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Healthcare Polar Express

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!

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December 21, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , | Leave a comment

Five Things Every Healthcare Executive Should Focus On: Updated, Revised

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

November 13, 2012 Posted by | Assisted Living, Home Health, Hospice, Senior Housing, Skilled Nursing | , , , , , , , , , | 3 Comments

Health Policy News: Too Good to be Quieted by Election Coverage

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 hislop3@msn.com 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.

November 5, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , | 1 Comment

Catching Up Part I: Politics, Observation Stays, and Medicaid

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….

September 11, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | Leave a comment

What’s Trending: Back on Track….For Now

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 hislop3@msn.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.

August 17, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | Leave a comment

A Rare Post

As much as I have focused on keeping this site free from any of my personal agenda, I have encountered a circumstance that bears a one-time exception to my rule.  Please bear with me as this will be brief.

I have a colleague and true friend who was recently downsized from a deteriorating health system due to their financial and operational mismanagement.  This gentleman was in charge of Marketing and P.R. for this organization.  In spite of his best efforts and gifts, he was hamstrung by the financial condition and continued deterioration of the organization, literally unable to do his job due to the reputation and care problems, staff turnover, poor community reputation and consistent resource shortage.  He became a victim of circumstances beyond his control.

As I said earlier, I rarely attest for anyone and never in writing of this sort.  This is a first.  The reason?  This gentleman is gifted, a true professional and a consummate, stand-up guy.  He became a victim of circumstances because he was too principled to walk when he should have, even in spite of my counsel.  He finishes what he starts, even if not given the tools or support to do so.

This all said, here’s the inside information.  His name is Steve (I’ll withhold further unless requested).  He has thirty years of health care marketing and P.R. executive experience within hospital systems (one being the largest in the state) and in the post-acute environment (seniors housing, assisted living, SNFs, hospice, etc.).  He comes from a journalism background originally; television principally.  He knows media, public and community relations and can market and sell health care.  He is a gifted writer and has worked all angles of health care P.R. and Marketing from spokesperson to damage control to mergers and acquisitions and new product launches.  He’s even overseen philanthropy and fund development.  Aside from me, his references are impeccable and he’s well-known in the health care community in his market areas.  I have recruited him in past positions and would without reservation, hire him again.

To the point, he’s networking and available, including possible relocation.  I know of few other health care marketing people with his breadth of experience and track record of success.  To my readers, all of whom I appreciate, and my professional colleagues whom I equally appreciate, your leads or insights on Steve’s behalf would be deeply appreciated.  If you have any ideas or interests you would like to share and/or learn more about Steve (resume, etc.) or talk directly with him, drop me an e-mail and I will make it happen.  My e-mail is Hislop3@msn.com.

Thanks for indulging my deviation in content and again to all, thanks for reading!

November 2, 2011 Posted by | Assisted Living, Home Health, Hospice, Senior Housing, Skilled Nursing | , , , , , , , , | 2 Comments

Accountable Care Organizations: A Post-Acute Perspective

Suffice to say, I am behind in getting this post “out”.  My best intentions of a month or so ago were quickly dashed by other more pressing commitments. Nonetheless, I did read the proposed regulations as produced by the Department of Health and Human Services/CMS on April 7 and worked through a stack of research on the subject of Accountable Care Organizations; loosely coined by me, the Good, the Bad and the Ugly.

In the purest of definitions, easily lost within the DHHS/CMS proposed regulations, Accountable Care Organizations (ACO) are about improving patient care outcomes and satisfaction while reducing cost or expenditures for care.  At the core of the premise about “why” and “how” an ACO would work in achieving better care, higher satisfaction and lower costs are three key assumptions or “truisms”.

  1. Best practices via algorithms and care pathways exist in sufficient supply, tested and proven, to reduce the variability that drives higher cost and lower satisfaction for a large and growing number of common patient care issues.
  2. Satisfaction is directly correlated to increased patient knowledge and communication, reduced bureaucracy at the provider level (fewer redundant steps) and better outcomes, more directly delivered and/or attained.
  3. Providers, properly incentivized to focus on outcomes and satisfaction will gravitate toward any and all steps and measures that improve outcomes and satisfaction and resultingly, deliver better and cheaper (less costly) care.  The key is developing the right level of incentives that drive provider behavior in the desired direction.

For years, I’ve written and lectured repeatedly that bending the cost curve or lowering the overall costs of health care in the U.S. system must first begin at the core of the issue; the system of reward.  A simple economic axiom defines this best; “what gets rewarded gets done”.  Fundamentally, the U.S. health system has rewarded in the form of payment, procedures, pills, tests, and surgical (or surgical-like) interventions at the expense of prevention and wellness/care management.  In spite of an enormous and growing body of evidence that much of the escalation of costs (steepening of the “curve”) in the U.S. is driven by chronic conditions poorly managed and lacking in early detection and prevention strategies, funding has remained skewed toward treatment practices that are technical and predominantly surgical or interventional in nature.  The result is poor to minimal access for Type II diabetics (as an example) to integrated chronic care programs designed to stave-off emergency room visits, loss of limbs, peripheral vascular disease, loss of vision, etc. while access to the latest imaging technology, interventional cardiac programs and surgery ranges from good to stellar and even drastically redundant in some markets.

Knowing the above and understanding that a fluid and flourishing economy has been built around this system, the belief or premise that one can design and make work effectively, a paradigm shift such as is intended with ACOs is curious at best.  Suffice to say that while I know such a premise makes sense (Accountable Care Organizations), I’m less than certain from my read of the proposed regulations and knowledge of the current system, how incentive realignment will work to first, bend the “cost” curve and second, create a necessary body of invested, at-risk stakeholders willing to place their economic futures (such that they are) in the hands of a governmental half-and-half, moving payment system.  Moreover, the initial investment capital is clearly all provider capital placed at first dollar risk and the shared-savings return proposed, provides a poor return on the capital invested.  This is particularly true for the post-acute elements critical in the formation of a truly functional ACO.

For an ACO at is primordial core to work (achieve the desired outcomes), hospital utilization and the most expensive clinical utilization must be diminished.  Diminution of such care is achieved primarily, via three methods/interventions/actions.

  1. Primary care available and accessible enough to create consistent early detection and provide low-cost interventions that arrest a progressing disease-state prior to an acute event that ordinarily would cause hospitalization.  In the case of Type II diabetics for example, education and monitoring of insulin levels and Ha1c to create optimal therapy and patient knowledge and disease management efficacy that delays and avoids, hospitalization and interventions on a crisis basis.  By simply deferring and/or avoiding, undetected and untreated peripheral leg and foot ulcers, thousands upon thousands of days of hospitalizations for amputations and/or intravenous therapy for infections can be avoided – annually.
  2. Delivering care in lower-cost settings or alternative settings, non-hospital based, nets enormous savings.  As payment today is skewed toward hospitalization and hospital-based care, patients disproportionately receive care, tests, procedures in hospital settings.  A primary example of how skewed the system has been is the artificial and unnecessary three-day prior hospital stay qualifier in order to receive Medicare coverage in a nursing home.  Equally as non-sensical are the present Part B outpatient therapy caps for any non-hospital based and provided therapy.  I could literally list hundreds of payment and care provision inequities but my point is made.
  3. True integration and data sharing among providers must occur and each provider must bear an incremental reward benefit and/or downside risk.  If providers cannot access data fluidly on a patient population and share best practices encompassing steerage to the most cost-effective,  best-outcome sources for care without fear of system reprisal, holes and gaps to effective care delivery at the best price/cost will remain too plentiful.

Taking the above into account, two major obstacles still remain in terms of successful development of an ACO.  The first is patients, now indoctrinated into a system where pills, brands, certain tests, and other non-proven care modalities are expected, nay demanded.  Simultaneous, this same group is famous for varying elements of non-compliance born out of a belief (though untrue) that most anything has a “medical fix” component.  All the best practices and lower-cost alternative settings can’t overcome patient behavior unless and until, patients are part of the risk-benefit system.

The second obstacle, touched on earlier, is the system of reward or the model of risk-benefit.  The ACO core model is one of risk-sharing; gains in the form of varying levels of saving returned to the providers willing to bear “risk” in the form of higher than desired utilization, costs, etc., or outcomes including satisfaction that are below certain pre-determined and desirable levels.  The inherent fallacy within this concept is multifaceted to say the least.

  1. As indicated, patients are a true wild-card; both in terms of behavior and health status.  As the patient remains effectively detached from the risk-benefit equation, behavior is left to chance.  Additionally, health status going into the population on behalf of patients is effectively unknown.  In short, a “ticking coronary time-bomb” may be present (or similarly present) creating a cost and outcome explosion that defeats the opportunity of an ACO to truly deliver effective savings.  The inability in the present regulations to set a path for securitizing against this risk and for truly integrating patients into the risk-reward equation (some element of cost-share broader than present) makes the attainment of long-term savings at a significant level, illusory.
  2. For many providers (or perhaps all) the up-front investments in terms of technology and service accessibility are steep.  This is dramatically so for post-acute providers as the Federal Government refuses to offer any resources for technology investment – not the case with physicians and hospitals.  This is fundamentally illogical as a major element to delivering true savings is via the full use of alternative care settings – lower cost options for care such as therapy/rehabilitation, chronic disease clinics, etc.  What occurs as a result of this enormous “up front” investment is a return on investment profile that is marginal to poor; in most cases (and in all that I have analyzed) below the organization’s cost of capital.  Additionally, the prospective savings return is not fluid or rapid leaving providers with a self-funding equation of producing results, subsidization of investment and cash flow, netting a return that is below any other reasonable and readily available alternatives.
  3. The sharing of incentives is impractically aligned such that the largest sources of current costs stand to lose the most while the post-acute elements stand to gain the least, though as the above occurs, the distribution is far from quid-pro-quo.  Briefly: ACOs begin fundamentally with physician groups and hospitals.  To fully achieve functionality and to meet the objective of better care provided cheaper, other providers core to the care continuum must be brought into the ACO.  Hospitals primarily have invested heavily in the current system of fee-for-service reimbursement, building environments that return the most on investment when heavily utilized on an in-patient and procedural basis.  It is illogical to assume that for most hospitals, voluntarily steering utilization elsewhere to lower cost settings or abating certain levels of utilization altogether in exchange for “shared savings” spread across the ACO players is a winning proposition.  On a similar plane, the same is true for physician specialists.  Interventional cardiologists will be hard-pressed to forego any elements of business financially and in honest reflection, Medicare-age patients are a major (if not the primary) source of patients.  For post-acute providers, utilization should likely increase as their services are more cost-effective but as established, these providers are bit players in the ACO game and while perhaps the most effective element in controlling costs and utilization, not proportionately rewarded.  Their participation for example, is all down-streamed through the ACO.

Forming a post-acute synopsis of the current ACO landscape is as simple as this: Play at your own risk.  There is little for most post-acute providers to gain within the present ACO framework, financially.  All gains are more market and patient-flow related.  The investments in terms of technology are steep and unsupported via government funding.  Similarly, the net margin attainable via an ACO that is at “risk” or participating in shared savings is less than adequate to support a return on capital investment scenario that justifies the up-front costs.  Personally, I would treat ACO participation at this stage as exploratory only; a devotion of only a small investment on-par and an expectation that minimal financial gain will occur, if any.

It stands to reason that some provider elements within the post-acute industry will stand to benefit better than others if for no other reason that they are already aligned from a business perspective to do so. LTACHs could reap significant market share if they can pose as legitimate first-admit options to an acute hospital.  SNFs that are and have been, operating as true transitional care providers with in-house, integrated services could become major partner players within the ACO landscape.  Key however to an SNF’s viability is some reform from three-day prior hospitalization requirements and relaxation/elimination of the Part B therapy caps.  Home health agencies that already have an infrastructure for electronic charting, referrals and a strong physician partnerships and hospital referral/discharge relationships are the most logical post-acute, ACO partners. The ability of a home health agency to manage a more complicated patient directly discharged from a hospital as well as bring into the home, core chronic disease management services adjunct to physician care is an ACO necessity.  As today and for the foreseeable future, ACO realization or not, Hospice will remain only a bit player, if that.  While Hospice is an effective alternative to more costly inpatient care when continued inpatient care and/or other procedural steps are unwarranted, getting patients, their families/significant others, and the physician community in general to openly embrace Hospice early and frequently is not going to occur simply because of an ACO.  Hospice, as I have written before, is a niche’ in the post-acute continuum and nothing within current trends suggest to me that the U.S. health system and patient expectations are moving to a deeper appreciation for or understanding of, the role hospice can and should play.

June 6, 2011 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , , , , | 2 Comments

Compliance, the Courts and a Risk Reminder

In previous posts I’ve written about the need for providers in all industry sectors to fully understand the compliance and legal risks that are inherent to the appropriate industry sector, as well as to health care today in general.  As someone who has been immersed in health care operations and health policy for the past quarter century, I can honestly say that I have not seen a period more perilous for providers and quite frankly, I perceive that it will remain risky and perhaps escalate in the near future.  Consider the following;

  • There is renewed vigor and funding in Washington to root out perceived waste and fraud, principally focused on Medicare.  Every sector that I follow is a target for the OIG and/or Recovery Audit activity.  In spite of GAO findings that Recovery Audits have fallen short of achieving their targeted goal of reducing $231 million in over-payments or improper payments, the action from CMS is to “improve” the system or in other words, increase the amount of personnel and resources devoted to this task.  In July, the Department of Justice announced the results of a multistate Medicare fraud investigation implicating 90 individuals, tied to a total of $251 million in Medicare payments.  The investigation involved doctors, nurses, therapy companies and others.  The investigation was part of the new Health Care Fraud Prevention and Enforcement Action Team.
  • According to a recent report from the Congressional Research Service the number of new agencies, commissions and boards created under the recently passed Health Care Reform law is “unknowable”.  The Center for Health Transformation headed by former speaker Newt Gingrich estimates that 159 new agencies, offices and programs were created under the PPACA and the Joint Economic Committee claims 47 new bureaucratic entities were created.  What this all means in brief is “more regulation”, not less and in most cases, regulations that haven’t even been written yet.  Most troubling is that the PPACA seemingly creates bundles upon bundles of additional regulation but is virtually moot on any current regulatory relief or reform.  Two interesting charts regarding the bureaucracies created under the PPACA are available at http://www.healthtransformation.net/
  • Existing regulatory burdens are already steep and increasing, regardless of the PPACA.  Take for example, the annual CMS rule making process regarding rates and payments.  Wholesale changes in Medicare assessment requirements and payments are forthcoming this fall for the SNF industry.  The home health industry has also seen its share of Medicare reimbursement changes and required assessment and documentation changes under Medicare imposed by CMS without any legislative activity.  New HIPAA requirements regarding electronic communications came into play this year, new self-disclosure rules under Stark and the False Claims Act, as well as dozens of other agency regulations.
  • Non-health care specific laws also change constantly and impact providers.  Whether these laws are labor related, tax related, state laws, local laws, commerce laws, building codes, etc., all are in some way related to the general business conducted by providers.
  • The court system (or more appropriately, the plaintiff’s bar) has become more actively focused on the provider side of the health care industry.  In just the first seven months of this year, two significant class-action suits have laid new fertile ground that providers should both fear and understand.  The first occurred in California where a jury awarded plaintiffs $613 million in statutory damages and $58 million in restitutionary damages (punitive damages not yet determined) against Skilled Healthcare Group, a proprietary nursing home chain.  The award was predicated on a 4 year old complaint that the organization failed to staff its facilities to meet the State of California’s minimum staffing requirement of 3.2 nursing hours per patient day at 22 of its California facilities.  The “rub” in this case for providers is that no harm or actual damage theory was applied to the “class of patients” affected or in other words, the residents of the 22 facilities were never effectively damaged in total yet, the jury awarded the maximum damages allowed under California law.  The result is that, even before punitive damages are assessed, the damage amount is larger than the value of the organization or more simply, if the damage amounts remain unaltered, Skilled Healthcare is bankrupt.  A final piece of irony?  The regulatory system that oversees nursing homes in the state took no specific action against Skilled Healthcare to prevent the “understaffing”.  The second case comes from the home health industry where as of today, three class action suits have been filed against Amedysis, the industry’s largest proprietary home health company.  The suits were born as a result of a Wall Street Journal article and a subsequent Senate Finance Committee inquiry into the Medicare billing practices of large, for-profit home health companies.  The fundamental allegation is that Amedysis, along with other major for-profit companies, used the Medicare rules in-place to essentially increase their revenues.  The fundamental issue pertains to therapy visits and a provision under Medicare two plus years ago that provided for incentive payments to be made to agencies based on the number of therapy visits (more visits, higher payments).  The basis of the suit against Amedysis (clearly a target because of its size, its focus on Medicare patients and the Wall Street Journal article) is that the company overstated its revenues and once investigated or discovered, the same activity now disclosed caused shareholders to lose value as a result of falling stock prices.  In a unique twist, the suits use Sarbanes-Oxley, a securities related law that requires senior corporate officers to avoid activity that would result in unethical conduct or malfeasance, harming shareholders.  As in the Skilled Healthcare case, the irony here is thick. First, there is no allegation that patients were harmed or that care was rendered inappropriately.  Second, the activity of Amedysis was not under investigation by CMS or the OIG concurrent to or before the filing of the suits.  In other words, the government’s own enforcement activity was moot on this issue and there is considerable question as to whether what Amedysis did was even improper given the rules that were in effect at the time.  Third, virtually all providers practice Medicare maximization or that time-honored practice of using Medicare’s own rules concerning reimbursements to maximize the amount of reimbursement available to them.  If the Amedysis case is the standard, virtually every Medicare provider would in fact, be guilty of similar conduct dependent on the industry and the applicable reimbursement rules.

Taking the above into account, and it is truly an overview only,  providers need to recognize the gravitas of the environment and the totality of legal and compliance risks that are present and mounting.  Recognition and identification of the compliance requirements per applicable industry sector and the legal risks associated with the business and operations encompassed is where providers can begin to respond, not react, and develop the tools, processes, plans and ultimately culture, that mitigates risk and creates effectively compliant operations (“effectively” because totally compliant is improbable if not impossible). Below are some time-honored tips and approaches for creating an organizational environment that achieves high-levels of compliance and mitigates legal risks (I ran a very large, multi-site, complex organization for twenty plus years and never had a lawsuit).

  • Within each industry sector there are tons of regulations that in theory, require daily compliance.  Likewise, within each industry sector, there are compliance themes and “key” compliance requirements.  Focus on the key compliance requirements as activities, tools, and systems that drive compliance in these areas mitigates 90 plus percent of the compliance risk and in all cases, the risk that is expensive and serious.  I like to think about the core intent of compliance and create understanding and organizational capacity and systems around these intents.  For example, in the areas of patient care, outcomes are the baseline of regulations.  Regulations focus on documentation of outcomes, prevention of negative outcomes, and actual standards for outcomes.  Systems which assure a close match with the regulatory expectations and are part of an organizational QI process (constantly) achieve the regulatory intent and create a “halo” of compliance.  The same can be said for billing practices under Medicare and Medicaid, privacy requirements under HIPAA, etc.  Polices are insufficient to achieve the requisite level of compliance required and quite often, do nothing more if not integrated within organizational practices and systems, than create more compliance risk.
  • Legal risks are harder to quantify but in some cases, easier to generally address.  Take the two legal cases I illustrated above.  In the first case, if the staffing requirement in a state is 3.2 hours per patient day, any provider flirting with these levels consistently is asking for trouble – avoid the risk entirely.  In the second case, as I pointed out, Medicare maximization is a time-honored tradition for providers.  What is not time-honored or allowable, is any activity that suggests that the provider is routinely and consistently, seeking to “game” the system.  I see too many therapy companies and SNF providers that merely “up-code” all residents into Ultra High therapy categories as a means of achieving the highest Medicare reimbursement per day.  I see too many providers stress the justifications for additional days, manipulate the rules to extract additional benefit periods, and create care requirements and documentation that is not supported by the actual needs or conditions of the patient.  These activities, when pervasive and constant, create a legal risk that is tough to impossible to defend.  A better approach is to develop strategic and operational plans that maximize revenue the right way.  The right way is by achieving high-levels of organizational capability in delivering the right care to the right patient at the most efficient cost levels possible.  It also means developing marketing plans and programs that attract the ideal patient mix that produces the highest possible revenue profile for the organization.  With respect to employment, avoiding significant legal risks means dealing with employees within the constructs of employment law.  This doesn’t mean don’t fire or don’t discipline.  It means fire and discipline effectively and only for consistent, documented and legally permissible activity.  A core or key requirement is to effectively train and only employ, capable and competent management that know and understand the applicable labor laws and are capable of using effective hiring and supervision methods that produce organizational results without violating company policy or the law.
  • Organizationally, the primary methodology to achieving a high level of compliance and to mitigate legal risks involves creating an organizational culture that focuses on compliant activity and solid risk management principles.  While not exhaustive, here are some key elements that are part of the culture.
    • Internal and external education and audits that identify risks and provide solutions.  Developing organizational thought-leaders and subject matter experts provides key resources that can be deployed to solve problems, identify risks, and provide education.
    • Encourage reporting and self-disclosure and reward the activity.  Management must be open to hearing “what is not right” and providing reinforcement for this activity.
    • Integrate compliance and risk management as part of strategic planning and allocate budgetary resources adequate to address the risks.  While risk prevention always appears to be money with another use, it is far cheaper to prevent compliance and legal risks than it is to bear the costs after an event has occurred.
    • Reward the concept and ideology of “doing the right things” first as opposed to those things which may be short-term, expedient or more profitable.
    • Benchmark and test key indicators constantly.  For example, if your Medicare census and revenue per day is higher than industry norms and/or market norms, make sure that such results are tied directly to organizational performance and activity, not to billing creativity.
    • Provide ownership to compliance activities and outcomes to all staff, not just management.  Engage the entirety of the workforce.
    • Keep up with pending or new regulatory activity and legal activity and get “ahead” of the curve.  Organizations that only respond to laws already passed and cases already decided tend to get caught trying to “react” rather than remain vigilant and prepared.  Rarely do new compliance requirements and legal requirements come instantaneously on the radar screen – they have been there for a while.  Providers that see and understand the trends can use the virtue of time to integrate new systems into existing systems, teach new knowledge requirements, and build new organizational capacity to manage effectively, the new requirements.

August 4, 2010 Posted by | Assisted Living, Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , , | Leave a comment

Health Reform Implications for Institutional Providers

My last post covered CMS’ proposed rule affecting LTAcHs in fiscal year 2011 (October 1, 2010).  In this post I noted that CMS’ proposed rule included a disclaimer that  any impacts related to the PPACA (health reform) were not included and as a result, CMS would from time to time, release updates providing additional guidance.  Late yesterday, the government released additional technical guidance on the provisions contained in the PPACA that impact institutional providers, effective April 1, 2010.  Below is a summary of the information and respective implications.

Note: The following provisions are found in sections 3401 and 3137 of the Patient Protection and Affordable Care Act (PPACA).  CMS is at work to implement these provisions and the expectation is that payment modifications will occur in late April/early May.

  • Inpatient Acute Care Hospitals: A .25% reduction in the PPS (inpatient) market basket for FY 2010 applied to discharges on or after April 1, 2010.  The reduction will affect PPS rates for discharges occurring between April 1 and up to September 30, 2010.
  • Long Term Acute Hospitals: A .25% reduction to the hospital’s market basket for FY 2010 applied to discharges on or after April 1, 2010.  The reduction will affect LTAcH rates for discharges occurring between April 1 and up to September 30, 2010.
  • Inpatient Rehab Facilities: A  .25% reduction to the Inpatient Rehab Facility market basket for FY 2010 applied to discharges on or after April 1,, 2010.  The reduction will also result in changes to the standard payment conversion factor, payment rates, and the outlier threshold amount.
  • Extension of Section 508 Hospital Reclassifications:  Extends section 508 and special exception hospital reclassifications from October 1, 2009 to September 30, 2010.  Effective April 1, 2010 section 508 and individual special exception wage data is removed from the calculation of the reclassified wage index if doing so raises the reclassified wage index.  Any hospitals affected by this provision will be assigned an individual specific wage index effective April 1, 2010.  If the hospital’s section 508 or individual specific wage index for the period October 1, 2009 to September 30, 2010 is lower than for the period after April 1, 2010 through September 30, 2010, the hospital will receive  an additional amount to make up for the difference.  This provision applies for inpatient and outpatient payments.

April 23, 2010 Posted by | Policy and Politics - Federal | , , , , , , | 2 Comments

Stark, Health Care Reform and Updated Compliance Requirements

When the Patient Protection and Affordable Care Act (PPACA) became law, a provision within adds a new dimension to the rules on self-referral and refund requirements of overpayment (Medicare) contained within the Stark Law.  Specifically, the PPACA requires the Secretary of HHS to develop a new self-disclosure protocol whereby health care providers can disclose known (or found) violations of the Stark Law.  The PPACA also gives new authority to HHS to settle claims on a “compromise” basis, creating more reasonable terms and conditions when violations occur and are disclosed.

Stark was created to prohibit a physician from referring patients to entities with which the physician (or physician’s family members) had a financial relationship.  Broadly, Stark sought to control business relationships between referring physicians and other providers furnishing services (inpatient and outpatient hospitals, etc.) when such relationships involved financial gains applicable to the referral for the physician or, when compensation associated with such a relationship for the physician was beyond the normal and customary payment the physician would receive within his/her primary practice.  Over time, Stark’s realm has expanded to include the OIG’s interpretation of applicability with the Anti-Kickback Act (prohibits payments made in exchange for referrals or recommending the purchase of supplies or services reimburseable under a government health program)  where provisions exist in strikingly similar context to the language and intents found in Stark.  The OIG at least realized the problems facing providers and allowed for (actually encouraged) self-disclosure under its Self Disclosure Protocol.  While disclosure to the OIG did not relieve providers of the burden of Medicare refunds, it did provide for a methodology to avoid the imposition of Civil Money Penalties and exclusion from continued participation in the Medicare program.

Adding an additional complication to the provisions for disclosure under Stark is the interpretation on the part of CMS of its obligation to collect 100% of all Medicare payments made in conjunction with the disclosed violation.  According to CMS, it is limited in its authority to compromise the government’s right to full recovery of any and all payments made in conjunction with a Stark violation.  Prior to the passage of the PPACA, CMS claimed that the Federal Claims Collection Act provided that an executive agency may only compromise collection of claims that do not exceed $100,000.  Claims in excess of $100,000 could only be compromised by the Justice Department.  Inserting the provisions found in the False Claims Act and the matter of recovery becomes even more complex.  Under interpretations of the False Claims Act, the government and certain courts, state that it is a violation of the Act for a provider not to disclose Medicare overpayments.  Briefly, the logic is as follows. It is a violation of the act for any person who “knowingly and improperly avoids or decreases an obligation to pay or transmit money to the Government”.  The penalty for such a violation is triple damages.  In effect, a violation of Stark creates a potential violation of the False Claims Act and as such, a de facto requirement that any Medicare payments be refunded.  A False Claims Act violation, if determined as a result of a Stark disclosure, carries the imposition of signficant damages due to the treble damages provision.  The risk therefore, to a provider that reports a Stark violation, is the determination that a violation of the False Claims Act also occurred bringing forth not only the obligation to reimburse the Government for all related Medicare payments but the imposition of the higher damages provided for under the False Claims Act; totals which could be extreme.  Medicare participating providers have always faced the risk that any illegal act involving self-referral or unwarranted excess compensation or benefits could trigger a circumstance where the activity nullifies the right of the provider to receive Medicare reimbursement (Medicare is legally bound to not pay for services provided when the provision of such service is connected to a violation or is a violation, of federal law).

With the passage of the PPACA, providers receive some additional potential relief while remaining subject to many of the same risks and obligations associated with reporting a Stark violation (as discussed above).  For example, the PPACA requires the Secretary along with the OIG, to establish a new self-disclosure protocol.  The purpose of this new protocol is to assist providers and suppliers with disclosure of an actual or potential Stark violation.  Establishment of the protocol is to occur within six months of passage of the PPACA (late-September 2010) and identify a specific official or office where disclosures are directed.  The PPACA also provides the Secretary with an exception to the False Claims Collection Act, allowing the Secretary to take into account certain factors such as the nature of the illegal practice, the duration of the practice, the timeliness of disclosure, etc., when determining the government’s claim.  Providers should note however that the PPACA also requires potential or known disclosures to occur within sixty (60) days of discovery of the violation.  Failure to disclose within 60 days correlates to a False Claims Act violation and as such, the remedies available under the False Claim Act are triggered.

In application, providers today should consider the following.

  • The predominant cause for a violation is sloppy administration of contractual relationships between a providers and physicians.  Examples include discounted office space, leases for space that are not at fair-market value, leases that are not signed by the parties, provisions for physicians to use free staff resources, overpayments for services under Medical Director agreements, Medical Director agreements that aren’t signed, etc.  Each of these examples is a potential Stark violation requiring disclosure.
  • In light of the point above and the requirements in the PPACA for disclosure of actual or potential violations within 60 days, providers should be fully engaged in routine QA activities to identify, correct and disclose any violations.  Ideally, implementation of solid education, preventative QA activity, and effective use of counsel is already in-place, mitigating the occurence of a violation or at the worst, mitigating the extent of a violation.
  • Providers should not wait for the completion of the new disclosure protocol as doing so creates undue peril that a violation extends beyond the 60 day disclosure requirement in the PPACA and results in a False Claims Act violation.  Providers can and should continue to disclose actual or potential violations to CMS even though it is likely that CMS will not resolve any disclosures until implementation of the Secretary’s new protocol.  The best case is that CMS will allow providers to update disclosures made prior to the implementation of the protocol and avail themselves of the new claims resolution system created by CMS and the OIG (an updated disclosure providing more detail sufficient to reduce the liability due to the government).

April 17, 2010 Posted by | Policy and Politics - Federal | , , , , , , , , , , | 6 Comments