Insight: CEO Turnover
During the pandemic and continuing somewhat through current, healthcare turnover has been on the rise. Nursing turnover (from direct care) and retirements exploded by mid-pandemic. Burnout was high as was job dissatisfaction. What became evident is the linkage between staff turnover and staffing difficulties along with COVID policy, and CEO turnover. While 2021 turnover was proximal to prior year norms, 2022 is showing an increase as the pandemic wanes but other headwinds increase.
According to Challenger, Gray & Christmas (executive outplacement firm), there were 62 hospital CEOs that called it quits in the first half of 2022 versus 42 in 2021. The impact is actually a bit more pronounced as the overall number of CEO positions has declined due to consolidations and closures. This same source indicates that the primary causes of turnover are COVID burnout, rising capital costs, capital access constraints, and staffing. Financial pressures due to these factors, evidenced by multi-billion-dollar losses at even the largest systems (Ascension $4.7 billion, CommonSpirit $3.7 billion) further contribute to turnover.
Senior Living/Post-Acute care is walking an almost parallel line in terms of turnover at the CEO level. Longer term, large provider executives are at retirement ages. The industry has not generated younger executive leadership in proportion to the positions that are turning. Talking with some of the larger recruiting firms specializing in Senior Living (e.g., Witt/Kiefer), even prominent positions at large non-profit organizations are struggling to source qualified candidates. The experience levels across the expanding system offerings (e.g., hospice, home health, post-acute services) aren’t universally held in various areas. Demand is high but quality candidate numbers are lower than say, 10 years ago. Further, market challenges in some areas such as high litigation, (low) available staff numbers, and changing demographics (think Chicago, Detroit, Portland) place boundaries on candidate opportunities. Simply put, many candidates have no desire to relocate to challenged locations.
Looking at key position availability by title, LinkedIn shows over 6,000 executive director/C-level openings in senior living. By comparison, LinkedIn shows hospital C-level openings at 738. The average tenure today for any healthcare CEO is a smidge over 5 years. Twenty years prior, the average tenure was between 10 and 15 years. Below are some interesting CEO turnover data points from Becker’s Hospital Review.
The average hospital CEO tenure is under 3.5 years.
• Fifty-six percent of CEO turnovers are involuntary.
• When a new CEO is hired, almost half of CFOs, COOs and CIOs are fired within nine months.
• Within two months of a new CEO appointment, 87 percent of CMOs are replaced.
• Ninety-four percent of new CEOs without healthcare sector experience believe extensive healthcare knowledge is not necessary to replace senior management positions.
• Eighty-nine percent of people involved in the hiring process believe a broad area of business expertise is beneficial in a hospital CEO position.
• Most new hospital CEO candidates come from a venture capital/private equity industry background (42 percent,) followed by finance and accounting (40 percent,) banking (32 percent) and marketing and sales (19 percent.)
An element not often factored into CEO turnover is the ripple effect. According to the American College of Healthcare Executives, the departure of the CEO is followed by departures of 77% of Chief Medical Officers and 52% of Chief Operating Officers. I have seen wholesale executive staff departures (CFO, COO, CPO/HR, etc.) in less than six months post the departure of a popular/effective CEO. In rural settings, the loss of a healthcare CEO can be even more painful as the executive role within the community in terms of service on various boards and civic organizations is lost with the vacation.
Addressing CEO turnover today is a function of understanding the key contributing factors. Below is a solid list that I have compiled over the past three or so decades of my work in the industry.
- Difficult relationships between the CEO and the Board
- The regulatory and reimbursement environment is becoming more challenging
- Profit motives out rank care strategies and growth
- Cultural misalignment
- Geography/location
- Challenges with helping board members understand their roles (often, board members are appointed/recruited from within, without proper training and onboarding)
- Capital access challenges
- Staffing challenges/building and maintaining a core team
- Compensation and benefits (an inability to maintain competitive compensation)
Given the above, and the fact that the majority of turnover is non-voluntary today, the industry volatility creates planning challenges. With average tenure at right around 5 years, constant and consistent succession planning for the healthcare organization is required. I’d argue, given the overall lack of qualified candidates that can be source externally, an internal leadership development process is preferable. What I have seen is that internal candidates tend to create less ripple turnover and have an advantage such that they know the culture and organizational capacity. The downside, however, is that internal candidates can have too many organizational biases and bred relationships such that creating change and new strategies that challenge the status quo (we’ve always done it this way), becomes difficult if not, improbable.
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!
Major Upgrade Needed: Care Coordination
I’ve been in and around healthcare for three plus decades and a concept that has always been front of mind for me is care coordination. This is something that is so important for a patient’s well-being in terms of improved outcomes and satisfaction. It is also a real opportunity for cost improvement. Unfortunately, I’ve seen this concept advanced via discussion but rarely via systemic adoption among providers. In fact, COVID set care coordination advances backward in many ways.
Care coordination is a patient focused process that seeks to single-point, map patient desired outcomes with patient needs. It seeks to connect providers to a common focus and to reduce steps, eliminate redundancy, and restrict unnecessary services or interventions. It in theory, reverses the driver’s seat role among the patient and providers, giving the patient voice the primary role as opposed to the provider (physician, etc.).
The challenge within the U.S. system is regulation and bureaucracy stifle care coordination. While we see regulations in the post-acute arenas prompting certain levels of care coordination, the regulations further segment rather than advance creativity. At the hospital/acute arena, the driver of care tends to be procedural and payment. There simply is little room for a holistic approach and/or a team approach. The driver of the admission is often, the need for an intervention. Multiple providers are involved (physicians) and the primary care provider of the patient by origin, is rarely if at all, involved. If the patient is elderly (the most common hospitalized patient), issues of multiple comorbidities and prior and current treatments confound the hospital stay. Tests are often repeated as no contemporaneous record follows the patient and history, may be sketchy at best. The ability to deliver effective care and coordinate the next step of the journey is bollixed by the need to complete the stay in the shortest time possible.
As more care and procedures for patients sub-65 with little prior comorbidity or controlled comorbidities are pushed outpatient, the inpatient hospital stays are dominated by elderly and/or complex care arising out of the need for major surgeries or trauma. For a senior patient, care coordination can be the difference between poorer outcomes, lengthier stays, and the need for additional inpatient stays, post-acute.
According to the Agency for Healthcare Research and Quality, care coordination is: “Care coordination in the primary care practice that involves deliberately organizing patient care activities and sharing information among all of the participants concerned with a patient’s care to achieve safer and more effective care. The main goal of care coordination is to meet patients’ needs and preferences in the delivery of high-quality, high-value health care. This means that the patient’s needs and preferences are known and communicated at the right time to the right people, and that this information is used to guide the delivery of safe, appropriate, and effective care”.
Broadly, care coordination involves a specific framework that emphasizes data sharing, teamwork, and patient-focused assessments clinical and psycho-social in nature. The desired outcome is a shared plan of care that covers admission, in-stay communication and education, and transitions from acute to post-acute. In some cases, the stay maybe an inpatient post-acute stay (e.g., SNF) with the same series of events (shared plan of care, communication and education, transition planning).
COVID in particular, illustrated how fractured the health care system in the U.S. remains. Care denials and delays became the norm and patients lost connections with their physician, clinics, and other providers. Access, already a problem, caved in many cases and for some, remains a continued problem as staffing shortages already at-risk, manifested. A few weeks ago, I wrote a post about access problems for SNFs and Home Health resulting post COVID. The post is here: https://wp.me/ptUlY-vL
The U.S. healthcare system is notorious for its silos. The silo issue is what care coordination attempts to ameliorate. For a senior adult patient, this issue of silos is incredibly perilous. Without direct connection within the system, it is not uncommon for a senior to either avoid care due to the access complexity or receive care that is unnecessary or unwanted, driven entirely by systematized processes. In other words, I have seen older adults all too often, become victims of polypharmacy for example, simply by seeing multiple physicians, all of which prescribe without going through medication reconciliation BEFORE writing the script. I’ve seen repeat procedures within the same day – multiple tests that don’t get checked because the patient follows orders and doesn’t ask questions. I’ve seen X-rays taken two days prior lead to an MRI, just to be cautious.
Objectively, and I have written this before, the system needs to be redesigned to advance the goals of patient care as primary, in fact, driven by a fundamentally simple concept known as primary care. The need for a different system and one that emphasizes care coordination, is succinctly stated by the Institute of Medicine.
- Current health care systems are often disjointed, and processes vary among and between primary care sites and specialty sites.
- Patients are often unclear about why they are being referred from primary care to a specialist, how to make appointments, and what to do after seeing a specialist.
- Specialists do not consistently receive clear reasons for the referral or adequate information on tests that have already been done. Primary care physicians do not often receive information about what happened in a referral visit.
- Referral staff deal with many different processes and lost information, which means that care is less efficient.
For readers interest in care coordination and applications, tools, and additional reading, I’ve provided some resources below including a presentation I did with some colleagues at a LeadingAge national conference a few years back.
https://www.qualityforum.org/ProjectDescription.aspx?projectID=73700
https://www.ahrq.gov/ncepcr/care/coordination.html
May 11 and PHE: Provider Alert
On May 11, the COVID Public Health Emergency (PHE) is set to end and along with it, a whole slew of requirements end or change, and regulatory waivers applicable to the Public Health Emergency, the same (ending). The end of the PHE will have positive and negative impacts on providers of all types though some things that were applicable during the PHE will continue via CMS rulemaking (tele-health provisions for example). One of the most negative impacts of regulatory waivers ending is the return of the three-overnight rule (3 day stay) for patients entering an SNF and potentially, receiving Medicare coverage for their qualifying stay. I wrote a post on this waiver change here: https://wp.me/ptUlY-w5
Among the most notable changes that will occur for providers with the end of the PHE are the requirements around masking, testing, and vaccination mandates for staff. Each of these conditions are effectively, eliminated with the expiration of the PHE. While other countries across the world have eliminated all or most of their pandemic restrictions/requirements over the past year, the U.S. and its health system have been slow to relax requirements with the Biden Administration extending the emergency up until May 11. Similarly, the emergency patchwork has followed through to states, some long ago abandoning masking requirements, vaccination mandates, testing, etc. What has been confounding is the myriad of rule interpretations and requirements that varied from municipalities to counties, to states, and ultimately, to the Federal government. For Medicare/Medicaid providers, Federal requirements superseded all other provisions in any other jurisdiction.
Within the Public Health Emergency period, even providers not participating in Medicare or Medicaid were impacted by the Federal policies. Many states chose to follow the Federal PHE provisions, layering the same over providers within the senior housing industry (aka Assisted Living and some CCRC/Independent Living under state law). Illinois is an example. In contrast, other states chose to ignore the Federal PHE provisions when not applicable to providers such as hospitals, nursing homes, home health, etc. Iowa, Florida, Texas are examples of states that early-on in the pandemic created rules or as in the case of Iowa, passed legislation prohibiting vaccine or mask mandates within state control.
Come May 11, confusion will no doubt remain prominent on COVID infection control/public health requirements. For example, the only updated CDC guidance on masking requirements dates back to September of 2022. In this guidance, the recommendation for masking requirements for visitors, patients, and staff is conditioned on a CDC tracking mechanism for the level of community concentration of COVID infection. Reporting from health departments, hospitals, SNFs, etc., fed this mechanism. Masking recommendations were tied to this level (high recommending masking vs. low, recommending optional masking). COVID testing requirements were also tied to this measure.
Effective with the end of the PHE, CDC has indicated that it would no longer report on the level of community infection/transmission. The PHE has deferred consistently to various agency recommendations for requirements and then subsequently, enforcement as needed. Clearly, we will see extensive confusion unless the CDC issues new guidance clearing up, the masking requirements tied to community COVID prevalence. I’ve watched many providers already move to a “no mask required” status, regardless of updated guidance. I’ve also watched many providers stuck and confused by virtue of state requirements vs. CDC requirements vs. where the community COVID prevalence really was in their area. The CDC guidance for long-term care (fundamentally the same for hospitals) is here: https://www.cdc.gov/coronavirus/2019-ncov/hcp/infection-control-recommendations.html?CDC_AA_refVal=https%3A%2F%2Fwww.cdc.gov%2Fcoronavirus%2F2019-ncov%2Fhcp%2Fnursing-home-long-term-care.html
I’ve seen some news coverage/reporting on the end of the Public Health Emergency, but it is very spotty. I also know by virtue of travel, etc., the awareness of COVID among providers and the community is varied. As I routinely traverse Illinois, Wisconsin, and Iowa, I see wide differences in COVID precautions, alerts, monitoring, requirements being applied, etc. Some of this due to region and state policy and some of it is due to provider behavior. Iowa as I mentioned, long ago took a stance against most PHE COVID related mandates and recommendations whereas Illinois, has followed the PHE Federal recommendations consistently. Iowa hospitals required to follow CMS COVID regulations, maintained vaccination and masking conditions though recently, I have seen most hospitals end masking requirements.
For providers, May 11 is very near. I suggest providers adopt the following strategies realizing, come May 11, regulatory confusion will likely remain.
- Update internal infection control policies regarding vaccination, testing, masking to conform to the changes that will occur with the end of the PHE.
- Communicate these changes to staff ASAP.
- Communicate these changes to patients and families, ASAP. Remember, the end of a mandate does not mean a change in behavior. It may be that staff will want to maintain their masks in some cases and patients/families the same. Allow for flexibility.
- State agencies that are required to survey and enforce compliance may also be slow to adopt. Trade associations are your best bet to help with regulatory transition. Recognize, state agency behavior will not adjust in some cases, as quickly as provider behavior.
- Conduct ongoing public communication via your website, via newsletters, etc. One and done won’t work.
- Definitely, DON’T, follow a path of resisting the end of the PHE and its requirements. I’ve watched provider sometimes, fail to adjust and in this failure, more problems occurred. I know the old “an ounce of prevention” thinking may still apply when it comes to vaccines or masking but be careful. If the regulation is not there, a forced or strongly urged condition, can lead to regulatory problems, labor law problems, community relations problems, and potentially, litigation.
SNFs: 3 Overnight Stay Requirement Returning
As the Public Health Emergency (COVID) ends, healthcare providers will revisit pre-pandemic policies as a slew of waivers expire. One waiver particularly impactful to hospitals and SNFs is the requirement of a 3 Overnight (3 Day Stay) for a patient to receive Part A Medicare benefits in a SNF. Recall, the rule pre-pandemic was that a person had to be admitted to an acute hospital with a stay of at least 3 overnights in the hospital prior to discharge to a SNF, in order to qualify for Medicare coverage applicable to the SNF stay. One little wrinkle, rarely experienced, is that the discharge could be to another location within a thirty-day window of the patient entering the SNF, and the patient still could qualify for Medicare benefits in the SNF. In other words, the patient could be sent home, and for whatever reason, subsequently enter the SNF within 30 days of the hospital discharge and still be eligible for Medicare SNF benefits.
While there has been support for the waiver of this requirement to remain via a continued policy change from CMS, it is now apparent that CMS will reinstitute the 3 overnight rule. The primary impetus for this? Of course, cost control. A study from the AMA, appearing in the JAMA Internal Medicine publication (released on Monday 4/24) basically provides CMS with its positional defense. The study is here for anyone interested: jamainternal_ulyte_2023_oi_230019_1681999138.05344
The study analyzed MDS data for patients admitted to a SNF between January 2018 and February 2020 (pre-pandemic) compared to admissions between March 2020 and September 2021 (pandemic period). During the pre- pandemic period, there were 130,400 care episodes per month, 59% of which were female. During the pandemic period, there were 108,575 episodes, again 59% were female. Per the study: “All waiver episodes increased from 6% to 32%, and waiver episodes without preceding acute care increased from 3% to 18% (from 4% to 49% among LTC residents). Skilled nursing facility episodes provided for LTC residents increased by 77% (from 15 538 to
27 537 monthly episodes), primarily due to waiver episodes provided for residents with
COVID-19 in 2020 and early 2021 (62% of waiver episodes without preceding acute care).”
What was interesting to me is where the predominant utilization of the waiver for non-prior hospitalized patients occurred. Per the study, the 80% v. 68% of the LTC waivers (non-prior hospitalized) were for-profit facilities. These facilities had lower overall star ratings on average with the for-profit average at 2.7 stars v. the non-profit average rating of 3.2 stars. The same kind of variance was found looking at the staffing star ratings – 2.5 v. 3.0. Skilled admission spending was $2.1 billion prior to the pandemic and $2.0 billion during but a big jump in LTC (Medicare covered) occurred from $301 million to $585 million. Hospital spending remained relatively unchanged, despite lower overall patient volumes (COVID incentive payments making up outlay differences).
Here is the key takeaway from the study:
Key Points
Question: Did skilled nursing facility (SNF) care volume and
characteristics change when the public health emergency (PHE)
waiver for 3-day qualifying hospitalization was introduced in March 2020?
Findings: In this cohort study of SNF care provided for 4 299 863
Medicare fee-for-service beneficiaries from January 2018 to
September 2021, waiver episodes without preceding acute care increased from 3% to 18% during the PHE in 2020 to 2021. Among long-term care residents, such waiver episodes increased from 4%
to 49%, with 62% of episodes provided for residents with COVID-19.
Meaning: This study found that the use of SNF care for long-term
care beneficiaries without a preceding qualifying hospitalization
increased markedly during the PHE, primarily for care for patients with COVID-19.
So SNFs will return to a pre-pandemic point where coverage for SNF skilled services under Medicare will require a 3 overnight hospital stay as the Public Health Emergency ends. The study cites cost as the main driver, but I also believe, that cost on an escalatory basis is more the concern. As the pandemic has ended and hospital volumes are normalizing, we’ve seen SNF referrals increase. I noted this trend in a post on Monday…link is here: https://wp.me/ptUlY-vL What this means is that a shift toward more expensive post-acute care is happening and may be more longer-term in trend than not. In other words, while a bias toward discharge to home health was prevailing pre-pandemic, the factors of reimbursement policy, staffing dynamics, and increasing patient acuity on discharge have moved the needle (so to speak) toward SNF discharge. Staffing is of course, the main driver.
What does this mean for hospitals, if anything? Maybe a bit of shift in consciousness about length of stay, inpatient admission, and discharge planning will occur. The growing use of observation stays vs. inpatient admits was always a sore spot for SNFs and patients and families. I saw lots of confusion a few years ago among SNFs and, then unfortunately families, when a patient arrived for admission and lo and behold, the majority of the stay was classified as observation vs. an inpatient admission, not meeting the 3-day inpatient admission requirement.
Medicare Advantage plans will also need to rethink some approaches in their care coordination. While the preference may be a discharge to home health, admission acceptance is still on the lower side (lots of rejections). it may just require a shift in focus from Med Advantage plans toward better coordinated SNF stays.
For SNFs, the loss will be felt among facilities that were able to “skill” typically, long-term care Medicaid patients. The missing revenue will be felt without a counterbalance pick-up readily available. For good performing SNFs that have focused on building strong value propositions and positioned themselves well for value-based care, options are plentiful, but they had been prior to the pandemic. Staffing remains the challenge. My advice for these folk? Get your care pathways together and your algorithms and be efficient in cost and length of stay. Use your data to drive partnership referral bases with hospitals and in particular, Med Advantage plans. Now is a good time to take advantage of the shifting policy dynamics.
Site Neutral Payment Update
In early October, I wrote an article regarding CMS 2019 OPPS (outpatient PPS) proposed rule, specifically regarding site neutral payments. The purpose of the article was to address the site neutrality trend that CMS is on, streamlining payments to reduced location of care disparities for the same care services. Succinctly, if the care provided is technically the same but the costs by location are different due to operating and capital requirements, should payments vary?
Yesterday, CMS pushed forward the OPPS final rule, maintaining the concept of site neutrality despite heavy hospital lobbying. The gist of the rule is as follows.
- Hospital off-campus outpatient facilities will now be paid the same as physician-owned or independently owned/operated outpatient facilities for clinic visits. No longer will there be a hospital place-of-care premium attached to the payment.
- Off campus is defined as 250 yards or more “away” from the hospital campus or a remote location.
- For CY 2019, the phase-in/transition is a payment reduction equal to 50% of the net difference between the physician fee schedule payment for a clinic visit and the same payment for a hospital locus clinic or outpatient setting. The amount is equal to 70% of the OPPS (hospital outpatient PPS rate).
- For CY 2020, the amount paid will be the physician fee schedule amount or 40% of OPPS rate, regardless of location.
- Final Rule text is here: 2019 OPPS Final Rule
What CMS noted originally as the need stemmed from a Medpac report where a Level 2 echocardiogram cost 141% more in a hospital outpatient setting than in a physician office/clinic setting. This final rule is part of an expected and continuing trend to simplify and streamline payments among provider locations. Similarly, CMS is following a path or theme laid forth by Medpac concerning payments tied to care services and patient needs rather than settings or places of care. The 2019 OPPS payment change is a $760 million savings in 2019 expenditures.
Finalization of the OPPS rule with site neutral payments cannot be overlooked in significance. As I wrote in the October article, this is a harbinger of where CMS and Medicare policy makers are heading. Hospitals lobbied hard and heavy against this implementation claiming a distinction in payment was not only required by dictated by patient care discrepancies. Alas, there appeared to be no common ground found within that argument.
I suspect now that the door is opened just a touch wider for site neutral post-acute payment proposals to advance. Under certain case-mix categories, there truly is very little difference in care delivered and no difference in outcomes (adversely so) between SNFs, IRFs, and LTAcHs yet there is wide payment difference. With lengths of stay declining and occupancy rates the same (declining) among these provider groups, CMS will no doubt (my opinion) push forward a streamlined proposal on site neutral payments in the next three years. I anticipate the first proposal to concentrate almost exclusively, on SNFs, IRFs and perhaps, some home health case mix categories. If hospitals can’t budge CMS away from the site neutral path, there is zero likelihood that IRFs and LTAcHs can divert CMS from site neutral proposals in the near future.
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.
Interoperability and Post-Acute Implications
I’m not sure how many of my readers are following the subject and CMS stance/policy on interoperability among providers but the concepts and resultant debate are rather interesting. I am trying to encourage as many clients and readers to tune-in on this subject as the implications are sweeping – positively and negatively.
Interoperability in this context means the ability of computer systems or software to exchange and/or make use of information for functional purposes. In health care, the genesis of the interoperability concept began with HIPAA in the nineties. HIPAA spawned the HITECH Act in 2009 which ultimately created Meaningful Use. For anyone unfamiliar with Meaning Use and its incentive provisions, think no further than Value-Based Purchasing (VBP) and quality reporting. The IMPACT Act is an analogous outgrowth of blended concepts between Meaningful Use, Value-Based Purchasing and Interoperability. Conceptually, the goal is to create data measures that have “meaning” in terms of clinical conditions, outcomes, patient care and economics. Ideally, data that matters and can be shared will improve outcomes, improve standardization of care and treatment processes and reduce cost through reduced waste and duplication. Sounds simple and logical enough.
In April of this year, with the roll-out of various provider segment Inpatient PPS proposed rules for FY 2019, CMS included proposals to strengthen and expedite, interoperability. The concept is contained within the SNF and Hospital proposed rules. The twist however, is that CMS is changing its tone from “voluntary” to “mandatory” regarding expediting or advancing, interoperability. Up until this point, Meaningful Use projects that advanced interoperability goals were incentive driven; no punishment. Among the options CMS is willing to pursue to advance interoperability are new Conditions of Participation and Conditions for Coverage that may include reimbursement implications (negative) and fines for non-compliance and non-advancement. In the SNF 2019 Proposed Rule, providers are mandated to use the 2015 Edition of Certified Health Record/Information Technology in order to qualify for incentive payments under VBP and avoid reimbursement reduction(s). For those interested, the 2015 Certified EHR Technology requirement summary is available here: final2015certedfactsheet.022114
The possible implications for providers are numerous – positive and negative. The greatest positive implication is a (hopeful) rapid escalation of software systems that can share functional data directly without having to build and maintain separate interfaces (third-party). Likewise, the proposed regulations will facilitate faster development of Health Information Exchanges (HIEs). Many states have operating HIEs but provider participation and investment has been limited. A quick interoperability interchange is via an HIE versus separate, unique data and software platform integration. As SNFs and HHAs have MDS and OASIS assessment requirements on admission, fluid patient history, diagnoses/coding exchange and treatment history will facilitate faster and more accurate, MDS/OASIS completion – a real winner. Dozens of other “tasky” issues can be addressed as well such as portions of drug reconciliation requirements by diagnosis on admission, review of lab and other diagnostic results, order interchanges and interfaces, etc.
The most negative implication for providers is COST. In reality, the post-acute side of health care isn’t really data savvy and hasn’t really kept pace with software and technology developments. Many providers are small. Many providers are rural. Many providers maintain primarily paper records and use technology only minimally. Full EHR for them is impractical and with present reimbursement levels, unlikely any time soon. The second most negative implication for providers is the fragmentation that exists among the system developers and software companies in the health care industry. The “deemed” proprietary nature of systems and their software codes has limited collaboration and cooperation necessary to advance interoperability. HIEs were supposed to remedy this problem but alas, not yet and not at the magnitude-level CMS is foretelling within its Proposed Rules.
Interoperability is needed and amazing, conceptually. The return is significant in terms of improvements in outcomes and reductions in waste and cost. Unfortunately, the provider community remains too fragmented and inversely incentivized today to jump ahead faster (money not tied to integration and initiatives among providers). Software systems don’t work between providers in fashions that support the interoperability goals. More troubling: the economics are daunting for providers that are not seeing any additional dollars in their reimbursements, capable of supporting the capital and infrastructure needs part and parcel to additional (and faster), interoperability.
Hospice, Hospital Readmissions and Penalty Implications
Late yesterday, a reader (who also happens to be a client from time to time), posed this question to me. “When hospitals discharge to hospice and if the hospice has to readmit to the hospital, the hospital doesn’t get penalized for the readmit? Is this true?” Since this question is not one that I have been asked, to my recollection, ever before my guess is that others may have a similar query or interest. My answer to him/the question, follows.
The short answer is that the readmission penalty issue is not applicable for a hospice to acute hospital transfer/admission. There is one single caveat that must be present, however: The patient in question must be on the Medicare Hospice benefit rather than traditional Part A and receiving services under some other Hospice offered program such as a Palliative Care program (a home health care style offering). Below is the reason and regulatory/legal construct why the readmission penalty is not applicable.
- When a patient elects and is qualified under the Medicare Hospice benefit, the patient opts (effectively) out of his/her traditional Medicare benefit structure – including the assumed coverage for inpatient hospital coverage offered under Medicare Part A.
- The issue or applicability for readmission penalties for hospitals is only under traditional Medicare fee-for-service or qualified Medicare Advantage plans It is also only applicable to certain originating DRGs (not all readmissions qualify for a penalty).
- When a patient enrolls in the Medicare Hospice benefit, the assumptive relationship under Medicare with regard to the patient and his/her provider relationship changes. The assumption becomes that the patient is effectively, now the “property” (bad word choice but illustrative nonetheless) of the Hospice. This is so much so that no patient can receive the Hospice benefit under Medicare without becoming a patient of a qualified, certified Hospice provider. Unlike the relationship under traditional or managed Medicare, the patient care is thus the property and coordinated responsibility of the Hospice. Prior to enrollment, the patient had no connective relationship to any provider – free (for the most part) to seek care from any qualified provider (Med Advantage networks notwithstanding).
- By his/her enrollment in the Hospice benefit with a Hospice, the patient agrees to a set of covered benefits tied to his/her end-of-life care needs. He/she also elects to have his/her care effectively provided by or through the Hospice exclusively. In fact, the patient can’t really show-up at a hospital for an admission and expect to be admitted, without the approval of the Hospice. The only option a patient has to receive care in this fashion is to “opt out” of the Hospice benefit.
- Once a patient is enrolled in Hospice, there effectively is no “hospital” benefit left. The use of a hospital by a Hospice patient is through the Hospice exclusively and any hospital or inpatient use is (only) technically via a GIP or other contracted event/need. In fact, the hospital has no DRG or admission code nor records the GIP stay as a “hospital” admission. It (the hospital) can’t create a bill to Medicare for this event and must seek all payment through the Hospice. As no bill is generated to Medicare Part A with a corresponding DRG and billing code, no inpatient admission occurred and thus, no readmission occurs either applicable (or not) for a penalty.
Like most things Medicare, you won’t find a succinct “memo” to this effect. Instead, you have to know and go through the detail on the program benefit side and understand how billing, coding and benefit eligibility/program payments work for each provider segment.
Health Systems, Hospitals and Post-Acute Providers: Making Integration Work
Early into the Trump presidency and health care/health policy is front and center. The first “Obamacare repeal and replace” attempt crashed and burned. The upcoming roll-out of the next round of bundled payments (cardiac and femur fracture) is delayed to October from the end-of-March target date. Logically, one can question is a landscape shift forming? Doubtful. Too many current realities such as the need to slow spending growth plus find new and innovative population health and payment models are still looming. These policy realities beget other realities. One such reality is that hospitals and health systems must find ways to partner with and integrate with, the post-acute provider industry.
In late 2016, Premier, Inc. (the national health care improvement organization) released the results of a study indicating that 85% of health system leaders were interested in creating expanded affiliations with post-acute providers. Interestingly, 90% of the same group said they believed challenges to do so would exist (Premier conducted the survey in summer of 2016 via 52 C-suite, health system executives). Most of the challenges? The gaps that exist “known and unknown” between both provider segments (acute and post-acute) and the lack of efficient communication interfaces (software) between the segments.
On the surface, bundled payments notwithstanding, the push for enhanced integration is driven by a number of subtle but tactile market and economic shifts.
- Inpatient hospital lengths of stay are dropping, driven by an increasing number of patients covered by managed care. Today, the largest payer source contributor of inpatient days, Medicare, is 30.6% “managed”…and growing. Medicaid is 62.7% and commercial, nearly 100% (99%). Source: http://www.mcol.com/managed_care_penetration
- Payment at the hospital end is increasingly tied to discharge experience – what happens after the inpatient stay. The onus today is on the hospital (and growing) for increasing numbers of patient types (DRG correlated) to discharge the patient properly such that the same does not beget a readmission to the hospital. Too many readmissions equal payment reductions.
- Population health, focused-care models such as ACOs are evolving. Their evolution is all about finding the lowest cost, highest quality centers of care. Other BPCI (bundled payment) initiative projects such as Model 3, focus directly on the post-acute segment of care. Unlike CJR (and the recently delayed cardiac bundles), the BPCI demonstration that began in 2013 covers 48 episodes of care (DRG based) and has participating providers (voluntarily) operating programs in all four model phases, nationwide.
- Patient preference continues to demand more care opportunities at-home. Never mind the increased risk of complication with longer inpatient hospital stays (the risk of infection, pressure injuries, weight loss, delirium, etc. increases as stays increase), it is patient preference to discharge quickly and preferably, to home with services (aka home care).
Regardless the fate of Obamacare now or in the near future, these trends are unlikely to change as they have been moving separate from Obamacare. Arguably, the ACA/Obamacare accelerated some of them. Nonetheless, the baked-in market forces that have emanated from ACOs and care episode payments illustrate that even in infancy, these different models produce (generally) more efficient care, lower costs and improved patient satisfaction and outcomes.
As with any integration approach such as a merger for example, cultural differences are key. The culture of post-acute care is markedly different from that of acute/hospital care. For hospitals to appreciate this difference, look no farther than the two key determinants of post-acute culture: regulation and payment. The depth and breadth plus the scope of survey and enforcement activity is substantially greater on the post-acute side than the acute side. As an example, observe the SNF industry and how enforcement occurs. Hospitals are surveyed for re-accreditation once every three years. The typical SNF is visited no less than four times annually: annual certification and three complaint surveys.
In terms of payment, the scope is drastically different. While hospitals struggle to manage far more payers than a post-acute provider, the amount that is paid to a hospital is substantially larger than that paid to a post-acute provider. At one point years back, the differences were substantiated largely by acuity differences across patients. While a gap still exists, it has narrowed substantially with the post-acute provider world seeing an increase in acuity yet lacking a concomitant payment that matches this increase.
Given this cultural framework, post-acute providers can struggle with translating hospital expectations and of course, vice-versa. Point-of-fact, there is no real regulatory framework in an SNF under federal law for “post-acute” patients. The rules are identical for a patient admitted for a short-stay or for the rest of his/her life. Despite the fact that the bulk of SNF admissions today are of the post-acute variety, the regulations create conformity for residency, presumptively for the long-term. Taking the following into consideration, a challenge such as minimizing a post-acute SNF stay to eight days for a knee replacement (given by a hospital to an SNF) is logical but potentially fraught with the peril presented by the federal SNF Conditions of Participation. The SNF cannot dictate discharge. A patient/resident that wishes to remain has rights under the law and a series of appeal opportunities, etc. that can slow the process to a crawl. At minimum, a dozen or more such landmines exist in analogous scenarios.
Making integration work between post-acute and acute providers is a process of identifying the “gaps” between the two worlds and then developing systems and education that bridge such gaps. Below is my list (experiential) of the gaps and some brief notes/comments on what to do bridge the same. NOTE: This list is generally applicable regardless of provider type (e.g., SNF, HHA, etc.).
- Information Tech/Compatibility: True interoperability does not yet exist. Sharing information can be daunting, especially at the level required between the provider segments for good care coordination. The simple facts are that the two worlds are quite different in terms of paper work, billing requirements, documentation, etc. Focus on the stuff that truly matters such as assessments, diagnoses, physician notes, plans of care, treatment records, medications, diagnostics, patient advance directives and demographics. Most critical is to tie information for treating physicians so that duplication is avoided, if possible.
- Regulatory Frameworks: This is most critical, hospital/physician side to the post-acute side, less so the other way. Earlier I mentioned just one element regarding an SNF and discharge. There are literally, dozens more. I often hear hospitals frustrated by HHAs and SNFs regarding the “rules” for accepting patients and what can/cannot be done in terms of physician orders, how fast, etc. For example, it might be OK in the hospital to provide “Seroquel for sleep or inpatient delirium” but it is not OK in the SNF. HHAs need physician face-to-face encounters just to begin to get care moving, including orders for DME, etc. There is no short-cut. Creating a pathway for the discharging hospital and the physician components to and through the post-acute realm is critical to keep stays short and outcomes high… as well as minimize delays in care and readmissions.
- Resource Differences: Understanding the resource capacities of post-acute, including payment, is necessary for smooth integration. What this means is that the acute and physician world needs to recognize that stay minimization is important but so is overall care minimization or better, simplification. Unnecessary care via duplicative or unnecessary medications, tests, etc. can easily eat away at the meager margins that are operative for SNFs and HHAs. For example, I have seen all too many times where a patient has an infection and is discharged to an SNF on a Vancomycin IV with orders for continued treatment for four more days. Those four days are likely negative margin for the SNF. A better alternative? If possible, a less expensive antibiotic or send the remaining Vancomycin doses to the SNF. Too many tests, too many medications, too much redundancy erodes post-acute margin quickly. Finding common ground between providers with shared resource opportunities is important for both segments to achieve efficiency and still provide optimal care.
- Language Differences: In this case, I don’t mean dialect. Industry jargon and references are different. I often recommend cheat-sheets between providers just to make sure that everyone can have a “hospital to SNF to HHA” dictionary. Trust me, there is enough difference to make a simple working dictionary worth the effort.
- Education/Knowledge: The gap between staff working in different environments can be wide, particularly as the same relates to how and why things are done the way they are. For example, therapy. Physical therapy in a hospital for the acute stay is markedly different than the physical therapy in a home health setting or a SNF setting. Care planning is different, treatments similar but session length and documentation requirements are vastly different. The clinical elements are surprisingly similar but the implementation elements, markedly different. The notion that one staff level is clinically superior to another is long dispelled. SNF nurses can face as many clinical challenges and perhaps more due to no/minimal immediate physician coverage, as a hospital nurse. True, there are specialty differences (CCU, Neuro ICU, Trauma, etc.) but at the level where patients flow through acute to post-acute, the clinical elements are very similar. The aspect of care differences and the how and why certain things are done in certain settings is where interpretation and education is required.
- System and Care Delivery: While the diagnosis may follow, assuring proper integration among the various levels or elements of care requires systematic care delivery. The best language: clinical pathways and algorithms. Developing these across settings for an episode of care creates a recipe or roadmap that minimizes redundancy, misinterpretation, and lack of preparation (all of which create bad outcomes). With these in-place, common acute admissions that beget post-acute discharges, places every care aspect within the same “playbook”.
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