the SNF industry is severely hurting or struggling mightily due to Med Advantage, softer demand, pervasive reliance on Medicaid for census, labor shortages, rising wage pressure, tight Medicare reimbursement, new regulations, etc. (I could elaborate for a stand-alone article). While not as pervasive in its struggles as the SNF industry, Assisted Living is facing challenges due to softer census, too much capacity, rising resident acuity, labor costs and shortages and gradually increasing regulatory scrutiny. The relative strength in the overall seniors housing and post-acute sector is home health and independent housing. Notice, I did say relative as home health demand is good but regulatory over-burden is still present along with tight reimbursement. Home health is also experiencing labor challenges, the same as SNFs and ALFs. The relative strength that is found in independent housing tends to be more on the market and sub-market rent side. Many, many high-end providers are still struggling with census challenges and soft demand in certain markets.
As I have written and counseled many times to investors and clients alike, there is something to learn from the national trends but health care and seniors housing is still, a local reality. What this means is that in spite of some rocky water for the industry, there are providers that do well and are bullish about their fortune in their respective industry segments. Not to seem too convoluted, the national trends matter but as I like to think, in the context of what they truly mean. In this regard, what they truly mean is how the trends impact providers on a macro basis as well as on a micro, behavioral basis.
As I started, this past week or so included some interesting information drops. The first and not too surprising, is another alarm from a major, publicly traded provider organization that it was on the narrow ledge to failure. Five Star Senior Living provided notice that given its financial condition now and as forecasted, it would not be able to meet its continuing obligations in the form of debt or timely payment of operating expenses. When I say half the SNF industry is in battle to survive, I’m not kidding.
In unrelated drops, CNA (the major national commercial insurance provider) released its 2018 Claims Report for Long-Term Care/Senior Living. The claims in this case are liability related. Following CNA’s release, Willis Towers Perrin (major insurance brokerage and consultancy firm) provided their outlook for liability insurance noting that Long-Term Care and Seniors Housing should expect liability premium increases of 5% to 30%. Anecdotally and unrelated, we are seeing steep property/casualty increases in the industry as well due to extreme weather losses over the last twelve to eighteen months.
While not absolute but substantial in nature, there is a direct correlation between providers that are struggling and the quality of care and service they provide to their patients. The core competencies required to provide superb care are tied directly to compliance and risk management. I have never seen an organization that delivers excellent care have poor compliance trends (billing, survey, other) and weak risk management leading to high levels of worker’s comp cases, lawsuits, liability insurance claims, etc. Lately, there is the same correlation developing between quality and financial results. As more quality payer source referrals and higher reimbursement with incentive payments connect to patient care outcomes, a gap is evident between the providers that are thriving and those that are dying. That gap is the quality divide.
There is a spiral effect that is visible today in the SNF industry. This effect has been visible for some time in hospitals. It occurs as follows.
- Care delivery is inconsistent and in most cases, not great. Service is the same.
- Complaints and survey results demonstrate the same and are reflected in star ratings.
- Consumers and referral sources catch wind that care is not good.
- Staff turnover accelerates, including key personnel that take with them, a disparaging message regarding care.
- Quality mix erodes slightly. Medicaid census increases as the “next best” alternative to an empty bed.
- Financial results start eroding and losses occur or come into view. Cash margins are getting tighter.
- Expenses become an issue and cuts are necessary. The cuts are incongruous to improving care.
- With limited resources, quality suffers even more. No money is available for capital and equipment upgrades. Staff morale suffers and staffing levels are lower. Productivity wanes as morale is poor and patient care follows.
- Survey results are very poor and fines now happen. The fines are expensive, removing more resources away from patient care.
- Costs are growing rapidly related to higher insurance premiums, poor worker’s comp experience, unemployment costs, turnover, and legal costs to defend the facility. These costs are removing resources away from patient care.
- Finally, because the resources are too depleted to make the necessary changes to rebuild quality, staff levels, etc. and no lender is available to front any more capital, the enterprise collapses. The names are becoming familiar….Signature, ManorCare, Five Star, Genesis, Kindred are all SNF providers whose future is extinction or “almost”.
Arguably it takes money to have and deliver quality. Equally as arguable today is that without quality, money won’t be made sufficient enough to stave-off failure due to…poor quality. When quality isn’t the primary objective, compliance and risk management work as dead weights that the organization must carry; and the weight increases over time. Why this isn’t obvious yet in the post-acute and seniors housing industry is beyond me. An analogy that I have used time and time again is the restaurant analogy. Successful restaurants are laser-focused on their products – food and service. They know that poor marks in either category or an outbreak of food borne illness can be death to their livelihood. In a crowded market of diners, price or value ties to quality and experience across a myriad of options. What is common among the restaurants that succeed is their quality meets and exceeds, the customer’s realization of value (getting equal to or more satisfaction for the price paid). When this occurs, money flows in increments sufficient to reward investors, pay employees, invest in equipment, and to reinvest in the products and services that customers buy. Simple.
Seniors housing and post-acute care aren’t too different or disparate from the restaurant analogy. The market is crowded with options…too many actually. Yes, the customer relationships are a bit different but the mechanics and economic levers and realities identical. Providers that give great care, equal to or higher than the price points/reimbursement levels are GAINING customers via referrals. The customers they are gaining are coming with good payment sources. Money in the form of cash flow is strong enough to invest in plant, property, equipment and staff. Doing so reinforces quality and service and allows the referral cycle to optimize. As the market continues to shrink in terms of number of providers due to failure, the few that are exceptional continue to see their future and fortune improve. Again, simple.
What we know is the following and the message should be clear today for those who still can control how they approach and manage their quality and customer experience.
- Poor quality costs money disproportionately more than the dollars required to deliver “high quality”. The costs are erosive and ongoing.
- Higher insurance premiums
- Poor compliance results with fines (the federal fines today are steep and immediate for SNFs)
- Higher capital costs (yes lenders are now looking at quality measures as a measure of credit risk)
- Increased litigation risks which when realized, contribute to higher insurance premiums.
- All of the reimbursement incentives today and going forward are only available to providers that can deliver high quality, efficient patient outcomes. Value-based purchasing rewards good care (limited rehospitalizations) and punishes poor care. The impact is just being seen today and in the years forward, the impact is greater – both ways (reward and punishment). The same is true under the new and forthcoming, case-mix payment models. The high quality, adept providers will be able to provide the care rewarded highest, under these new payment models (PDPM, PDGM). Those that don’t have the clinical infrastructure will languish.
- Referrals today are more and more, skewed toward quality providers. With hospitals and narrow networks looking for select post-acute providers that won’t increase their risks in value-based purchasing or bundles/ACOs, poor providers in terms of quality are increasingly seeing diminished referrals.
- The Plaintiff’s Bar is watching the SNF and seniors housing industry carefully and with optimism. The CNA report I referenced includes these snippets.
- 22.6% of closed claims relate to pressure injuries (an almost entirely avoidable negative outcome).
- Death from or related to pressure injuries is the highest average claim by cost.
- 14 out of the 15 highest cost claims occurred in for-profit facilities.
- Assisted Living claims cost more on average than SNF claims.
- Falls continue to represent the lion share of liability claims – 40+%. The vast majority tie to SNF care.
- The frequency of claims is increasing.
- Independent Living is not immune. The report contains claim data on fall and pressure injury cases from Independent Living.
While no organization is immune from a law suit, the reality remains that organizations with exemplary quality history, high satisfaction levels, and processes that focus uniquely on the elements of great care and service (staffing levels, staff competency, good management, proper equipment, IT infrastructure, etc.) provide less of a target, if any. No matter where, negative outcomes still occur but in “quality” organizations, they are an exception. Because care is primary and service right behind, there is far less of a motivation for patients and families to litigate as by reason, the organization wasn’t negligent. Again, the connections are rather ‘simple’.
Home Health Final Rule: Rate Increases plus PDGM
While I was in Philadelphia speaking at LeadingAge’s annual conference, CMS released its 2019 Home Health Final Rule. As I wrote in an earlier post regarding the proposed rule, the topic of interest was/is a new payment model – PDGM. As has been the case across the post-acute industry, CMS is advancing case-mix models crafted around a simplified patient assessment, less therapy oriented more nursing/medically balanced. The industry lobbied for modification or delay in PDGM, primarily due to some underlying behavioral assumptions CMS embedded in the proposal (more on this in later paragraphs).
The most relevant, immediate impact of the final rule is rate increases (finally) for the industry – 2.2% or $420 million. The industry has experienced rate cuts and rebasing consistently since 2010 as a response to fast growth and high profit margins exhibited by companies like Amedysis (the center of a Congressional hearing in 2011).
PDGM is slated to take effect “on or after January 1, 2020”. The ambiguity in this language is worth noting as there are some that believe modification, even delay is possible. Compared to the proposed rule, the final rule includes 216 more Home Health Resource Groups due to bifurcating Medication Management Teaching and Assessment from previous group alignments. The following key changes are a result of PDGM.
- As with PDPM on the SNF side, PDGM removes the therapy weight/influence separately from the assessment and payment element weights for HHAs. The clinical indications or nursing considerations are given more weight along with patient comorbidities.
- Coding becomes a key factor in payment mechanics, particularly diagnoses and co-morbidity.
- Functional status is given a higher weight, as is the case today with all post-acute payment model reforms.
- Episode lengths are halved – down from 60 days (current) to 30 days.
- PDGM is budget neutral meaning that when fully implemented,, the cost to the Federal government for Medicare HHA payments in the aggregate is no greater than current (inflation adjusted for time). To get to budget neutrality, certain behavioral assumptions about provide reactions to the changes are used. As one would suspect, this is a subject of concern and debate by the HHA industry.
The behavioral assumption issue referenced in #5 above is an imputed reality in all payment model changes. In fact, it is an economic model necessity when attempting to address “how” certain changes in reward (payment) will move activity or behavior toward those places where reward or payment is maximized. It is a key economic behavioral axiom: What get’s rewarded, get’s done.
In effect, CMS is saying that budget neutrality is achieved for a 30 day episode when payments for the episode equal $1,753.68. Getting to this number, CMS assumed that agencies would react or respond quickly to payment changes (areas where increases are found) in co-morbidity coding, clinical group assignment and reduction in LUPA cases. However, if CMS models slower reactions or limited reactions by the industry (operating norms as current persist), the payment impact is an increase of 6.42% or $1,873.91. Because budget neutrality is mandated concurrent with PDGM, the concerns providers are raising relates to how payments will ultimately be determined and when if necessary, will adjustments be made IF the anticipated behavioral changes don’t manifest as factored. Simply stated, this collective concern(s) is the reason the industry continues to lobby for delay, more analysis and further definitional clarity with the PDGM funding and payment assumptions prior to implementation.
One final note with respect to PDGM dynamics. Readers of my articles and attendees at lectures, webinars, other presentations have heard me discuss overall post-acute payment simplification and the movement within Medicare reimbursement to site neutrality. PDGM is an interesting payment model from the standpoint that it parallels in many ways, the PDPM movement for SNFs. It is diagnosis based, more clinically/nursing driven than the previous system and more holistic in capturing additional patient characteristics (co-morbidities) than before in order to address payment relevance. With assessment simplification and a growing focus on patient functional status at various points across a post-acute global episode (from hospital discharge to care completion), an overall framework is becoming more visible. Expect continued work from CMS on payment simplification, more calls from MedPac for site neutral payments for post-acute care. The policy discussions are those that reinforce payment that follows the patient, based on patient clinical needs, unattached to any site dynamics or locations, save perhaps a coding modifier when inpatient care is warranted to account for the capital and equipment elements in the cost of care. When looking globally at the overall health care payment and policy trend that is occurring sector by sector, the future of payment simplification and movement to site neutrality is certain. One question remains: By when?
Post-Acute, Site Neutral Payment Upcoming?
In the 2019 OPPS (outpatient PPS) proposed rule, CMS included a site neutral payment provision. With the comment period closed, the lobbying (against) fierce, it will be interesting to see where CMS lands in terms of the final OPPS rule – maintain, change, or abate. The one thing that is for certain, regardless of the fate of this provision, site neutral proposals/provisions are advancing.
CMS has advanced a series of conceptually similar approaches to payment reform. Site neutral approaches are a twist on value-based care as they seek to reward the efficiency of care by de-emphasizing a setting value. This is loosely an approach to “payment follows the patient” rather than the payment is dictated by the locus of care. Assuming, which isn’t always in evidence, that for many if not most outpatient procedures, the care required is the same such that one setting vs. another isn’t impactful to the outcome, then a site neutral payment seems logical. Managed care companies have been using this approach overtly, attaching higher cost-share to certain sites or eliminating payment altogether for procedures done in higher cost settings. In the OPPS proposal, the savings is rather substantial – $760 million spread between provider payments and patient savings (deductibles). To most policy watchers, there is a watershed moment possible with this proposal and its fate. The fundamental question yet resolved is whether hospitals will continue to have a favorable payment nuance over physician practices and free-standing outpatient providers. Hospitals arguing that their administrative burden and infrastructure required overhead, combined with patient differences (sicker, older patients trend hospital vs. younger, less debilitated patients trending free-standing locations), necessitates a site different payment model (such as current).
In the post-acute space, payment site neutrality has been bandied about by MedPAC for some time. Up to now, the concept of payment site neutrality has languished due to disparate payment systems in provider niches’. SNFs and their RUGs markedly different from Home Health and its OASIS and no similarity with LTACHs in the least. Now, with post-acute payments narrowing conceptually on “patient-driven” models (PDPM and PDGM) that use diagnoses and case-mix as payment levers, its possible CMS is setting a framework to site neutral payments in post-acute settings.
In its March 2015 report to Congress, MedPAC called for CMS to create site neutrality for certain patient types between SNFs and IRFs (Inpatient Rehab Facilities). While both have separate PPS systems for payment, the IRF payment is typically more generous than the SNF payment, though care may look very similar in certain cases. For IRFs, payment is based on the need/extent of rehab services then modified by the presence or lack of co-morbidities. IRFs however, have payment enhancements/ additions for high-cost outliers and treating low-income patients; neither applies in the SNF setting.
The lines of care distinction between the two providers today, certainly between the post-acute focused SNFs and an IRF, can be difficult to discern. For example, both typically staff a full complement of therapists (PT, OT, Speech), care oversight by an RN 24 hours per day, physician engagement daily or up to three times per week, etc. Where IRFs used to distinguish themselves by providing three hours (or more) of therapy, SNFs today can and do, provide the same level. As a good percentage of seniors are unable to tolerate the IRF therapy service levels, SNFs offer enhanced flexibility in care delivery as their payment is not predicated (directly) on care intensity. What is known is that the payment amounts for comparable patient encounters are quite different. For example, a stroke patient treated in an IRF vs. an SNF runs $5,000 plus higher. An orthopedic case involving joint replacement differs by $4,000 or more. Per MedPAC the difference in outcomes is negligible, if at all. From the MedPac perspective, equalized payments for strokes, major joint replacements and hip/femur related surgical conditions (e.g., fracture) between IRFs and SNFs made sense, at least on a “beta” basis. With no rule making authority, MedPac’s recommendation stalled and today, may be somewhat sidelined by other value-based concepts such as bundled payments (CJR for example).
So the question that begs is whether site neutral payments are near or far on the horizon for post-acute providers. While this will sound like “bet-hedging”, I’ll claim the mid-term area, identifying sooner rather than later. Consider the following.
- Post-acute care is the fastest growing, reimbursed segment of health care by Medicare.
- The landscape is changing dramatically as Medicare Advantage plans have shifted historic utilization patterns (shorter stays, avoidance of inpatient stays for certain procedures, etc.).
- Medicare Advantage days as a percentage of total reimbursed days under Medicare are growing. One-third of all Medicare beneficiaries were enrolled in a Medicare Advantage plan in 2017. Executives at United Healthcare believe that Medicare Advantage penetration will eclipse 50% in the next 5 to 10 years. As more Boomers enter Medicare eligibility age, their familiarity with managed care and the companies thereto plus general favorability with the product makes them quick converts to Medicare Advantage.
- Managed care has to a certain extent, created site preference and site based value payment approaches already. There is market familiarity for steering beneficiaries to certain sites and/or away from higher cost locations. The market has come to accept a certain amount of inherent rationing and price-induced controls.
- At the floor of recent payment system changes forthcoming is an underlying common-thread: Diagnoses driven, case-mix coordinated payments. PDPM and PDGM are more alike in approach than different. IRFs already embrace a modified case-mix, diagnoses sensitive payment system. Can homogenization among these be all that far away?
- There are no supply shortage or access problems for patients. In fact, the SNF industry could and should shrink by about a third over the next five years, just to rationalize supply to demand and improve occupancy fortunes. There is no home health shortage, save that which is temporary due to staffing issues in certain regions (growth limited by available labor rather than bricks and mortar or outlets). Per MedPac, the average IRF occupancy rate pre-2017 was 65%. It has not grown since. In fact, the Medicare utilization of IRFs for certain conditions such as other neurologic and stroke (the highest utilization category) has declined. (Note: In 2004 CMS heightened enforcement of compliance thresholds for IRFs and as a result, utilization under Medicare has shrunk).
- Despite payment reductions, Home Health has grown steadily as has other non-Medicare outlets for post-acute care (e.g., Assisted Living and non-medical/non-Medicare home health services). Though the growth in non-Medicare post-acute services has caused some alarm due to lax regulations, CMS sees this trend favorably as it is non-reimbursed and generally, patient preferred.
- Demonstration projects that are value-based and evidence of payment following the patient or “episode based” rather than “site based” are showing favorable results. In general, utilization of higher cost sites is down, costs are down, and patient outcomes and satisfaction are as good if not better, than the current fee-for-service market. Granted, there are patient exceptions by diagnoses and co-morbidity but as a general rule, leaving certain patients as outliers, the results suggest a flatter, site neutral payment is feasible.
If there is somewhat of a “crystal ball” preview, it just may be in the fate of the OPPS site neutral proposal. I think the direction is unequivocal but timing is everything. My prediction: Site neutral payments certainly, between IRFs and SNFs are on the near horizon (within three years) and overall movement toward payments that follow the patient by case-mix category and diagnoses are within the next five to seven years.
Five Post Acute Axioms (Truisms)
I read a lot – part of the job. I hear lots of conversations and participate in many in-person and online. Last week, I spent a few evenings with my rehab partner. Between he and my wife, with clients across the country, it was fascinating how the conversation regarding fortune or famine (providers) boiled down to a few simple truths. Summarizing, those that do well have accepted and work doggedly at embracing and living out these axioms. Those that are struggling, simply refuse to grasp these plain truths. Regardless of the entity (SNF, HHA, etc.), these axioms apply (truthfully, for any provider including hospitals).
To preface, I’ve slimmed-down hours upon hours of recent conversations to these five “axioms”. One could argue more apply. Between my partners, my wife (a partner) and me, we have some context here as we work with multiple entities that rank in the top 1,000 post-acute providers in the nation. For example, we all share a working relationship with the 6th ranked SNF in the nation, out of 15,636 SNFs. Unfortunately, we also have client relationships with the lowest ranked providers including one that ranks 15,609. This dichotomy (cruel as it is) gives us a unique perspective regarding truisms (embrace them and succeed, ignore them and fail).
- Quality Matters: This isn’t about hype or verbiage; it’s about results. Organizations that are succeeding are doggedly, persistently and hyper-fixated on their care outcomes. Their culture is deep in quality and they benchmark themselves and what they do, how they perform, with an effort on getting better all the time. Their outcomes demonstrate their quality.
- Staffing Matters: Providers that perform invest in and have in number, great staff perform better. They put the right people closest to the patients. They have assessed their operations and know precisely, what levels of staff by credential and education, their operations require. They train, teach and invest in their “troops”. You won’t find a great SNF that doesn’t have RNs on every shift, every day. You won’t find a great provider, HHA or SNF, etc., that doesn’t have actual employees, not contractors, taking care of patients (primarily).
- Excellence in Management and Leadership is Imperative: The best have long-term, highly qualified management and leadership at every level in the organization. They retain great talent and grow it like a prized rose-bush (ever watch rose “aficionados” you’ll get the reference). These folks aren’t the highest paid or even with the most credentials; they are excellent directors of task and people. The most credentialed (education, certifications, etc.) don’t correlate to the best manager or leader. In a nutshell: Excellence here means bright, strategic, engaged, earnest, industry and trade experts, that are quality driven.
- The Devil is in the Details: The best providers are not just current with policy issues and reimbursement trends, they are ahead and know the implications and manage to these details. For example, they know length-of-stay matters and they are working to shorten each encounter to only the resources required (days, visits, etc.). Their quality measures are excellent because they review the dozens of measurable data points to look for trends and to track outcomes. They have protocols and disease pathways in-place. They adopted antibiotic stewardship practices before the buzzword existed. They already were on pain and the management thereof, without or minimizing opioids, before alarms sounded. They had steps in place to quality review care transitions and hospitalizations. QAPI was something new but not to them. Doing things right was and still is, the driver for these excellent organizations.
- The Organization is like a Car: This is meant to be a silly reference but also serious. Driving is all about what is going on ahead of you and being anticipatory and prepared. The rearview mirror is checked but only briefly. Failure to pay attention to the road ahead and anticipate hazards, keep safe distances, etc. is how one arrives at a destination, safely and efficiently. Think of it this way: Slow is smooth, smooth is fast (an old and time-honored, Special Forces reference). Great providers embrace this philosophy – do things slowly, smoothly to be able to respond quickly when necessary. What differentiates the very best providers from the very worst is their focus on FORWARD – being very anticipatory and developing core, innate competencies that help be “smooth and fast” as adaptation is required in health care.
Food for thought. If one chooses to use the above points on a comparative basis, my guess is you will find what I know. The best embrace these axioms. The worst don’t or don’t consistently. Everyone else in the middle has a choice to make – get better or get worse. The truth about “great’ in health care is easy to understand.
Stuck in Neutral: Bundled Payments and Post-Acute Providers
After CMS nixed the mandatory expansion provisions for Bundled Payments and reduced the metro areas participating in CJR (joint replacement), the prospects for post-acute provider involvement in non-fee-for-service initiatives (payments and incentives based on disease states and care episodes) went in to limbo. With a fair amount of excitement and trepidation building on the part of the post-acute world about different payment methodologies, new network arrangements, new partnerships, incentive possibilities, etc., CMS put the brakes on the “revolution”; a screeching halt.
While Bundled Payments aren’t dead by any means, the direct relationships for post-acute providers are in “neutral”. The Bundled Payments for Care Improvement Advanced (BPCI Advanced) initiative announced in January included no avenue for SNFs, HHAs (home health) to apply and participate. Nationally, other voluntary bundle programs continue including the remnants of CJR, and Models 2, 3 and 4 in Phase II. According to CMS, as of April of this year, 1100 participants were involved in Phase 2 initiatives. The Phase 2 initiatives cover 48 episodes of care ranging from diabetes, through various cardiac issues and disease to UTIs.
BPCI Advanced opportunities (episode initiators) involve hospitals or physician groups. Post-acute will still play a role but the direct connections and incentives aren’t quite tangible or specific, compared to CJR. Time will tell how the roles for post-acute providers evolve in/with BPCI Advanced. Oddly enough, the economic realities of care utilization and negative outcome risk suggest that post-acute should play a direct, large role. As hospital stays shorten, outpatient and non-acute hospital surgical procedures increase, the directed discharge to post-acute has taken on greater meaning in the care journey. HHAs in particular, are playing an expanded role in reducing costs via enhancements to their ability to care for more post-surgical cases direct from the hospital/surgical location. Simultaneous however, readmission risk exposure increases. What is certain is that system-wide, the window of 30 to 90 days post hospital or acute episode is where significant efficiency, quality and cost savings improvement lies.
While the direct opportunities initially forecast under BPCI for the post-acute industry have evaporated (for now), strategic benefits and opportunities remain. Providers should not stray from a path and process that focuses on enhancing care coordination, improving quality and managing resource utilization. Consider the following:
- For SNFs, PDPM (new proposed Medicare reimbursement model) incorporates payment changes and reductions based on length of stay (longer stays without condition change, decrease payment after a set time period). A premium is being placed on getting post-acute residents efficiently, through their inpatient stay.
- For HHAs, payment reform continues to focus on shorter episodes in the future. Like PDPM for SNFs, the focus is on efficiency and moving the patient through certain recuperative and rehabilitative phases, expeditiously.
- Medicare Advantage plans are increasing market share nationwide. In some markets, 60% of the post-acute days and episodes are covered by Medicare Advantage plans – not fee-for-service. These plans concentrate on utilization management, ratcheting stay/episode length and payment amounts, down. Providers that again, are efficient and coordinate care effectively will benefit by focused referrals and improved volumes.
- Quality matters more than ever before – for all providers. Star ratings are increasingly important in terms of attracting and retaining referral patterns Networks and Medicare Advantage plans are focused on sourcing the highest rated providers. Upstream referral sources, concerned about readmission risks are targeting their discharges to the higher rated providers. Consumers are also becoming more market savvy, seeking information on quality and performance. And of course, government programs such as Value-Based Purchasing place providers with poor performance on key measures (readmissions for SNFs) in the reimbursement reduction pool.
- Indirectly, Bundled Payment initiatives move forward and the Advanced option will require physicians and hospitals that participate, to source the best referral partners or lose incentive dollars and inherit unwarranted readmission risk. SNFs and HHAs that excel at care coordination, length of stay management, have disease pathways in-place, can manage treatment, diagnostic and pharmacology expenses and produce exceptional outcomes and patient satisfaction are the preferred partners.
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