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Senior and Post-Acute Healthcare News and Topics

Don’t Miss Event: Webinar on Reducing Rehospitalizations

A week from today, I am conducting a webinar on reducing/avoiding unnecessary rehospitalizations.  With SNFs just experiencing the VBP impact (Medicare incentive or reduction) starting October 1, this event is extremely timely.  I’ll cover the health policy and reimbursement implications regarding rehospitalizations plus new QRP and QM updates.  I’ll also touch on PDPM implications.  Some great tools are available for attendees as well.

Register here at a super price – $59 for the session and the tools!

http://hcmarketplace.com/reducing-readmissions

 

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November 1, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | Leave a comment

SNF QRP and What the Data Means

Yesterday, CMS began posting the first elements from the Quality Reporting Program.  There are five elements that contain data, compared to the national average.

  1. Percent of residents developing new or worsening pressure injuries
  2. Percent of residents experiencing one or more falls with major injury
  3. Percent of residents who had a functional assessment on admission and the outcomes incorporated on the careplan and assessed at discharge
  4. Medicare spending per beneficiary
  5. Percent of successful return to home or community

A sixth measure regarding avoidable, 30 day hospital readmission was not reported as CMS is still trying to determine how to best present the data.

The above data is available for each SNF on Nursing Home Compare.  To view, go to the website, choose a facility and then delve into the “Quality of Resident Care” tab.  At the bottom of the screen, expand the sections on short-stay and long-stay to view all Quality Measures including this latest set.

As in most cases, data is only as valuable as it is meaningful and communicates a story.  In this case, I would caution that these new measures still bear a touch of skepticism for current interpretation.

  • The data in most cases, is more than nine months to a year old (observations between 2016 and 2017).
  • The context of some of the measures may be incongruous to others more recently reported.  For example, there is a long-stay QM on falls with a major injury where the data set/accumulation period is 7/1/17 to 6/30/18.  The comparable new QRP data point on falls is illustrative of data between 1/1/17 and 12/31/17.  My point is that no data for any measurement, including the new QRP measures, should be viewed separately without a common review of all QM data current (or at least as current as is available).
  • The famed quote of former British Prime Minister Benjamin Disraeli (appropriated by Mark Twain and others) harkens: “There are three types of lies; lies, damn lies, and statistics”. There are 15,000 plus SNFs and as I have experienced, clear uniformity in data reporting exists in form as much as spotted Zebras.  And, I am not calling any SNF a liar.  Claims-based measures are a touch more reliable but remember; inaccurate claims and upcoding per CMS OIG is rampant in the industry.  Garbage in, garage out?

So a question I have already been asked dozens of times today: Is this data meaningful, useful and if so, how so?  Being a true Trinitarian: Yes, No and Maybe.  Here’s how I see the QRP impact now.

  • It will have virtually no impact or should I say, absolutely no impact, for consumers.  It is simply too arcane to digest without a better context for consumers.
  • The data is old so now, its reliability on a face-value basis is questionable (kindly stated).  Much changes in the SNF environment, good and bad.  Changes in leadership, ownership, MDS Coordinators can “funk-up” data results quickly.
  • As I indicated, it must be viewed in complete context against all other QMs.
  • Those facilities that are good, consistent performers will exhibit the same outcomes with their QRP results.
  • Facilities that are poor performers will have their poor results magnified or validated via the QRP data.
  • There will be a small set of facilities for which the QRP data is not relevant at all.  They are the facilities that have undergone some sort of cataclysmic change since the data measurement started in 2016, likely in 2017.  This could represent a good or negative trend.

Finally, if there is some use it will be in the form of strategy within narrow networks, ACOs, etc.  The Medicare spend per beneficiary number, if it is below 1, could be of value.  Again, one needs caution as that result is more than one year old.  What I do know from the Managed Care/Med Advantage folks is that this data set will have ZERO implications for them.  As I have written before, these plans are buyers in a universe of sellers.  There are too many beds available, even among good providers, in most markets.  Frankly, SNF supply exceeds demand by a TON.  A Med Advantage plan has no need to pay-up for access nor be horribly concerned that a bed will not be available, even at the best 5 Star providers.  Until supply ratchets down to meet actual demand, it will be a Buyer’s market for Med Advantage plans with no need to negotiate/pay more for access.

October 26, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | Leave a comment

SNF Final Rule 2019: Key Points and Provisions

Beginning yesterday, I’ve been following the news regarding CMS’ annual issuance of Final PPS rules for providers.  Of greatest interest is the SNF Final Rule as it includes a completely new payment system, departing from the RUGS IV, therapy-centric system currently in-place.  I’ve read through the Final Rule (all 424 mind-numbing pages) and summarized what SNFs need to know right now. I will undoubtedly expand upon the PDPM model as more is known and I’ve modeled claims via provider experience data.

RATE: The Final Rule includes a 2.4% increase to SNFs via adjustments to the RUGS IV categories/CMIs.  NOTE:  Providers that have not met their QRP (Quality Reporting) requirements/data submissions will receive a .04% increase – net of the 2% penalty.

SNF QRP: There were no changes made to the SNF QRPs in this rule.  The Claims-Based Measures of, 1) Community/Post-Acute discharge; 2) Preventable re-hospitalizations (30 days post discharge), and; 3) Spending per Medicare beneficiary (SNF) remain.  The Assessment-Based Measures of , 1) Falls with injury; 2) New or worsening pressure injuries post-admission, and; 3) Percent of patients with functional admission and discharge assessments and care plans.  CMS did indicate that it will adopt a “burden” or return on investment test for adoption or removal of future measures.

SNF VBP: The impact of Value-Based Purchasing begins Oct. 1, 2018. This incorporates an incentive payment or penalty reduction for the lone applicable quality measure: 30 day re-hospitalization rates post SNF discharge.  The Final Rule includes notably, an extraordinary circumstances exception policy plus discussion on future baseline periods for measurement, scoring changes, etc.

PDPM: This new payment system (Patient Driven Payment Model) is set to go into effect on October 1, 2019 (FY 2020). It will replace the RUGS IV system.  It is case-mix driven, utilizing the MDS assessment tool to categorize resident care needs via five case-mix categories: Physical Therapy, Occupational Therapy, Speech Therapy, Nursing, and Non-Therapy Ancillary requirements.  The base non-clinical case-mix category remains which captures the room and board and capital costs for SNFs (technical stuff here so no need for detail). As part of PDPM, only three assessments (MDS) are needed/required. The first is correlated to admission, the second to discharge and the third is related to change in condition/change in need.  Payment, regardless of service utilization, is assessment driven via each case-mix category.  Also gone from this system is any intensity measure of therapy services (no minute requirements or frequency). Added to the therapy requirements is a provision that as much as 25% (aggregate) of therapy treatment time can be group or concurrent.  Based on data provided, the unadjusted Federal Urban PDPM rate (10/1/2019) would be $410.85 (before labor/wage adjustments). The Unadjusted Rural PDPM rate would be $425.37.

As in the Proposed Rule, PDPM incorporates a variable rate concept.  The Final Rule maintained this concept unaltered.  After day 20, rates begin to decline at a pace equal to 2% every 7 days, starting at day 21.  The decline correlates to reductions in PT and OT rates (.03 per day) and a reduction in NTA (Non-Therapy Ancillary).  More below on Non-Therapy Ancillary inclusions.

Under PDPM, residents are classified/coded via ICD 10 into one (only one) of ten clinical categories corresponding to the primary reason for the inpatient stay. CMS intends to map ICD-10 codes into the clinical categories for providers.

  1. Major Joint Replacement or Spinal Surgery
  2. Cancer
  3. Non-Surgical Orthopedic/Musculoskeletal
  4. Pulmonary
  5. Orthopedic (that doesn’t fall into #1)
  6. Cardiovascular and Coagulations
  7. Acute Infections
  8. Acute Neurologic
  9. Medical Management
  10. Non-Orthopedic Surgery

To accommodate higher-cost, sicker patients in the SNF setting, PDPM implements a Non-Therapy Ancillary case-mix. The NTA categories are below.  Other than the first category of HIV/AIDS, each NTA is picked-up from a corresponding MDS item. Sorry for the length but I think the list is informative for providers.

HIV/AIDS 

Parenteral IV Feeding: Level High

Special Treatments/Programs: Intravenous Medication Post-admit

Special Treatments/Programs: Ventilator or Respirator Post-admit

Parenteral IV feeding: Level Low

Lung Transplant Status

Special Treatments/Programs: Transfusion Post-admit

Major Organ Transplant Status, Except Lung

Active Diagnoses: Multiple Sclerosis Code

Opportunistic Infections

Active Diagnoses: Asthma COPD Chronic Lung Disease Code

Bone/Joint/Muscle Infections/Necrosis – Except Aseptic Necrosis of Bone

Chronic Myeloid Leukemia

Wound Infection

Active Diagnoses: Diabetes Mellitus (DM)

Endocarditis

Immune Disorders

End-Stage Liver Disease

Other Foot Skin Problems: Diabetic Foot Ulcer

Narcolepsy and Cataplexy

Cystic Fibrosis

Special Treatments/Programs: Tracheostomy Care Post-admit

Active Diagnoses: Multi-Drug Resistant Organism (MDRO)

Special Treatments/Programs: Isolation Post-admit

Specified Hereditary Metabolic/Immune Disorders

Morbid Obesity

Special Treatments/Programs: Radiation Post-admit

Highest Stage of Unhealed Pressure Ulcer – Stage 4

Psoriatic Arthropathy and Systemic Sclerosis

Chronic Pancreatitis

Proliferative Diabetic Retinopathy and Vitreous Hemorrhage

Other Foot Skin Problems: Foot Infection Code, Other Open Lesion on Foot

Complications of Specified Implanted Device or Graft

Bladder and Bowel Appliances: Intermittent Catheterization

Inflammatory Bowel Disease

Aseptic Necrosis of Bone

Special Treatments/Programs: Suctioning Post-admit

Cardio-Respiratory Failure and Shock

Myelodysplastic Syndromes and Myelofibrosis

Systemic Lupus Erythematosus, Other Connective Tissue Disorders, and Inflammatory Spondylopathies

Diabetic Retinopathy – Except Proliferative Diabetic Retinopathy and Vitreous Hemorrhage

Nutritional Approaches While a Resident: Feeding Tube

Severe Skin Burn or Condition

Intractable Epilepsy

Active Diagnoses: Malnutrition

Disorders of Immunity – Except : RxCC97: Immune Disorders

Cirrhosis of Liver 

Bladder and Bowel Appliances: Ostomy

Respiratory Arrest

Pulmonary Fibrosis and Other Chronic Lung Disorders

Summary: Ten clinical categories essentially begin the coding process (reason for admit).  From this point, each case-mix category is developed (PT, OT, SLP, Nursing and NTA). This is done via the admission MDS.  The rate is constant for days 1-20 of the stay.  Beginning on day 21, the rate reduces equal to 2% every additional 7 days.  A change of condition MDS can occur, altering the rate variability (reduction) by change in patient need.  One more assessment (MDS) is completed to recap the stay at discharge and capture QRP data.  In the meantime, stay tuned for additional information and strategic tips on how to prepare for PDPM and what specifically, to know in interpreting the “best path/best-practices” at the facility level.

 

August 1, 2018 Posted by | Skilled Nursing | , , , , , , , , , , , | 2 Comments

Five Post Acute Axioms (Truisms)

I read a lot – part of the job.  I hear lots of conversations and participate in many in-person and online.  Last week, I spent a few evenings with my rehab partner.  Between he and my wife, with clients across the country, it was fascinating how the conversation regarding fortune or famine (providers) boiled down to a few simple truths.  Summarizing, those that do well have accepted and work doggedly at embracing and living out these axioms.  Those that are struggling, simply refuse to grasp these plain truths.  Regardless of the entity (SNF, HHA, etc.), these axioms apply (truthfully, for any provider including hospitals).

To preface, I’ve slimmed-down hours upon hours of recent conversations to these five “axioms”.  One could argue more apply.  Between my partners, my wife (a partner) and me, we have some context here as we work with multiple entities that rank in the top 1,000 post-acute providers in the nation.  For example, we all share a working relationship with the 6th ranked SNF in the nation, out of 15,636 SNFs.  Unfortunately, we also have client relationships with the lowest ranked providers including one that ranks 15,609.  This dichotomy (cruel as it is) gives us a unique perspective regarding truisms (embrace them and succeed, ignore them and fail).

  1. Quality Matters: This isn’t about hype or verbiage; it’s about results.  Organizations that are succeeding are doggedly, persistently and hyper-fixated on their care outcomes.  Their culture is deep in quality and they benchmark themselves and what they do, how they perform, with an effort on getting better all the time.  Their outcomes demonstrate their quality.
  2. Staffing Matters: Providers that perform invest in and have in number, great staff perform better.  They put the right people closest to the patients.  They have assessed their operations and know precisely, what levels of staff by credential and education, their operations require.  They train, teach and invest in their “troops”.  You won’t find a great SNF that doesn’t have RNs on every shift, every day.  You won’t find a great provider, HHA or SNF, etc., that doesn’t have actual employees, not contractors, taking care of patients (primarily).
  3. Excellence in Management and Leadership is Imperative: The best have long-term, highly qualified management and leadership at every level in the organization.  They retain great talent and grow it like a prized rose-bush (ever watch rose “aficionados” you’ll get the reference). These folks aren’t the highest paid or even with the most credentials; they are excellent directors of task and people.  The most credentialed (education, certifications, etc.) don’t correlate to the best manager or leader.  In a nutshell: Excellence here means bright, strategic, engaged, earnest, industry and trade experts, that are quality driven.
  4. The Devil is in the Details: The best providers are not just current with policy issues and reimbursement trends, they are ahead and know the implications and manage to these details.  For example, they know length-of-stay matters and they are working to shorten each encounter to only the resources required (days, visits, etc.).  Their quality measures are excellent because they review the dozens of measurable data points to look for trends and to track outcomes.  They have protocols and disease pathways in-place.  They adopted antibiotic stewardship practices before the buzzword existed.  They already were on pain and the management thereof, without or minimizing opioids, before alarms sounded.  They had steps in place to quality review care transitions and hospitalizations.  QAPI was something new but not to them.  Doing things right was and still is, the driver for these excellent organizations.
  5. The Organization is like a Car: This is meant to be a silly reference but also serious.  Driving is all about what is going on ahead of you and being anticipatory and prepared.  The rearview mirror is checked but only briefly.  Failure to pay attention to the road ahead and anticipate hazards, keep safe distances, etc. is how one arrives at a destination, safely and efficiently. Think of it this way: Slow is smooth, smooth is fast (an old and time-honored, Special Forces reference). Great providers embrace this philosophy – do things slowly, smoothly to be able to respond quickly when necessary.  What differentiates the very best providers from the very worst is their focus on FORWARD – being very anticipatory and developing core, innate competencies that help be “smooth and fast” as adaptation is required in health care.

Food for thought.  If one chooses to use the above points on a comparative basis, my guess is you will find what I know.  The best embrace these axioms.  The worst don’t or don’t consistently.  Everyone else in the middle has a choice to make – get better or get worse.  The truth about “great’ in health care is easy to understand.

 

July 16, 2018 Posted by | Home Health, Skilled Nursing | , , , , , , , | Leave a comment

Stuck in Neutral: Bundled Payments and Post-Acute Providers

After CMS nixed the mandatory expansion provisions for Bundled Payments and reduced the metro areas participating in CJR (joint replacement), the prospects for post-acute provider involvement in non-fee-for-service initiatives (payments and incentives based on disease states and care episodes) went in to limbo.  With a fair amount of excitement and trepidation building on the part of the post-acute world about different payment methodologies, new network arrangements, new partnerships, incentive possibilities, etc., CMS put the brakes on the “revolution”; a screeching halt.

While Bundled Payments aren’t dead by any means, the direct relationships for post-acute providers are in “neutral”.  The Bundled Payments for Care Improvement Advanced (BPCI Advanced) initiative announced in January included no avenue for SNFs, HHAs (home health) to apply and participate.  Nationally, other voluntary bundle programs continue including the remnants of CJR, and Models 2, 3 and 4 in Phase II.  According to CMS, as of April of this year, 1100 participants were involved in Phase 2 initiatives.  The Phase 2 initiatives cover 48 episodes of care ranging from diabetes, through various cardiac issues and disease to UTIs.

BPCI Advanced opportunities (episode initiators) involve hospitals or physician groups.  Post-acute will still play a role but the direct connections and incentives aren’t quite tangible or specific, compared to CJR.  Time will tell how the roles for post-acute providers evolve in/with BPCI Advanced.  Oddly enough, the economic realities of care utilization and negative outcome risk suggest that post-acute should play a direct, large role. As hospital stays shorten, outpatient and non-acute hospital surgical procedures increase, the directed discharge to post-acute has taken on greater meaning in the care journey.  HHAs in particular, are playing an expanded role in reducing costs via enhancements to their ability to care for more post-surgical cases direct from the hospital/surgical location.  Simultaneous however, readmission risk exposure increases.  What is certain is that system-wide, the window of 30 to 90 days post hospital or acute episode is where significant efficiency, quality and cost savings improvement lies.

While the direct opportunities initially forecast under BPCI for the post-acute industry have evaporated (for now), strategic benefits and opportunities remain.  Providers should not stray from a path and process that focuses on enhancing care coordination, improving quality and managing resource utilization.  Consider the following:

  1. For SNFs, PDPM (new proposed Medicare reimbursement model) incorporates payment changes and reductions based on length of stay (longer stays without condition change, decrease payment after a set time period).  A premium is being placed on getting post-acute residents efficiently, through their inpatient stay.
  2. For HHAs, payment reform continues to focus on shorter episodes in the future.  Like PDPM for SNFs, the focus is on efficiency and moving the patient through certain recuperative and rehabilitative phases, expeditiously.
  3. Medicare Advantage plans are increasing market share nationwide.  In some markets, 60% of the post-acute days and episodes are covered by Medicare Advantage plans – not fee-for-service. These plans concentrate on utilization management, ratcheting stay/episode length and payment amounts, down.  Providers that again, are efficient and coordinate care effectively will benefit by focused referrals and  improved volumes.
  4. Quality matters more than ever before – for all providers.  Star ratings are increasingly important in terms of attracting and retaining referral patterns  Networks and Medicare Advantage plans are focused on sourcing the highest rated providers.  Upstream referral sources, concerned about readmission risks are targeting their discharges to the higher rated providers.  Consumers are also becoming more market savvy, seeking information on quality and performance.  And of course, government programs such as Value-Based Purchasing place providers with poor performance on key measures (readmissions for SNFs) in the reimbursement reduction pool.
  5. Indirectly, Bundled Payment initiatives move forward and the Advanced option will require physicians and hospitals that participate, to source the best referral partners or lose incentive dollars and inherit unwarranted readmission risk.  SNFs and HHAs that excel at care coordination, length of stay management, have disease pathways in-place, can manage treatment, diagnostic and pharmacology expenses and produce exceptional outcomes and patient satisfaction are the preferred partners.

June 29, 2018 Posted by | Home Health, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , , , | Leave a comment

SNFs and PBJ Article

Attached is a link a to a good PBJ (payroll based journal) article.  It covers the basic concepts of what is going on today with regard to staffing level reporting and the Five Star system.  Recall, staffing as a domain, is one of the stars in this system.  The article is posted here (re-published) with permission of the original publication.  Enjoy!

Excerpt_S3_BALTC_0618

June 13, 2018 Posted by | Skilled Nursing | , , , , , , , | Leave a comment

CMS Proposes New SNF Payment Model

Last Friday, CMS released the contents of its annual proposed rule updating the SNF PPS plus (as always), fine tuning certain related programmatic elements. Final Federal Register Publication is set for May 8.  (Anyone wishing the PDF version may download it from the Reports and Other Documents page on this site or access it here SNF Proposed Rule 4 2018 ).  The most watched information for providers is the proposed rate adjustment though lately, for the post-acute segments of health care, other elements pertaining to payment model changes have eclipsed rate “watching”.

Last year’s proposed rule for the SNF PPS contained the release of RCS-1.  After extensive commentary, CMS pulled back RCS-1, shelving it for some conceptual remake.  We now, as of Friday, know the remake – PDPM for short (Patient Driven Payment Model). As with all yearly releases similar, a comment period has begun, lasting until (if not otherwise extended) the last week of June (June 26).

PDPM as proposed, is designed to replace the current SNF payment methodology known as RUGs IV.  Unless date changes, etc. are made by CMS post commentary review, the effective date of the change (from RUGs to PDPM) is 10/1/19 (next October).   PDPM as an outgrowth of RCS-1 and received commentary, is a simplified payment model designed to be more holistic in patient assessment, capture more clinical complexity, eliminate or greatly reduce the therapy focus by eliminating the minute levels for categorization, and simplifying via reduction, the assessment process and schedule (reduced to three possible assessments/MDS tasks). Below is a summary of PDPM core attributes/features as proposed.  On this site in the Reports and Other Documents page is the PDPM Calculation Worksheet that provides additional details beyond the reference points below PDPM Calculation for SNFs.

  • PDPM uses five, case-mix adjusted components for classification and thus, payment: PT, OT, Speech, Non-Therapy Ancillary and Nursing.
  • For each of these components, there are separate groups which a resident may be assigned, based on MDS data.  For example, there are 16 PT groups, 16 OT groups, 12 Speech groups, 6 Non-Therapy Ancillary groups and 25 Nursing groups.
  • Each resident, by assessment, is classified into one of the group elements within the component categories. This means that every resident falls into a group within the five case-mix components of PT. OT, Speech, Non-Therapy Ancillary and Nursing.
  • Each separate case-mix component has its own case-mix adjusted indexes and corresponding per diem rates.
  • Three of the components, PT, OT and Non-Therapy Ancillary have variable per diem features that allow for changes in rates due to changing patient needs during the course of the stay.
  • The full per diem rate is calculated by adding the PT, OT, and Non-Therapy Ancillary rates (variable) to the non-adjusting or non-variable Nursing and Speech components.
  • Therapy utilization may include group and/or concurrent treatment sessions provided no more than 25% of the total therapy utilization (by minutes) is classified as group or concurrent.
  • PT, OT, and Speech classification by group within their respective components do not include any function of “time”.  The sole denominator of how much/little therapy a resident receives is the necessity determined by the assessment process and by the clinical judgment of the care team.  In this regard, the minimum and maximum levels are based on resident need not on a predetermined category (RUG level).
  • Diagnoses codes from the hospital on admission (via ICD-10) are important and accuracy on the initial MDS (admission) are imperative.
  • Functional measures for Therapy (PT, OT) are derived from Section GG vs. Section G as provided via RCS-1.
  • The Non-Therapy Ancillary component allows facilities to capture additional acuity elements and thus payment, for additional existing comorbidities (e.g., pressure ulcers, COPD, morbid obesity, etc. ) plus a modifier for Parenteral/IV feeding.
  • There are only three Medicare/payment assessments (MDS) required or predicated starting in October of 2019 – admission, change of condition/payment adjustment and discharge. NOTE: All other required MDS submissions for other purposes such as QRP, VBP, Quarterly, etc. remain unchanged.

For SNFs, the takeaways are pretty straight-forward. First, clinical complexity appears to be the focus of increased payment opportunity.  Second, therapies are going to change and fairly dramatic as utilization does not involved minutes and more is better, when clinically appropriate but less is always relevant (if that makes sense).  The paperwork via MDS submissions is definitely less but assessment performance in terms of accuracy and clinical judgment is increased.   MDS Coordinators, those that are exceptional clinicians and can educate and drive a team of clinicians, will be prized as never before.  RUG style categorization is over so the focus is not on maximizing certain types of care and thus payment but on being clinically savvy, delivering high quality and being efficient.  The latter is what I have been preaching now for years.  Those SNFs that have been trending in this direction, caring for clinically complex patients, not shunning the use and embrace of nursing RUGs, and being on the ball in terms of their assessments and QMs are likely to see some real benefits via the PDPM system.

More on this new payment model and strategies to move forward will be in upcoming posts.

May 1, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing, Uncategorized | , , , , , , , , , , , , , | Leave a comment

SNFs and the Medicaid Conundrum

What do Morningside Ministries in San Antonio, Genesis Healthcare, Signature Healthcare, HCR ManorCare, and Syverson Health and Rehab in Wisconsin have in common?  Answer: A terminal relationship with Medicaid. While Genesis isn’t “dead” yet, it is fundamentally on life support with a stock price of $1.50 per share and a Medicaid payer mix averaging 73%.  HCR ManorCare is in bankruptcy. Morningside Ministries closed a facility in San Antonio as it simply could not survive on the Texas Medicaid payment at its Chandler Estate facility.  Syverson in Wisconsin is among a slow growing list of SNFs that cannot financially exist under Wisconsin’s Medicaid system – the poorest payer in relation to cost in the nation.

For the vast majority of SNFs nationwide, Medicaid is a conundrum; a Catch 22 of epic proportion.  It is by far, the dominant payer source for LTC among the elderly and thus, the largest payment source for SNF residents when they enter an SNF or fall back on, shortly (typically within 6 months) after their admission.  For the average SNF (and majority of the universe), an unwillingness to openly accept a Medicaid resident equates to an empty bed and no (zero) revenue.  This phenomenon is the Medicaid conundrum – damned if you do, damned if you don’t scenario.

Few SNFs have the reputational excellence, the referral base, capacity limitation and payer source alternatives to minimize or limit, their Medicaid admissions.  Those that do typically are less than 75 beds in capacity and all private rooms, located within an affluent or fairly affluent community, are attached or part of a referral source such as a retirement community or a hospital system, have high star ratings and a good survey/compliance history, and have strong amenity features and equally strong customer reviews/experiences to market.  In such rare or atypical circumstances, the facility is able to control its Medicaid exposure to less than a third of its payer mix.

At greater than a third or so of its payer mix, the SNF is forced to undertake operational strategies and approaches anathema to resident interests and thus, business stability.  First, the SNF must minimize its fixed expenses if possible.  In organizations/facilities where rent payments and debt payments were high comparatively and no opportunity to reduce these payments available, the SNF was vulnerable to any vacancy and to any substantive changes in other payer sources.  This is the demise scenario for HCR ManorCare, Signature and Genesis. Too much of their revenue component was allocated to fixed rent/occupancy costs.

Second, with high Medicaid census, the SNF is forced to be vigilant on variable expenses, predominantly staffing hours and staff mix (professional licensed to unlicensed).  While expense vigilance is good in any business, SNF staff to resident ratios (gross) and by acuity adjusted, are corollary to good care results.  Too few staff, care suffers.  Too few licensed staff and care really suffers.  Today, the regulatory/compliance environment is keenly focused on staff numbers, compliments by license, and competency levels.  In fact, the Phase II implementation of the new(er) COPs for SNFs (new since fall 2016) require facilities to conduct an assessment of resident care needs and conditions and to assure that the same are matched with staff adequate in number and competence to provide care for identified needs and conditions.  Citations today, classified as jeopardy or actual harm, come with instant fines/forfeitures attached, starting at the date of the violation.  It does not take long for an Immediate Jeopardy citation to accumulate a fine of tens of thousands of dollars.

Third, higher Medicaid census requires revenue offsets via other payers such as private insurance, private pay (resident funds), and/or Medicare and Medicare replacement.  The Catch 22 is that the higher the Medicaid census, the greater the reliance the facility has on these other payers.  A facility thus, experiencing any kind of quality or reputation problems, will experience difficulty attracting these higher payers, in sufficient number, to offset the Medicaid “payment effect”.  Vacancies increase and feeling pressure that any occupant is better than none, Medicaid census slowly increases.  Depending on the fixed cost level for the facility, coverage of rent or debt may become problematic (Signature, Genesis, etc.) whereby the attainable EBITDAR is less than the rent or occupancy payment due (coverage below 1).

For the large majority of the industry, the Medicaid Conundrum is worsening as the overall revenue perspective/outlook tightens while operating costs are slowly but steadily increasing, due to:

  • Wage inflation.  An improving economy and employment outlook at the $15 an hour and under labor strata has place wage pressure on SNFs.  The lower to middle end of the SNF workforce is in high demand in many markets meaning that employers are competing for the same basic labor hours across multiple industries.  A typical SNF CNA may find today, equal or better wage opportunities at a Costco or Wal-Mart with “better” working conditions (no customer fannies to wipe, drool to manage, etc.), less physical demanding and more “fun” in terms of atmosphere.  Given the 24 hour/365 labor demands of a SNF, a $.50 increase in hourly compensation can quickly equate to     in a 100 occupied bed facility.  If the facility is in Missouri or Kansas, this increase in operating cost is juxtaposed with a Medicaid rate cut.
  • New Conditions of Participation for SNFs (federal regulations) are phasing in and the cost of compliance is increasing.  Regulatory requirements for facility assessments that drive staff hours and mix plus more emphasis on documentation, training, physician and pharmacy engagement, etc. are adding to operating cost.  Again, this is occurring while rates are flat or in some states, decreasing.

And, while operating costs are slowly increasing, revenue make-up/alternatives to Medicaid are eroding.

  • Other payment sources, particularly Medicare, are not increasing fast enough (if at all), to soak-up the expense increase or Medicaid rate reduction.  In the case of Medicare, an increasing number of SNF days are paid for by Medicare Advantage (replacement) plans.  These plans do not operate EXACTLY like fee-for-service Medicare in so much that they may pay less per diem (and do) and may manage utilization (length of stay) to minimize overall expenditure risk of the plan.  In some markets, the Medicare Advantage beneficiaries are equal to or greater in number for an SNF than the fee-for-service beneficiaries.
  • Shifting care and referral pattern trends have reduced the overall need for a utilization thereto, of SNF beds.  Simply, there is less overall demand for SNF beds than total supply.  Occupancy levels nationally have shrunk year over year for the past decade and additional shrinkage is forecasted until closures reduce supply closer to demand.  In certain areas, the supply may be as much as one-third greater than the demand/need.  Medicaid waiver programs that now pay for community based housing alternatives (Assisted Living and support services) have dented demand along with a shift in post-acute referral to outpatient and home health for non-complicated, orthopedic rehabilitation post surgery.

For the SNF industry, Medicaid has become an addiction no different from nicotine.  Facilities simply cannot survive without it yet it is ruining their health (operationally).  The alternatives to Medicaid are to close shop.  The facilities most reliant, cannot break the cycle as the steps necessary to rebase and retool an SNF revenue and quality model are expensive and long.  Genesis will not get there.  HCR ManorCare couldn’t and didn’t.  The damage of too high of fixed costs and too much reliance on government reimbursement, particularly Medicaid and then an increasing Medicare rate to offset the loss, was a Fools Paradox after all.

Ending this cyclical nightmare is going to require forces and changes to the current paradigm that are yet, on the drawing board.

  • Wholesale changes to the Medicaid funding process are required.  Either more money must flow into the system from the Federal side or the State side (less likely) or the product cost must reduce (see next point).
  • The biggest driver of product cost for an SNF is regulation.  Without wholesale regulatory reform, it is unlikely the system (Medicaid) can find enough funding to adequately compensate an SNF for the cost of care.  The net will be poorer care (calling for thus, more regulation) or more closures leaving service gaps for the most vulnerable older adults.
  • Increasing advances in different product/service options and designs that are cheaper alternatives to institutional care can and will, continue.  Again, speeding the implementation of alternatives requires incentive and regulatory reform but there is no question, certain home and community based options are cheaper than SNF options.
  • Closure of poor performing facilities and constriction on supply is needed.  The industry must shrink and government needs to take an active role to reduce the overall supply and particularly, the supply tied to poor performing facilities.  Fewer beds equal higher occupancy, more efficiencies and enhance funding options (easier to derive funding models tied to actual, organic demand vs. tied to bed capacity and “forecasts” based on flawed assumptions of days of care).

Until these steps are taken, the conundrum will remain entrenched and most facilities, will continue to wrestle with Medicaid addiction problems.  Cold turkey is not an option for nearly all and when no hope remains, facility demise will continue to be the final resort.  Watchers of my home state of Wisconsin will see the most tragic examples as the state has a thriving economy, low unemployment and the worst Medicaid system in the nation.  With paltry additions of funding like 2%, when costs are climbing by double, more closures are certain.

March 30, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | Leave a comment

Upcoming Webinar: Reduce Citation Risk

SNFs are just a little past one year since the new Conditions of Participation were implemented along with a new survey process.  Today, we are in the first-full quarter of Phase 2 implementation and facilities are just now getting surveyed on these requirements. As a result, we have some data on how the new survey process is going, what facilities are experiencing in terms of citations, how survey teams are looking at Phase 2 requirements, etc.

On Wednesday, March 7th I will be joined by Diane R. Hislop, RN, H2 Healthcare’s compliance expert and Senior Partner, presenting a webinar on the Phase 2 aspects of the SNF Conditions of Participation, the new survey process and how facilities can reduce citation risk.  The webinar will last an hour and there are some great handouts and tools that Diane has agreed to share with all participants.  I hope you can join me and Diane for what will be, an exceptionally informative update on SNF surveys and compliance trends.

The registration link is here:

http://hcmarketplace.com/reduce-citation-risk

February 14, 2018 Posted by | Uncategorized | , , , , , , , | Leave a comment

SNF Outlook: 2018/2019

As 2017 closed, a number of projects kept me busy right up to the Christmas holiday.  Among these projects was a focus on the SNF industry current and its fortunes going forward, principally driven by clients in the investment industry.  With REIT troubles, portfolio defaults on the part of HCR and Consulate, Sabra divesting Genesis facilities and Genesis completely exiting Iowa, Missouri, Nebraska and Kansas plus nervousness over rising debt levels and increasing operating expenses (before interest/debt and rent) at Ensign, there is growing concern about “blood in the water”….and when (do) the sharks arrive, particularly for REITs which hold a large number of the physical SNF assets. Back in May of 2017 I wrote a post on the Kindred, HCR, REITs and where the SNF industry was headed.  Readers can refresh here: https://wp.me/ptUlY-m7 . For this post, its time to re-examine the industry economically and structurally and the policy and industry dynamics at-play that will affect the fortunes of the SNFs and the firms that invest in them or the industry.

First, its important to understand the general health policy and reimbursement dynamics at-play in the SNF industry.

  • Phase II Transition of  New SNF Conditions of Participation: Starting in December of 2017, the Phase II survey requirements began corollary to the new SNF Conditions of Participation.  Given a fairly aggressive industry lobbying push to CMS and the Trump Administration with respect to “regulatory overreach and burden”, CMS eased compliance requirements but did not abate any survey or compliance requirements related to Phase II.  In easing compliance requirements, CMS agreed to not impose remedies for Phase II non-compliance and not to impact Star Ratings under the Inspections component for one year.  Given how many SNFs are struggling already with compliance issues and the cost of implementation and compliance, a one-year hiatus for remedies isn’t much of a reprieve.
  • Value-Based Purchasing: Beginning in October of 2018 (FY 2019), SNFs with poor performance (below the target) on the 30 day readmission elements measured under VBR will see their Medicare reimbursement reduced by 2%.  Conversely, high-performing facilities will see a modest incentive, up to 2%, added to their reimbursement.
  • Medicare: In addition to a reimbursement outlook that is flat, a new looming specter has appeared known as RCS-1.  RCS-1 is the proposed new resident classification system for reimbursement for SNFs.  If CMS pushes forward on the time table noted in the proposed rule, the first phase of changes could begin as early as October of 2018 (FY 2019).  For SNFs that rely heavily on the rehabilitation RUGs in the present PPS system, the transition could be expensive and painful as therapy in the new system is UNDER rewarded in terms of “more equaling more payment” and a premium is placed on the overall case-mix including nursing, of the SNF’s Medicare population.  Further, lengths of stays are targeted for shortening as the reimbursement model under RCS-1 reduces payment by 1% per day as the resident’s stay progresses beyond the 15th day.  While the proposed model is “expenditure neutral” per CMS, there will be clear winners and losers.  Winners are facilities that have a balanced Medicare “book” or case-mix (nursing and therapy).  Losers are the facilities that have parlayed the “more minute, longer length of stay system”, focused on the highest therapy paying RUG categories.  These categories evaporate and the payment mechanics with them.
  • Medicaid: This payment source continues to be a revenue center nightmare for most SNFs in most states.  Medicaid underpays as a general rule, an SNF, compared to its daily cost of care for an average resident. As a result, the net loss an SNF will achieve for each Medicaid resident day can be minimal to jaw dropping (depending on the State).  For example, in Wisconsin, the average loss per Medicaid day exceeds $55.00.  This means that for every day of care reimbursed by Medicaid, an SNF must make-up via other payers, the $55.00 loss that comes from Medicaid.  An average SNF has fifty percent of its resident days paid for by Medicaid.  In a 100 bed facility in Wisconsin (assuming 100% occupancy), the facility loses daily, $2,750.  For a month, the loss total expands to $82,500 and for a year, just below one million dollars ($990K). Neighboring states such as Iowa (loss of $12 per day) and Illinois (loss of $25 per day) have better reimbursement ratios per daily cost but present other challenges. For example, Illinois has such overall budgetary problems that annually,  facilities must accept IOUs in lieu of payment as the State runs short of funds.  Kansas and Missouri had rate cuts this past year.  Only two states in the nation in 2016 has surplus rates under Medicaid – North Dakota and Virginia (Virginia is basically break-even).

Adding to this picture are the market and economic forces that provide additional headwinds for many (SNFs).

  • Medicare Advantage: 2018 will mark the year where 50% of all Medicare days for SNFs are paid by non-fee for service sources/plans; the dominant being Medicare Advantage.  In some metro regions, Medicare Advantage days already eclipse the 50% mark (Chicago for example).  Because there remains a surplus of SNFs beds in most if not nearly all markets, the Medicare Advantage plans have been able to set price points/ reimbursement rates below the Fee for Service rate; in most case, minus 10% to 15% lower.  Similarly, these plans focus on utilization and length of stay so rates are not only lower but stays, universally shorter.
  • Bundled Payments and ACOs: While CMS axed the core of the evolving mandatory bundled payments (hip, knee and cardiac), various  voluntary programs/projects are active, fertile and expanding in many markets.  The same is true, though less so, with ACOs.  As with Medicare Advantage but on a more focused basis, these initiatives seek to shorten length of stays, pay less for inpatient care, and focus on quality providers versus generic market locations.  In other words, the incentives for upstream providers (hospitals) under bundled payments  and ACOs is to cherry-pick the post-acute world for high quality, highly rated providers and to work to make the overall post-acute utilization as efficient and non-inpatient related as possible.
  • Care and Point of Service Advances: As technology and innovation in health care and direct surgical and medical care expand, the need for certain types of care services shifts.  Inpatient, post-acute care is seeing its share of “location of care” impact.  Patients once commonly referred to Inpatient Rehabilitation Facilities now hit the SNF.  Patients that may have gone to the SNF post a knee replacement or even a hip replacement, now go home with home health.  With the very real possibility of an equalized post-acute payment forthcoming, the post-acute transformation from a focus on “setting of care determinants” will all but erode.  What this means is that occupancy dynamics will continue to change and building environments that can’t be shifted to a new occupancy demand and patient type, will be obsolete.

Given the above forces, policy dynamics, etc., the overall outlook skews a bit negative for the SNF sector in general.  And while I may be a bit “bearish”, there are some unique opportunities present for properly positioned, properly capitalized providers.  Unfortunately for most investors, these providers and provider organizations are generally private, regional, perhaps non-profit and in nearly all (if not all) cases, not part of a REIT.  Some general facts that bear understanding and reinforcing.

  • By nearly all quantitative measures and expert reviews, the industry is over-bedded (too much capacity) by minimally 25% up to 33%.  This is not to say that any one facility in any one location typifies the stigma but as a whole, a solid 25% of the bed capacity could evaporate and patients would still have ample beds to access.  Remember, the average industry occupancy has shrunk to 80% of beds available.
  • Average revenue due to reimbursement changes and the impact of Medicare Advantage and “stuck to declining” Medicaid rates, has shrunk on a per day basis and a Year over Year basis; down from $259 per day in January 2015 to $244 per day in July 2016 (negative 2%).

  • The average age of physical plant across the sector is greater than 25 years (depreciated life).  The average gross age since put into use is older than 30 years.  This means that the typical SNF is larger in scope, very institutional, and expensive to retrofit or modernize.  In many cases, modernization to private rooms, smaller footprints, more common space, etc. comes at a cost greater than any potential Return on Investment scenario.  The winning facility profile today is under 100 beds, all private rooms, moderately to highly amenitized and flexible in design scope and use (smaller allocations of corridor or single use spaces).
  • Quality ratings and performance matters today.  SNFs that rate 3 stars or lower on the Medicare Star system will have trouble garnering referrals, especially for patients with quality payment sources.  It is not easy to raise star levels if the drag is caused by poor survey performance.  In a recent review I did for a project, analyzing the Consulate holdings of a REIT (SNF assets leased by the REIT to Consulate for management and operations), the average Star rating of the SNFs was below 3 stars and the 80th percentile, just above 2 stars).

The general conclusion?  Watch for another rocky year for the SNF sector and particularly, the large public chains and the REITs that hold their assets.  The sector has significant pressures across the board and those pressures are not decreasing or abating.  Still, there will be winners and I look for strong regional players, private localized operators and certain non-profits (health system affiliated and not) to continue to do well and see their fortunes rise.  A change in Medicare payment to RCS-1 will benefit this group but at the expense of the other SNFs in the industry that have not focused on quality, have a disproportionately high Medicaid census and have used Medicare fee for service/therapy/RUG dynamics to create a margin.

January 18, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment