Nearing the end of the Supreme Court session, the Court issued an important clarification ruling concerning the False Claims Act in cases of alleged fraud. In the Universal Health Services case, the Court addressed the issue of whether a claim could be determined as fraudulent if the underlying cause for fraud was a lack of professional certification or licensing of a provider that rendered care related to the subsequent bill for services. In the Universal case, the provider submitted claims to Medicaid and received payment for services. The services as coded and billed implied that the care was provided by a licensed and/or qualified professional when in fact, the care was provided by persons not properly qualified. In this case, the patient ultimately suffered harm and death, due to the negligent care.
The False Claims Act statute imposes liability on anyone who “(a) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; or (b) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” It defines “material” as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” And it defines “knowingly” as “actual knowledge; … deliberate ignorance; … or reckless disregard of the truth or falsity of the information; and … no proof of specific intent to defraud is required.” The last element is key – no proof of intent to defraud is required.
Though providers sought a different outcome, the initial review suggests the decision is not all that bold or inconsistent with other analogous applications. The provider community hope was that the Court would draw a line in terms of the expanse or breadth of False Claims Act “potential” liabilities. The line sought was on the technical issue of “implied certification”; the notion that a claim for services ‘customarily’ provided by a professional of certain qualifications under a certain level of supervision doesn’t constitute fraud when the services are provided by someone of lesser professional stature or without customary supervision, assuming the care was in all other ways, properly provided. The decision reinforces a narrow but common interpretation of the False Claims Act: An action that would constitute a violation of a federal condition of participation within a program creating a condition where the service provided is not compliant creates a violation if the service was billed to Medicare or Medicaid. Providers are expected to know at all times, the level of professional qualifications and supervision required under the applicable Conditions of Participation.
The implications for providers as a result of this decision are many. The Court concretized the breadth of application of the False Claims Act maintaining an expansive view that any service billed to Medicare and/or Medicaid must be professionally relevant, consistent with common and known professional standards, within the purview of the licensed provider, and properly structured and supervised as required by the applicable Conditions of Participation. Below are a few select operational reminders and strategies for providers in light of the Court’s decision and as proven best-practices to mitigate False Claims Act pitfalls.
- One of the largest risk areas involves sub-contractors providing services under the umbrella and auspices of a provider whereby, the provider is submitting Medicaid or Medicare claims. In these instances the provider that is using contractors must vet each contractor via proper credentialing and then, provide appropriate and adequate supervision of the services. For example, in SNFs that use therapy contractors the SNF must assure that each staff member is properly licensed (as applicable), trained to provide the care required, and the services SUPERVISED by the SNF. Supervision means actually reviewed for professional standards, provided as required by law (conditions of participation), properly documented, and properly billed. The SNF cannot leave the supervision aspect solely to the therapy contractor.
- Providers must routinely audit the services provided, independently and in a structured program. Audits include an actual review of the documentation for care provided against the claim submitted, observations of care provided, and interviews/surveys of patients and/or significant others with respect to care and treatment and satisfaction.
- Establish a communication vehicle or vehicles that elicits reactions to suspicious activity or inadequate care. I recommend a series of feedback tools such as surveys, focus groups, hotlines and random calls to patients and staff. The intent is to provide multiple opportunities for individuals, patients, families and staff to provide information regarding potential break-downs in care or regarding outright instances of fraud.
- Conduct staff training on orientation and periodically, particularly at the professional level and supervisory level. The training should cover organizational policy, the legal and regulatory framework that the organization operates within, and case examples to illustrate violations plus remedy steps.
The bulk of my work centers around gathering data, analyzing trends and working with the leadership of various organizations to implement strategy or more centered, strategies. The process is iterative, interactive and always fascinating. Throughout my career, I’ve worked within (virtually) every health care industry segment and seniors housing segment. I also counsel and have worked with entities that buy, sell, invest in, consult with, account for, finance, and research health care and seniors housing businesses. Its my work with the latter that is the genesis of this post and my decades of work with the former that is the “content”.
There are two fundamental reasons why health care leadership is hard and different from leadership duties in other industries: 24/7 demands and the immediacy of the customer to the enterprise. Health care and seniors housing (regardless of the segment specific) never closes, has no true seasonality, and demand can increase and decrease with equal force and equal pace, almost entirely related to external factors and forces. Pricing for the most part, other than seniors housing, is almost immaterial and unrelated to revenue. No other, non-governmental, business is as regulated and scrutinized and mandated transparent than health care. Likewise, no other business has the mandate that the full array and intensity of all services must be available 24/7, on immediate demand, with no ability to defer, fallow, or limit. Even a 24 hour PDQ won’t have all services available constantly (if the hot dogs run out, they are gone!).
While other industries will have close customer contact, health care has a unique, and intimate relationship with its customers. In SNFs, Assisted Living Facilities, Seniors Housing, etc. the customer is present for long-periods (years). In hospitals, the customer is present for hours, days, up to weeks at a time (the latter rare unless we are talking LTAcH). In the health care setting, the enterprise has total responsibility for all needs of the customer – great to small. The quality of care and service to all needs matters and is measured, reported and today in many regards, tied to compensation. Back to the PDQ, the over-done hot dog costs the same and there is no governmental entity that maintains a hotline for customer reports and investigations regarding the quality of the hot dog.
In health care, there is a very unique and in many ways, perverted twist concerning the customer relationship. The customer today is a Dr. Jekyll/Mr. Hyde manifestation. No other industry has customers that are bifurcated as such – the payer being a consumer unique and separate from the actual present being. Health care entities, to be successful, must satisfy both and manage the expectations of both, seamless and fluid to each party. I know of no other industry where on any given day in a hospital for example, where it is likely that of 300 individual inpatients there are dozens more of the payer/insurer consumers requiring unique attention, simultaneously. Miss a step, miss a form, etc. and the payer consumer refuses to pay for the human consumer that is receiving or received the care.
Because of the “constant” nature and customer relationships (coupled with many other reasons of course), health care leadership is hard. It is hard because these two fundamental components are nearly, completely, out of the control of the leader. The leader can only react or respond but truly, never change the paradigm or structure and always, in terms of the payer customer, sit beholding to the rule changing process and bureaucracy of the payer customer. This last element can be unbelievably insidious. For example, in the State of Kansas, dozens of SNFs face grave peril in terms of solvency because the State cannot efficiently certify eligibility for Medicaid for qualified seniors. The delay has left dozens of facilities with Medicaid IOUs at six digits and climbing – the human customer receiving care, the paying customer bureaucratically inept and unwilling and incapable of paying its bills, and the SNF sitting with no real recourse.
Given the above, its frankly easy to see why so many leaders fail or simply, give up. The deck is stacked toward failure. On the expense side of the equation, because of mounting regulation, fewer elements are within a leader’s control. With a rare exception, revenue is completely beyond control in terms of price and reimbursement for services provided. With RAC and other audits, revenue initially earned can be retrospectively recast and denied. (The PDQ six month’s later decides to recoup payment for the hot dog because, in its infinite wisdom, you didn’t need to the eat the hot dog or you should have made a wiser food choice). The overwhelming variables that can contribute to failure in a micro and macro sense for a leader are not lessening. His/her organization is open and under scrutiny, 24/7. He/she must oversee and be accountable for the health outcomes of a human customer that in turn are interpreted by the payer customer (remotely), subject to alteration, and retroactive scrutiny. Today, success isn’t just based on what occurred at the point of service but after the service concluded. The enterprise is at-risk for human behavior (compliance and non-compliance) of the consumer for not just days post service but months. Further, the enterprise is at-risk for the satisfaction of a consumer whose behavior and lifestyle may have significantly contributed to his/her need for care and service initially. As one executive told me recently; “We have to tell people the truth about their disease, figure out how to make it sound good and nice, and hope that we have done so in such a life affirming fashion that the patient will give us 5 stars for service. Figure that one out”. Alas, perhaps failure is inevitable.
Aside from failure correlating to burn out or shear “giving up” (the average large system executive tenure is less than 10 years), the failure in leadership that I see resides primarily in two areas. The first is an inability or lack of willingness to realize that the paradigm is constantly changing today and the pace of which, is accelerating. It is human nature to seek equilibrium; to pursue elements of stasis and calm. The same ( is) anathema to leading a health care enterprise. The second area is aversion to risk. Precisely because of the first point, taking risk or being capable of tolerating large elements of risk is imperative today in health care. The best leaders are true entrepreneurs today. They see opportunity and are willing to pursue it with vigor. They find the niches and pursue them. Every bureaucracy and rapidly changing industry paradigm begets opportunity with equal pace and ferocity. For example, the growing “private, non-reimbursed” service sectors in health care that continue to grow and flourish because of and in-spite of the heavily regulated, price tied market. I know of and have consulted for, provider groups that have moved further away from Medicare and managed care to private payment with phenomenal success. Was the strategy a risk? Yes. Most would not take this type of risk. I am harkened however by the notion that at times, the greatest risk present is the risk of doing nothing.
Successful leadership and leaders today, those that I know, have the ability to think systematically and algebraically – to solve the industry polynomials with all of the variables. They are inquisitive by nature and unwilling to accept the status quo, regardless of where and why. They embrace the famed Pasteur quote: “Chance (luck) favors the prepared mind”. They also have the soul and panache (tempered) of Capt. Jack Sparrow (from Pirates of the Caribbean). They like risk and have the entrepreneurial heart and mind to innovate and move fluidly through problems and challenges such that the same are opportunities. They don’t allow their enterprises to become complacent or bureaucratic.
Today, success is about better – better products, better service, and better care. Payers are demanding accountability and want an increasing level of care and service for lower levels of payment. That is the paradigm and it is moving to higher levels of accountability and lower levels of overall payment. The best execs know this and don’t quibble with it (much). They realize that success if about adapting the enterprise accordingly while finding the pliable spots that such an environment creates. These spots are service lines, system enhancements, productivity improvements, and different levels of patient engagement. Similarly, they realize the risk limits of concentration – too much exposure to certain payers. They have seen this trend coming and have already moved. For those still trying to reverse or slow the trend, this is where failure first begins ( the search for stasis in a rapidly changing world).
Over the last six months or so, I’ve written a number of articles on the issue of SNFs, therapy contracts/contractors, and recent fraud settlements. I’ve also given a few presentations on the same subject, covering how fraud occurs, the relationships between therapy contractors, SNFs and Medicare, and the keys to avoiding fraud. A reader question based on this subject area is the genesis (the answer is anyway) of this post. The questioned shortened and paraphrased is;
“If we (the SNF) conduct an audit of our therapy contractor and our Medicare claims as you suggest and we find abnormalities that appear to be fraudulent claims, what do we do next? We know we have to correct the practices that allowed the claims to happen but is there something else we need to do?”
Not only is this an excellent question given the subject area, the answer or outcome is likely the reason so many providers don’t or won’t audit their therapy contractors and Medicare claims (afraid of what they might find). The answer to the question is YES, there is something else to do and it is a federal requirement if a provider wishes to potentially avoid Civil Monetary Penalties and other remedies. This key step is known as Self Disclosure.
Starting at the beginning: If the results of the “audit” determine that Medicare was billed inappropriately, the provider is in potential violation of the False Claims Act. The False Claims Act describes violations as ‘any entity or person that causes the federal government to make payments for goods or services that are a) not provided b) provided contrary to federal standards or law or, c) provided at a level or quality different than what the claim was submitted for (summarized)’. For Medicare, providers are in violation of the False Claims Act if bills are/were submitted to Medicare (and paid) for care that was inappropriate, unnecessary, falsely misrepresented (upcoding, documentation etc.) or not provided. Assuming, as the questioner poses, that the audit found abnormalities (improper bills and payments) to Medicare (Parts A, B, or C) for any of these reasons, a False Claims Act violation (liability) has been identified. The provider has obligations as a result, under federal law.
The “obligation” once the activity is discovered is to self report. The OIG maintains a Self Disclosure Protocol policy that can be accessed here ( http://oig.hhs.gov/compliance/self-disclosure-info/files/Provider-Self-Disclosure-Protocol.pdf ). Self Disclosure is a methodology that providers can use to potentially avoid Civil Monetary Damages, other remedies and extensive legal costs. Self Disclosure however, cannot be used to mitigate criminal penalties if the activity that is part of the Medicare False Claims violation was/is criminal. Self Disclosure also is not relevant for overpayments. Overpayment issues are handled via the Fiscal Intermediary directly.
Per the OIG Self Disclosure Protocol:
“In 1998, the Office of Inspector General (OIG) of the United States Department of Health and Human Services (HHS) published the Provider Self-Disclosure Protocol (the SDP) at 63 Fed Reg. 58399 (October 30, 1998) to establish a process for health care providers to voluntarily identify, disclose, and resolve instances of potential fraud involving the Federal health care programs (as defined in section 1128B(f) of the Social Security Act (the Act), 42 U.S.C. 1320a–7b(f)). The SDP provides guidance on how to investigate this conduct, quantify damages, and report the conduct to OIG to resolve the provider’s liability under OIG’s civil monetary penalty (CMP) authorities.”
Below are some key points providers need to know prior to and in connection with, a self disclosure process. Again, I encourage all providers that are conducting a billing audit or considering a billing audit, to access the PDF from this post and review the OIG Self Disclosure Protocol.
- A current regulatory process or audit from Medicare (or a contractor such as a ZPIC audit) does not mean that the provider cannot self disclose, provided the disclosure is in good faith.
- Further investigations and reviews are part of the process and providers need to be aware that the OIG will direct the provider’s investigative process as part of the self disclosure. In other words, the audit the provider conducted which may have identified the false claims is not the end nor will it suffice to resolve the matter once disclosed.
- Providers that wish to self disclose need legal counsel as the initial disclosure requires a succinct identification of the legal violations applicable and the scope of the activity and dollar amounts (potential) involved.
- Self disclosure should only be made after corrective action has occurred. The disclosure does not suffice as a remedy for conduct going forward nor can it absolve liability in scope that predates the disclosure or the period disclosed (see the point prior).
- Providers need to be aware that this process is not quick nor does it alleviate or mitigate any requirement for repayment of improper claims. Additionally, providers need to recognize that resolution will require mitigation steps including potential agreement to a compliance program/plan and commitment to additional monitoring/auditing, depending on the scope of the violations disclosed.
I encourage providers to read the Protocol and to pay particular attention to 5 – 9. While I know the information may seem daunting and discouraging, don’t use this post or the information in the Protocol as a reason to not conduct a Medicare billing/claims audit and/or to not report, if violations are found. I assure you, having worked extensively with providers caught by the OIG, DOJ and/or in a Qui Tam action, prevention and self disclosure, while onerous is far better and cheaper than what occurs if the violations are discovered federally.
Yesterday, the Speaker of the House (John Boehner) announced that a compromise is forthcoming to alleviate, for one year, the pending 24% payment reduction to the Physician Fee Schedule arising out of the current SGR formula. Ten days or so ago I wrote a post regarding a House bill that repealed the SGR but contained a “poison-pill” provision assuring its death in the Senate ( http://wp.me/ptUlY-gm ). As is the common methodology in Congress today, this initiative is a “patch”; another extension of the current status quo, delaying any SGR implications for one year. Alas, while the SGR demands fixing, permanently, no traction is available among the parties to resolve the issue.
What the compromise does and doesn’t do is as much the center of debate as any efforts to replace the SGR with a more permanent formula. In summary, the compromise;
- Staves off the 24% cut but doesn’t restore any cuts related to sequestration.
- It delays the implementation for hospitals of the 2 midnight rule for another six months. The 2 midnight rule essentially reduces Medicare payments to hospitals for short in-patient stays. It requires admitting physicians to have justification for the inpatient stay and if the same is lacking, the stay could be deemed (by RAC auditors) outpatient observation and thus, paid under Part B at a lower rate. The Bill would delay RAC auditors ability to review such stays until March of 2015 and give CMS authority in the interim and beyond, the ability to probe and educate but not re-classify stays.
- It extends the implementation of ICD-10 for one more year.
- It extends certain programs that provide additional funding for rural hospitals.
While no one wins under these compromises, the Patch is likely to pass both houses quickly, viewed as a better alternative than the SGR cuts. For post-acute providers, this is good enough news as the therapy fee schedule was subject to the same 24% reduction.
Interesting to note is that while the Bill extends the implementation of the 2 midnight rule, it doesn’t address the backlog of Administrative Appeals that continues to mount due to the Medicare RAC initiative. This backlog is enormous and growing and it is the sole source initially, for providers to appeal RAC decisions. I know of multiple providers today in the appeal queue waiting for a review of what appears to be, many erroneous determinations and shabby reviews of claims. More on this in another post – later.
An issue that continues to confound the hospital and SNF industry is the growing use and thus, referral and coverage (Medicare) ramifications of observation stays. Fundamentally, and observation stay by current definition is a non-inpatient stay – an extended residence in an outpatient status. Truly, this a bifurcated problem or issue; hospitals wishing to avoid admission and readmission penalties and SNFs trying to determine the nature of the hospital stay for Medicare coverage purposes.
The observation stay issue at hand is truly the proof of the law of unintended consequences and outgrowth of competing health policy agenda. For elderly patients and SNFs, it can be exceptionally difficult to sort out a multiple day hospital stay (greater than three days) when many of the days, or all, occurred in what appears as a private room. In fact, in many hospitals, expanded outpatient areas are easily confused as inpatient environments, with no visible delineation in accommodation, care, etc. The sole differentiating factor is whether the room and location are defined by the hospital’s license as an “inpatient room”. As Medicare coverage in an SNF requires a precluding three-day inpatient hospital stay, a stay that does not incorporate an actual admission to the hospital proper (not an outpatient admission) of at least three days in length fails to satisfy the three-day inpatient requirement.
For the hospital, observation stays (and the increase thereof) are a direct outgrowth of aggressive Medicare Recovery Audits. By deeming, via post review, inpatient stays “inappropriate or not medically necessary”, Medicare has recovered hundreds of millions of dollars from hospitals. Additionally, a growing list of admitting diagnoses (DRGs) are plaguing hospitals in terms of looming reductions in reimbursement if a patient originally admitted and subsequently discharged, is readmitted for any reason within 30 days of the discharge. To avoid this readmission penalty, hospitals will use an observation stay as an alternative. The most significant observation trend ramification is the growth in the length of stay in this status. In 2006, only 3% of observation stays lasted longer than 48 hours. In 2011, the percentage increased to 11%. In certain regions today, the percentage is as high as 14% of observation stays exceed the 48 hour period.
In May, CMS proposed to alter or modify the observation stay vs. inpatient stay criteria; creating additional clarity for recovery auditors. The proposal would allow recovery auditors to presume that any inpatient stay equal to or greater than two midnight periods (one Medicare day) is appropriate. Stays shorter than this duration (inpatient) are thus classified as outpatient. CMS has not yet codified this change.
Earlier by a month or so, two bills were introduced (companions) in the House and the Senate. Both bills proposed modification to Title 18 (Medicare) of the Social Security Act, effectively classifying an observation stay day as equivalent to an inpatient stay day for purposes of satisfying the three-day prior stay requirement for Medicare coverage in an SNF. The bills are titled “Improving Access to Medicare Coverage Act of 2013”. Each has achieved a fair number of co-sponsors and today, reside in committee (House sub-committee on health and the Senate).
The likelihood of passage is by my estimate, 50/50 at best. The rub in terms of passage is cost as a change in definition (proposed) will increase the coverage exposure for SNF stays. No one knows what the exact magnitude is and no CBO score exists for either bill (yet). Additionally, CMS is likely to balk as simplification as proposed will have a spill-over impact on the “appropriateness” definition presently used to recover hospital payments for “unwarranted” inpatient stays. There is no question that weighting a day under federal law equivalent to another day for coverage purposes will push hospital lawyers to pose arguments that reclassification of inpatient to outpatient days via recovery auditors is “capricious”. Such arguments are already in federal courts and administrative courts. Further, a case filed in 2011, Bagnall v. Sebellius argues that the use of observation stays violates federal law. This case is not yet at trial but will in all likelihood, receive a boost if Congress amends the Social Security Act as proposed.
Regardless of the legislative outcomes, it is clear that movement is in-place for additional clarity around the use and misuse of observation stays. Even sans legislative success, CMS is now tasked to modify and clarify the use of observation status and thus, re-focus recovery auditors on a more direct course of Medicare payment excess. This issue needs resolution and frankly, Medicare auditors need to focus more attention where the real abuse and overpayments are occurring. This is small potatoes by comparison.
With the Holidays fast approaching and me, heading into a break and a brief vacation, the time is right to recap the current health policy landscape. As the title states, now it seems as if the industry is riding on the Healthcare Polar Express; head first into the dark, cold, snowy north.
- Fiscal Cliff: Wow, what a mess. The House has adjourned for the Christmas holiday, leaving the Senate to try to fashion a compromise bill. The key players, namely Speaker Boehner and President Obama are at impasse. As I write, the market has dropped by 120 points. Aside from the tax issues unresolved, the bigger implications of “no deal” are the pending Medicare Part B cuts of 26% (physician payments, outpatient payments tied to the Sustainable Growth Rate formula), sequestration cuts for Medicare of 2%, and a series of PPACA related provisions that raise Medicare premiums and apply new provider taxes on insurance companies/insurance plans. While it is possible that a temporary deal gets one, buying once again a brief reprieve, the tone of settlement of the big issues is alarming. What’s worse is the imbedded economic impact of “no deal” or a “marginalized” deal. Recall, Medicare and Medicaid funding is primarily tied to taxes; payroll and income. I am most alarmed at the implication for Medicaid as any further erosion in economic recovery will put states in a real fiscal vice. Nationalized signs of recovery are just that, nationalized. Important for state budgets and Medicaid is an expansion of GDP growth fertile enough to expand into local, regional and state economies. Right now, a meager 2% GDP growth is akin to treading water for most states. Slower growth or a recession is disastrous as Medicaid ranks are already swollen with chronically unemployed and underemployed individuals.
- Medicare and SNFs: On the heels of last year’s outlay reduction and rate cuts (10%), sequestration cuts set to occur without a Fiscal Cliff compromise add an additional 2% reduction. Making matters worse are two recently released reports from Medpac and the GAO respectively. In November, the GAO reported that 23% of all Medicare SNF claims are fraudulent (upcoding, care billed for and not provided, etc.). Important to note, the GAO review focused on claims from 2009, prior to changes imputed under RUGs IV. Arguably, the current environment is still somewhat ripe with fraudulent claims but my guess is that the GAO is mixing “apples with oranges” in some of its conclusions. The simple fact is that the RUGs III environment and rules gave providers very wide berth via the use of look back provisions, the methodology for minute counting (group minutes divided in whole treatments versus fractional), etc. Earlier in the month, Medpac recommended elimination of the 2013 market basket for SNFs accompanied by a plan to rebase rates for 2014 imbedding an initial 4% payment reduction. Medpac’s conclusion is derived somewhat from data drawn from the GAO but moreover, from reviews of cost reports, etc. that continue to imply fairly substantial Medicare margins for SNFs. Medpac’s reasoning for rebasing is to bring payments more in-line with provider costs (down). The difficulty in making sense of this argument for the industry is that the industry still survives by cost and revenue shifting as the dominant payer source for the vast majority of SNFs is Medicaid; historically a payer that creates a negative margin. Regardless of the track Congress takes, the overall implication is a future with downward rate trend. The industry faces difficult haggling positions given the GAO’s report – tough to argue that rates should remain high when there is a 20 plus percent fraud over-hang.
- Lame Duck Watch: If the Fiscal Cliff issues aren’t enough to feel like “coal in the stocking”, consider that this is also Lame Duck time in the House and the Senate. Lame Duck watch means simply this: Don’t ignore the series of bills and riders to spending continuation legislation proffered by Lame Duck Senators and Congressmen. A classic case is a bill supported by Lame Duck Senator Kohl known as the Painkiller Bill. Kohl first introduced this bill in 2011 and it went nowhere. Its back. The bill on the surface seems reasonable, offering an easier methodology for physicians to provide oral orders for opiates and other pain killers for SNF residents. The objective is to provide more rapid response to patients with chronic and break-through pain. Alas, as is customary with legislative manipulation of this sort, the bill is loaded with potholes that would dramatically increase record-keeping requirements for pain medication administration and impart fines (significant) and penalties including prison time for compliance failure or diversion. Simply put, this should be a non-starter. The issue isn’t to create a different path but to establish a different systemic methodology that would allow the use and encourage with grant funding, automated dispensing. Hospitals have used this system for years but as of today, CMS still requires “unit dose” per resident for SNF patients. With automated dispensing, the delay in care issues are significantly controlled as is the likelihood of diversion as the systems have multiple fail-safes for access and distribution of controlled substances such as opiates.
- Hospital Quality Payment Program: On Thursday, CMS released a schedule of bonuses and penalties for 3,000 hospitals tied to quality of care provided by standard as well as patient experience. The nearly $1 billion in payment revisions will begin in January. The approach or program is known as Value Based Purchasing, incorporating 12 measures of timely and effective clinical care. Examples include the percentage of heart attack patients given anti-coagulants within 30 minutes of arrival at the hospital, the percent of pneumonia patients cultured before started on anti-biotic therapy, and the percent of surgical patients that received an antibiotic within an hour of surgery. In addition, 8 surveyed measures on quality of service were incorporated. Examples include how well doctors communicated with patients, how well nurses communicated with patients and how responsive hospital staff was to patient needs. Any reader interested in knowing all 12 clinical measures and the 8 quality of service measures, drop me an e-mail (contact on the Author page) or comment to this post. I also have information on possible upcoming additions to the program as well as a series of charts and accompanying data on hospital performance. Nationally, 52% of hospitals will receive positive adjustments and 48% negative or payment reductions. The best performing state in terms of percentage of hospitals receiving a bonus is Maine (79%) with an average adjustment of .23%. The worst performing state, if you can call it that, was Washington D.C. with 0 or no hospitals receiving a bonus.
To all my readers, Happy Holidays and best wishes for a prosperous, healthy and safe New Year!
More than two years ago I wrote a post regarding “five” things every SNF administrator should focus on and lo and behold, a reader asked late last week if I would revisit this subject. She (the reader) is not an SNF administrator so she asked if I could focus more globally; sort of a “best practices” approach. While each health care industry segment has its nuances, in reviewing my travels, the challenges and successes leaders have, where failures occur, and where careers are made and sustained, I quickly found commonality in approaches and focused competencies.
Healthcare leadership is complex and very dynamic. The alchemy is nearly one-part inquisitor, one-part psychologist, and one-part theoretician. Those that do well and thrive, regardless of industry segments, are today “global” thinkers capable of transitioning to tactician seamlessly. They are outcome oriented and know the pieces of the puzzle well enough to be bull**it proof. They think and act as if synergism is their main duty and they understand (acutely) the law of unintended consequences. Bottom line: They see cause and effect and constantly seek ways to shorten the distance between the two.
Industry issues aside regarding changing reimbursement, regulation, etc., the focal core that I find as key and thus, displayed in action by the successful executives is as follows.
- Quality: This is an oft used buzzword but very skilled and successful executives can articulate this for their business immediately. In healthcare, quality is all about tangible outcomes that patients experience. Going one step deeper, quality today is also about a measurable outcome at a particular cost. In my economist jargon, this is about utility and warranty. Utility is maximized in healthcare when the payer and the patient receive a desired, tangible outcome at a market or below market price. Warranty in healthcare is about the outcome’s sustainable benefit to the patient and the payer. Technical yes but this theory is a key focal area for healthcare executives. Think about it tangibly in light of today’s issues. Hospital executives need to understand this because it impacts re-hospitalizations. The outcome must match the warranty or in other words, the care must be complete such that avoidable readmissions are low or non-existent. For SNF executives, the same holds true but with a slight twist. The SNF executive must deliver excellent care all while minimizing the risk areas that lead to re-hospitalizations such as infections, falls, and medication errors. As a core competency, the best executives I work with didn’t wait for the government to tell them to reduce their falls, reduce their re-admissions, etc. They knew these issues years ago and had already understood the relationships between quality or utility and warranty.
- An Outside-Inside View: Where I find failings in healthcare leadership it almost always starts with executives that believe their challenges and their industry are utterly unique. They not only bought the healthcare executive manual but they memorized it. They seek only peer knowledge or interaction, often I believe to validate that “they” are doing the same thing everyone else is doing. Alas, the story of the Lemmings on their way to the sea is cogent. What I see as key competency among the best is that they have an “outside-inside” view competency. This outside-inside view is characterized by looking beyond their industry at analogous problems or issues and seeking solutions that are applicable. Yes, healthcare is unique but certainly not so unique that strong parallels in marketing, customer service, project management, systems design, etc. can’t be found via other industries. Across my career, the best ideas I’ve used came from other industries – not healthcare. I simply altered the concept to fit the situation. Philosophically, “the coolest things in life exist in places where their aren’t any roads”; a quote from a former camp counselor to my son. Developing this competency is all about forcing oneself to explore well beyond the industry noise, rhetoric and ideologies.
- Small Spaces and Closet Organizers: As odd as this heading sounds, it makes sense to me when I see it applied. The industry has run through its hey-day where bigger was better and, “if you build it, they will come”. Really strong executives today have learned how to creatively adapt and re-adapt and they realize the core competency of “revenue contribution” per square foot is the new reality. This competency area is all about revenue maximization and in a go-forward universe of revenue stagnation via reimbursement cuts and flat payments, using space efficiently and keeping the closets organized rather than overflowing with stuff not needed nor ever used, is the requirement. Gone are the days where more is better or additional lines of inventory make sense. This focus is truly a trend from manufacturing where realities on plant size, productive capacity and just-in-time inventory came to roost many years ago.
- The True Meaning of Health Policy: This is about the Paul Harvey requiem; “the rest of the story”. Health policy impacts are point in-time in terms of regulatory implications and reimbursement implications but woven together, a trend is evident. This competency area is about knowing what the policy trends are, where Medpac is going and why and how the enterprise led should position accordingly. I have written repeatedly that regardless of regulation and new laws like the PPACA, core issues about entitlement financing, sustainability of funding, etc. will beget certain and permanent changes in health policy. Ignoring these realities and the resulting policy trends is akin to committing hara-kiri with a butter knife; no one blow is fatal but the culmination of all blows leads to a slow, painful death. Much is trending right now regarding networks, ACOs, bundled payments, pay-for-performance, accountability, fraud, etc. Knowing not only the implication of each but how the same is directing the future is a core executive competency.
- Freakonomist: OK, I’m stealing from a book title here but the point is simple: Healthcare executives need to understand at a certain level, core human behavior and economics. I’m not talking about finance or reimbursement but behavioral economics. One of the major problems or arguably, the single most demonic problem with healthcare today lies in the axiom that “what get’s rewarded, get’s done”. We have lived too long on the native belief that acute, fee-for-service, episodic medicine or care is how the U.S. health system thrives. Thus, we have overspent and over-taxed the system without regard to a potential breaking point. We have arrived at such a point. Today’s healthcare executive must realize this core reality and to survive and thrive, re-define his/her leadership to developing systems and services that prevent utilization or revise utilization to more of a minimalist plane. Those that embody the philosophy that “better is better” rather than “more is better” will understand this innately. This competency is about “solving” core problems and not chasing root, flawed ideologies of the past. Profit and success will come via innovation and system-thinking not from finding new ways to exploit Medicare and Medicaid.
With all of the election news blaring (thank goodness the end is soon here), some important health policy issues have been somewhat lost in the milieu. Below is a quick summary of what has caught my attention as of late (a heads-up for readers).
Medicare/SNF Class Action Settlement: This is profound on a number of levels though I have seen very little analysis on the decision. A nationwide “group” of Medicare beneficiaries and their families, all suffering (some passed) from one or more chronic illnesses, sued the Federal government on a class-action basis alleging denial of Medicare coverage based on the “improvement” criteria imposed by Medicare intermediaries. The gist of the case is as such. In each instance, a SNF resident was admitted meeting the qualifying criteria (three day prior hospital stay, requiring skilled services). In each instance, Medicare benefits were subsequently denied to these residents, even though the skilled service requirement remained, as the resident’s condition stabilized or failed to show improvement. The suit further alleged that in certain cases, care levels diminished or skilled services reduced or ended as the individuals involved, were not able to pay for additional care privately. Briefly, without the presumption of Medicare coverage, the presumption of continuation of skilled services like therapies evaporates, requiring the resident to then pay privately for continuation of service.
The settlement arose when Medicare officials agreed to re-write the claim adjudication manuals to make “clear” that Medicare coverage is only conditioned upon Medicare eligibility, a three day prior inpatient qualifying stay (hospital) and the requirement and delivery of, daily skilled services (as presently defined). Denial of continued coverage should only occur when the skilled service is no longer required based on the resident’s care needs, not based on improvement or lack thereof. Nowhere in existing Medicare regulations is there a requirement for “improvement” yet the standard has been universally applied by Fiscal Intermediaries (Medicare claims adjudication contractors).
The case, coming out of Vermont, is expected to be published soon and the class encompassing more than 10,000 beneficiaries nationwide. The implication is that this group, as well as other beneficiaries, can appeal coverage decisions (where coverage was discontinued) for claims prior to January of 2011 (when the suit was filed). Note: This will limit claim review exposure unless the decision provides greater detail due to Medicare’s 18 month limit for re-filing claims (18 months from denial or service discontinuation if denial is implied). Additionally, many residents in the class will no doubt be dead with closed estates, thereby limiting a reconsideration of coverage claim.
What I don’t know yet is how this decision will impact claims going forward. I am awaiting details on the following questions/concerns.
- Appeal information as applicable from intermediaries.
- Coverage guidance to providers to continue to bill Medicare as long as a skilled service is still required.
- Any RUG guidance and assessment guidance for interpretation of therapy services in particular. Ordinarily, some assumption of continued therapy hinges on documentation of improvement of some type and guidance is necessary to document minutes for other reasons (prevention of decline, safety, etc.).
- When intermediaries will be instructed by Medicare on the “revised” interpretation of coverage.
Medpac Recommends Cut to Part B Therapy Caps: In their November 1 report to Congress, Medpac recommends a 33% reduction to the current Part B Outpatient therapy cap; presently $1,880 reduced to $1,270. Additionally, Medpac is recommending that the Manual Medical Review process expand to all “therapy” services including those provided in hospital outpatient departments, whenever a cap is exceeded. Currently, the process kicks-in at $3,700. Set to expire at year-end is the exception process with hard-caps going into place in January of 2013, unless Congress acts to extend the cap limits and the exception process. Medpac’s report is the first shot at creating a recommended action for Congress prior to the January date. Medpac further recommended, in conjunction with their continuation of the manual review process, a streamlined review approach. Core to this recommendation is a ten-day turnaround and the use of two MAC contractors nationwide for consistency and focus. Anyone who wishes to view the report, e-mail me at firstname.lastname@example.org or leave a comment on this post with your contact e-mail and I will forward it to you.
Medicare Sued for Inappropriate Setting Determination Denials: This one fascinates me particularly as it is the first suit I am aware of implicating Medicare’s RAC contractors and post-care denials. In this case, the American Hospital Association, joined by four other healthcare providers sued HHS and CMS for allowing RAC contractors to retrospectively, deny outpatient claims filed under Part B determining that the care should have been rendered inpatient and the claim submitted via Part A. The suit alleges illegality in denial of payments when cases are retrospectively reviewed. What is interesting is that “inappropriate location” of care is an odd justification for denial, especially when the setting is less costly to Medicare. While it has always been illegal to improperly bill Medicare, including under-billing, rarely have I seen (in fact never) claims denied retrospectively as inappropriate, simply based on the use of a lower cost or alternative setting. Typically, a claim properly billed has never been reversed or denied based on location and certainly not a judgment call such as this appears – seemed more appropriate inpatient. No allegation or substantiation is provided as to whether the care rendered was inadequate, merely wrongly located. Why this case bears watching is that the RAC issues are brewing in terms of the programs costs, its inter-relationships and lack of impartiality, and the incentivized methodology that exists to “recover” overpayments. Denials of this nature and the appeals are incredibly expensive for providers and clearly, the suit incorporates by description, the cost vs. benefit insanity of having to appeal denials of this nature.
Off the golf course (reluctantly) and back to work. Last week was full of catching up and revisiting issues and reports. As promised before I went temporarily AWOL, here’s Part I of at least two parts (maybe three) of issues that I am following.
- Politics and the First Tuesday in November: The conventions are done and now the grind begins through the November election. This may be the most polarized election in decades and the price tag is certain a record breaker – approximating $1 billion. What is most interesting to me is the banter about the economy and healthcare. Being that I am an economist by training and a healthcare guy on the ground, what I see is quite different than the rhetoric on the news, reported via polls, analysts, etc. Here’s my twist on the substantive issues under debate.
- The economy is stalled and the primary reason is uncertainty. Fixing uncertainty is all about changing, for the U.S. economy, the consumer’s point of view. Consumption drives economic activity (demand) and thus, businesses and suppliers will return with investment, jobs, etc. to meet the rising consumer demand. This also is true for healthcare demand which has stayed level to flat in a number of sectors as the ranks of the under and unemployed have swelled (no job, no health insurance, no healthcare). I suspect that a fair amount of healthcare demand is pent-up now, awaiting a change in economic fortunes. Granted, this is primarily elective type demand but nonetheless, business and revenue presently absent. Sadly, I also believe that a near-term rise in chronic disease is forthcoming as folks have foregone early intervention for lack of resources.
- Creating “certainty” doesn’t happen via a presidential election directly unless the elected president is capable of galvanizing a vision and creating compromise. For example, tax policy. The economy is far more fluid than either party would want voters to believe. It can handle higher or lower tax rates but not “tax policy” by absenteeism. For the economy, the fiscal cliff is less about falling into the abyss and more about what is at the bottom of the cliff, if a bottom even exists. Certainty is about rational for consumers, not ideology. Only one major impediment exists to creating rational on a broader level and that is bureaucracy. Endless regulatory policy and reams of court and administrative law interpretations are anathema to certainty. Clear, straight-forward approaches that share gain and balance pain are necessary. No business person that I talk with, healthcare or other, is simple-minded enough to believe that gain in any form comes without a certain amount of pain. It is the fear of unknown pain (how much and how bad) that is keeping both consumers and producers away from the economic fray (discretion is the better part of valor).
- Healthcare economics is trickier than either party chooses to admit and neither has an answer at this point. Entitlement spending is out of control and the present policy fixes described, come woefully short of changing the trajectory. Both parties are presenting band-aid solutions to a hemorrhaging wound. The only true answer is a complete overhaul of Medicare and Medicaid from benefit levels to funding mechanisms to entitlement conditions. The Ryan Roadmap came closest albeit “close” in this case is akin to getting the ball near the red zone, taking three holding penalties and then fumbling at mid-field. True, political suicide is sure to occur for anyone bold enough to take this on but failure to touch the core issues creates a certain “death by a thousand cuts” scenario. Solutions are available but unfortunately for a politician or his/her party, each is too radical to tie to re-election prospects.
- Regardless of the outcome of November’s election, recovery will remain slow and stagnant without fundamental changes to how we “govern”. The prospects for recovery today are less economic and more policy weighted. Without fundamental shifts in policy, recovery stays stuck in neutral. For fans of civics lessons past, this has more to do with Congress than it does with the President. Congress controls the purse-strings and makes the laws, not the President.
- Hospital Observation Stays: In healthcare today, its hard to find a more on-point issue to underpin my comments on uncertainty than hospital observation stays. Briefly, a hospital observation stay is a period of “limbo” time where a patient is typically triaged through an urgent care or emergent care setting proximal to the hospital. The triage period has determined the patient unstable to return to a non-medical or community setting, requiring observation but services beyond this point. less clear as to justify an admission and inpatient stay. Where the rub or issue is today is for Medicare patients and as most cases with Medicare policy issues, it is squarely bifurcated. From the hospital side comes the concern regarding readmission penalties applicable to certain Medicare inpatient DRGs that re-visit the hospital with another admission anytime 30 days post-discharge. The penalty for too many readmission instances in 2013 is a payment reduction of up to 1% of Medicare reimbursement. The number of applicable DRGs and the percent reduction for too many readmissions increases again for FY 2013, applied in 2014. On the post-acute side, primarily the nursing homes, is the argument that a patient not admitted to the hospital but hospitalized in an observation status nonetheless, may not/won’t qualify for a three-day prior inpatient stay and thus, won’t receive Medicare coverage for their nursing home stay. Arguably, the consumer or Medicare beneficiary and his/her family are placed in a stage of uncertainty as well and insurance and other coverages post hospitalization are jeopardized. CMS has heard the concern and their answer is to expand an outpatient Part B billing (hospital) demonstration project that would provide a safe-harbor for hospitals on the payment end, somewhat. Via a demonstration project presently under way, CMS proposed and is soliciting comments, on providing a 90% level of payment for a denied Part A claim via re-billing under the outpatient (Part B) program guidelines. At the same time, they are stating that payment would not be made for observation status claims. Payment of course is subject to medically necessary definitions, etc. Oddly, a wholly bizarre proposal. Legislatively, two bills are working their way through the House and Senate with bi-partisan support. The origin bill is H.R. 1543 known as “Improving Access to Medicare Coverage Act of 2011”. This bill would require counting all hospital time against the three-day qualifying stay criteria for Medicare coverage of nursing home care. This would re-solve the observation stay issue. Watching this issue over the past years, I’ve seen a fairly consistent increase in observation stays and the length thereof. While CMS implies that an observation stay should not last more than 24 hours, this guideline is clearly not followed and no enforcement mechanism is in-place. In fact, this issue is so pervasive in the industry that Medicare beneficiaries have resorted to court action, charging that the use of observation stays violated their rights to use their Medicare benefits for skilled nursing care, creating real financial damages. According to a recent study by Brown University, average lengths of observation stays are up by 7% and in 10% of cases reviewed, the stay is longer than 48 hours. Their findings also suggest an 88% increase (between 2007 and 2009) in stays longer than 72 hours.
- Medicaid: Alas, the election will push health policy debates regarding Medicare front-and-center while the bigger immediate looming gorilla is Medicaid. Two distinct policy choices are going to get little play. The first is the current-law provisions for Medicaid expansion which will cost an estimated $650 billion over the next ten years (I think this figure from the CBO is light). The second is the Romney proposal to cut $800 billion for Medicaid funding and transition the program to a “block-grant” system. In a block grant approach, the Federal government allocates a fixed amount of dollars to a state in return for the state providing certain levels of qualified services. Typically, block grant style funding pushes more regulatory oversight back to the states and allows room for programmatic flexibility. Medicaid today is actually a hybrid block grant program as states are required to provide certain levels and programmatic criteria before the government allocates funding. My take, based on my discussions with various statehouses nationally is that the states are divided on which would work better. Not surprising, present Red states prefer the Romney approach provided sufficient regulatory relief comes as a result. Blue states tend to favor increased government funding and expansion as a means of helping the state fiscally. With more and more states taking a Managed Medicaid approach, it would seem like a ground-swell of “reform” Medicaid is brewing. I’ve said for years that Medicaid, not Medicare, is this generation’s next biggest unfunded liability and all of the studies and numbers coming from credible sources bear this out. The federal government has no means of sustaining the funding promises concurrent with the ACA expansion provisions. States have no economic means to continue to fund the current liabilities let alone, any expanded programs (with or without additional federal dollars). Providers are already loathe to see a growth in poor-paying Medicaid patients. Forget the funding equations for a moment and focus just on the access issues. How in the world can expanded Medicaid coverage be absorbed by the current level of providers even willing to take on additional Medicaid patients at below cost reimbursement levels? Many rural and urban areas lack adequate supplies of providers as it is. Adding to the ranks more Medicaid beneficiaries with existing demand will only create widening access gaps. And honestly, where will the dollars come from necessary to improve payments enough to entice providers to open their arms, clinics, offices, hospitals, etc? My take is that the Medicaid issue needs real-watching as this system is approaching melt-down and can very easily, contribute a significant drag (already is) on state economies and their recovery.
Part II soon to come….
Finally, my plans and I collide again on a Friday afternoon and I’m somewhat back on schedule … for now. With forecasted travel next week plus a touch of R&R time, it looks like I’ll be back off-track before long. We’ll see. Not a lot different on my dashboard as this week concludes. I’m pretty much awash in health policy “what if” issues as of late so my trends at this mid-August point follow this theme.
The Great Medicare Debate and the Reality of it All: One week post, not quite, of the Romney selection of Paul Ryan as his running mate and the proverbial Medicare fur is flying. The back-and-forth accusations of which party cut (or would cut) Medicare most, change the program, alter coverage for the poor, etc. is both fascinating and nauseating at the same time. The reality of this discussion is not available via the words and rhetoric but in the economic outlook for Medicare and Medicaid. Both programs are enormous and structurally unsound. Both are unsustainable without ramping deficit levels. Both need significant reform at all levels and with a larger vision than either party wishes to admit. The real validation this week came from Moody’s Investor Service. Moody’s issued a negative outlook for non-profit hospitals this week stating, “The economic recovery will remain tepid, the transition to new payment methodologies will require significant investment, revenue growth will remain low by historical standards, and reimbursement will remain under pressure from all sources.” Their negative outlook focused on the funding questions for Medicare and Medicaid combined with the Washington stalemate on health care reform and policy decisions tied to spending, taxation, etc. My trend to watch has little to do with the election rhetoric and more to do with how everyday life responds to the debate and the questions that are looming and unanswered.
Medicaid and State Elections: Kaiser’s on it (see http://www.kaiserhealthnews.org/Daily-Reports/2012/August/17/states-and-health-law.aspx ) and I’ve talked at length about the real impact of the Supreme Court decision regarding Medicaid expansion not being fully visible until later this year. If this fall, more statehouses shift to Republican control, it is likely more states will pass on Medicaid expansion. Is it possible that more than a dozen states opt out? The more that do, the more pressure for Medicaid programmatic change will roll to Washington. A potential, and today that is all it is, Republican coup from Washington through double-digit state capitols and legislatures could create a literal tsunami of death for Medicaid expansion, even if repeal of the ACA is not in the cards as a result of no real numbers changes in the Senate. Predictably, I am forecasting that Medicaid not Medicare, will be the first substantive and large-scale change post ACA passage and not in the way spelled-out in the ACA.
Hospitals and Readmissions: October 1 is fast-approaching and thus, the roll-out of penalties via reduced Medicare payments for certain “avoidable” readmissions. The focus of the October 1 penalty period is the rate of readmissions (within 30 days of inpatient discharge) from the three-year period between July 2008 and June 2011. Applicable diagnoses are heart failure, heart attack and pneumonia. Starting October 1, we already know of more than 2,000 hospitals that face reduced Medicare payments (up to 1% of base Medicare) as a result of higher readmission rates. Nationally, the average readmission rate has held around 19%, equating to 2 million Medicare beneficiaries costing Medicare $17.5 billion in additional spending (per CMS). Starting next year (begins October 2013), penalties rise to 2% and then in the following year to 3%. According to CMS, of the 2,200 hospitals presently in queue for penalties, 1,900 will receive less than the 1% maximum. From all indications, the hospitals hit hardest serve a disproportionate share of at-risk elderly and patients that comprise the lowest (or near lowest) SES (Socio-Economic Status). These hospitals tend to be more urban, more teaching oriented, and more Level 1 centers than others. My trend to watch is now that the penalties are known, applicable to which hospitals and the data available, is what behavior changes will occur at the hospital end and in addition, what post-acute providers shift to position themselves as possible solutions to this problem. Anyone interested in knowing the penalty applicable to a particular hospital, drop me a note at email@example.com or coment on this post. I have the full list from CMS.
Finally, a bunch of Fall Out issues this week (worth noting but not necessarily worth continued watching).
- According to study completed by the Commonwealth Fund, the vast majority of hospitals are not seeking to develop an ACO (Accountable Care Organization). The primary barrier in considering whether to participate or not is the willingness to accept financial risk. Those that have jumped-in were driven primarily by physician leadership and engagement.
- According to polls conducted by the Kaiser Health Foundation and the Washington Post, a majority of Republicans and Democrats oppose cuts to Medicare benefits or transitioning the program to a voucher type system. I do love polls! Makes one wonder what the poll would look like if the majority of Americans preferred a different system? Do the Lemmings always march to the cliff at the sea?
- In a report to Congress, CMS indicated that first year results were mixed in the SNF pay-for-performance pilot; a three-year demonstration program. The program’s goal is to reward via increased payments, SNFs that reduce hospitalizations and exhibit high clinical quality measures. The pilot includes over 180 nursing homes in Wisconsin, New York and Arizona. Per CMS, one of my favorite states did very well. Congratulations Wisconsin!
- One last political bit…and a definite fall-out issue.. Paul Ryan is everywhere on the news and the Medicare reform/restructure debate is hot and getting hotter. I know it’s easier to listen to the media coverage than to dig through the numbers but I urge readers because of the magnitude of the health care decisions facing us now and going forward, to read the related CBO reports and the pieces produced by Paul Ryan regarding his approach to entitlement reform. I for one, am not going to tell anyone how to vote but I certainly urge everyone to understand both sides of the issues and to get the “facts” before deciding which “tailored” news report or interview to put stock in. Enough said – for now.