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Senior and Post-Acute Healthcare News and Topics

SNFs, Therapy Contracts and Fraud: Another Warning and Example

I know I sound redundant but clearly, the message is still not permeating through the industry (except for readers here). The Department of Justice and the OIG for the Department of Health are scrutinizing SNFs, their therapy billings, and the use of therapy contractors.  Why?  It is all due to a known and now routinely validated, prevalence of over-billing and thus fraud and/or violations (same thing really) of the False Claims Act.  I have written on this subject on this site multiple times before and those that have heard me speak at various industry events, received the same message. Bottom-line: If you are an SNF and you use a contract therapy company to provide your therapy services, you must monitor the performance of your therapy contractor and assure that all Medicare billing and Condition of Participation requirements are being met.  The acts of the therapy contractor (over-billing, miscoding, improper care, etc.) are the “ACTS” of the SNF as far as the Federal government is concerned.  The SNF is responsible for ALL elements of care provided and the accuracy and compliance elements of any and all claims submitted to Medicare.

In another case, recently disclosed, a group of three SNFs in New York (Arch Care) operated by Catholic Health Care System settled improper (false) claim allegations with the Department of Justice for $3.5 million.  The settlement is based on improper and inflated claims submitted to Medicare for unnecessary, erroneous and improper therapy care provided by RehabCare (a division thereof in this case).  The cause of the settlement or the crux of the issue related to the SNFs failure to monitor the therapy provider and to assure that the erroneous/illegitimate claims were not submitted to Medicare.  The result of the claims submission is overpayment and thus, the recovery and settlement.  Noticeably absent is any action taken against the therapy company by the Department as none such can be taken – the therapy contractor did not bill Medicare – the SNF did!

SNFs need to pay attention to these cases – more are assuredly forthcoming.  There are simple remedies to avoid these problems on the part of any SNF or group of SNFs.  Below is just a small sample.  For additional resources, attend the upcoming HcPro webinar that I  am conducting next week (posted on this site) or contact me directly.

  • Implement a triple-check system immediately.
  • If an SNF hasn’t audited its Medicare billings lately via an outside contractor, do so immediately especially if the SNF uses a therapy contractor.  Be prepared if irregularities are found to self-disclose.  Self-disclosure is required and it is the only way to potentially avoid treble damages, criminal liability, etc.
  • Retain an outside auditor and develop a routine audit system. I have checklists which can be used to guide in this process plus sources for auditors.
  • Educate your MDS and billing staff immediately on red-flag issues when it comes to your Medicare billings.
  • Integrate certain outcome and patient/resident/family feedback elements into your QA process.  Seek direct feedback monitor care outcomes and risk areas.

March 5, 2015 Posted by | Skilled Nursing | , , , , , , , , , , | 2 Comments

Post-Acute Compliance 2015: OIG Targets

As is customary in late fall, the Office of the Inspector General (OIG) of the Department of Health and Human Services released its Fiscal Year work plan.  As a reminder or preface, the work plan is the summary of investigations and focal areas the OIG plans to undertake in the upcoming fiscal year and beyond to ensure program efficiency and integrity and to identify and prevent fraud, waste and abuse (the latter is the most relevant activity).  Each provider segment reimbursed by Medicare is covered, some more so than others depending on the prevailing nature of program expenditures.  As of late (most recent years), the post-acute sector is targeted principally due to the outlay/expenditure growth (Medicare) for hospice, home health and skilled nursing care.

Below is the categorical highlights (not exhaustive) found within the 2015 Work Plan (the full plan can be found here ( ;

Skilled Nursing Facilities

  • Medicare Part A Billing: Scrutiny on claim accuracy and appropriateness of billed charges, particularly focused on therapy utilization and RUGupcoding.  Recent False Claims Act cases withExtendicare illustrate how the OIG views Medicare payments for inappropriate utilization and for care that is clearly inadequate.  This is a major risk area for providers and no SNF should discount the exposure, particularly if any of the following elements within the organization’s operations are present.
    • Therapy services provided by an outside contractor.  The OIG has identified previously that there exists a correlation between certain therapy agency contractors and patters of upcoding.
    • Disproportionately higher (as a percentage of census/payer mix), Medicare utilization.  The common threshold level is 30% or lower of total census.  Higher Medicare days as a percent of overall payer mix is a red flag for the OIG or an outlier.
    • Low overall Part B therapy utilization.
    • Skewed RUG distribution where the majority of days are falling the highest paying therapy RUGs (particularly ultra-high with moderate to minimal ADL scores – minimum/moderate assist levels)
    • Longer length of stays at higher RUG levels – minimal or infrequent Change of Therapy without corresponding Change of Conditions or vice-versa.
  • Medicare Part B Billing: The converse to the point previous is enhanced focus by the OIG on over-utilization or inappropriate utilization of Part B therapy services when Part A is exhausted or unavailable.  The OIG has noticed a trend for providers wary of Part A scrutiny to shift utilization to Part B. Again, the focus is on inappropriate billing patterns and utilization trends above or beyond, the historical norm.
  • State Agency Survey Reviews: The OIG plans to review how frequently and how well, state survey agencies reviewed and verified, facility plans of correction for completeness and compliance.  The gist: enhanced/additional federal look behind visits and desk reviews.
  • Hospitalizations: The OIG intends to review the hospitalization trends of SNF patients, identifying patterns of utilization for manageable or preventable care issues. A 2011 review found that 25% of Medicare SNF patients were hospitalized in a given year and the OIG is of the opinion that a percentage (likely sizable) is preventable and potentially, indicative of quality problems at the SNF level.


  • Hospice in Assisted Living: The OIG will monitor the continued growth trend of hospice care provided in Assisted Living facilities.  Part of this initiative is couched in the requirement within the ACA for the Secretary (of HHS) to reform the hospice payment system.  The OIG indicates that it will gather data on hospice utilization, diagnoses, lengths of stay, etc. for residents in Assisted Living facilities.  Medpac has noted that for many providers, particularly the larger national chain organizations, that hospice care in this setting is typified by longer stays and thus, monitoring is warranted.
  • General Inpatient Care: OIG will continue to monitor the utilization of General Inpatient Care within the hospice benefit for appropriateness and potential abuse.  As General Inpatient Care pays a higher per diem and many hospices maintain their own inpatient units, the concern on the part of OIG is misuse or abuse for payment or, to mitigate (agency) staffing shortages where the better alternative for the patient is Continuous Care.

Home Health

  • Reimbursements/Payments: The OIG will continue to monitor payments made to agencies principally for accuracy.  Prior investigations by the OIG identified that at least on in four claims were incorrect and potentially, fraudulent.  This initiative is a continuation of ongoing concerns by the OIG of excessive fraud and or waste in the Home Health sector principally due to improper application of the Medicare benefit and lack of substantiated medical necessity and/or supported clinical documentation of appropriateness of care (e.g., therapies particularly).

LTAcHs and Inpatient Rehab Facilities

  • Adverse Events: The OIG is targeting both settings for an analysis of adverse events/temporary harm circumstances to patients in the setting (falls, infections, etc.).  Inpatient Rehab Facilities provide 11% of post-acute inpatient therapy services and growth over the past decade or so has been consistent and steady.  Questions however have arisen regarding the actual value of such care compared to the care received in an SNF. The SNF is reimbursed substantially lower than the IRF even though many SNFs staff sufficiently to provide the same level of therapy services (up to 3 hours per day).  Similar concerns have risen within the LTAcH setting as to cost vs. outcome and quality, particularly as compared other setting comparable, lower cost settings such as SNF.  There continues in Washington, a generalized view that post-acute payment reform is overdue, particularly given the rapid expansion of the sector.  Within the payment reform movement is the growing view that setting differentiation and thus payment differentiation at the inpatient level is no longer warranted and consolidation is required to rid the excess capacity and reward economically efficient providers that demonstrate higher quality outcomes (SNFs in particular as well as rural swing bed hospitals and to a lesser extent, home health providers and outpatient providers).

December 10, 2014 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment

SNFs: Five Compliance Issues to Pay Attention To

I don’t write a lot on compliance issues. Given the scope of my firm’s practice in this area, maybe I should.  My practice focus is more strategic, policy, research  and corporate development while compliance is the purview of another Sr. Partner and it is our largest practice area (by full disclosure, this practice area is headed by my wife).  In a recent meeting, we reviewed the list of common/current compliance issues, engagements, and information and speaking requests and determined that five compliance issues bear illustration via a post here.  These are not in order of importance but their appearance represents issues of current magnitude or issues where we see clients potentially putting themselves “behind the 8 ball” by not addressing the requirements properly.

  1. Emergency Disaster/Preparedness Plan: In December of last year (2013), CMS issued a proposed rule that will significantly update the requirements for providers to address all elements of Emergency Preparedness (storms, earthquakes, active shooters, infectious disease outbreaks, etc.).  While final Conditions of Participation are forthcoming as comment periods were extended, providers who have yet to start on a path toward compliance will find themselves startled by how lengthy and daunting the route toward compliance is. This process is a complete revamp of anything prior.  Attached via link is the CMS Preparedness checklist:   Clearly, the larger the organization the greater the length of time and preparation required to complete the plan.  As of this writing, the significant majority of the providers we connect with regularly are not in compliance and worse, haven’t started a process toward compliance and/or, haven’t paid attention that this new requirement is forthcoming.  Note: This requirement applies to virtually all providers that participate in Medicare and Medicaid including hospitals, home health organizations, hospices, and yes, Assisted Living Facilities if the same receive resident care funding via Medicaid waiver programs (Home and Community Based Services).  Anyone wishing additional info. or templates on this requirement, contact me directly via a comment to this post with a valid e-mail address or via the contact info. on the Author page of this blog.
  2. CPR/Advanced Care Planning: In October of 2013, CMS issued new survey guidance to SNFs and State Survey Agencies requiring that all SNFs provide CPR to residents who wish resuscitation and that each SNF have a program and process in-place to assure adequate trained individuals, the communication and education of residents regarding the availability of CPR and the rights of residents to execute Advance Directives including no-code orders.  Effectively, CMS has said that a facility must provide residents access to CPR if desired, 24 hours per day, 365 days per year and no longer will “no code” policies suffice or “911 policies” be permitted.  This regulation went into effect 30 days after it was published though we are just beginning to see enhanced enforcement.  For SNFs there are many nuances to consider including the issues around resident transportation, activities outside of the facility, etc.  As the SNF, without a complete discharge or transfer to another provider for specific care (hospital, ER, etc.) is still responsible for the care of the resident, CPR trained individuals must be available (and the SNF must assure availability) when residents are transported to physician visits, on therapeutic (recreational) outings, etc.  Again, as with the Emergency Preparedness requirements, we continue to see a large number of SNFs unaware of this requirement and not in compliance by the documentation and trained staff requirements across the resident care continuum.  The original CMS memo on this issue is here :
  3. QAPI: I have written about this topic in an earlier post ( ) and posted a PowerPoint from a presentation I did last fall on the Reports and Other Documents page of this site.  While CMS has not yet set a hard date for SNFs to be compliant with a QAPI program, one is forthcoming.  Like the Emergency Preparedness requirement, QAPI is not a simple “paperwork” fix.  Meeting the requirement takes time and requires commitment fromf the entire organization plus an enhanced engagement from residents (via input), families/loved ones, and community.  Additionally, with pay-for-performance forthcoming (competitive bidding/Quality Measures), facilities that are not actively engaged in a QAPI effort are today, behind and falling further behind.  Illustratively, we have clients that have had their proverbial compliance Bacon “saved” by having a fully functional QAPI program in-place (QAPI minutes, data, etc. were used to show surveyors that issues were addressed, monitored and continued to be monitored – particularly QIS friendly).  The take-away is that SNFs need to get on their QAPI journey now and build, build, build!  Again, anyone needing additional resources that aren’t on this site or direction, feel free to contact me via comment or e-mail (on Author’s page).
  4. Care Transitions: SNFs that aren’t actively monitoring any and all transitions of their residents to other providers, especially hospitals, are placing themselves at- risk; competitively and from a reimbursement perspective.  While the latter has yet to arrive, it is coming as CMS will, under ACA mandated pay-for-performance rules, begin to reduce Medicare payments for SNFs that re-hospitalize and hospitalize unnecessarily, Medicare residents.  Additionally, as bundled payment models expand and ACOs increase, SNFs that cannot control their transitions are at competitive risk; the risk that they will be precluded from various alliances, ACO models, etc. In May of 2003, CMS issued enhanced survey guidance for hospitals via updated interpretive guidelines on discharge planning, focused on re-admission reductions.  In order for SNFs to continue to garner referrals and position themselves for competitive success in the near future (and survival), a focus on care transitions is paramount.  Attached is the link to Interact – a good resource for transition monitoring and reductions tools:
  5. Medicare Therapy Billing: This issue is on the OIG’s radar, in their 2014 work plan and forward on the audit agenda for CMS.  SNFs that ignore this issue are asking for potential significant problems including False Claim Act exposure (it is illegal to bill Medicare for services not medically necessary).  SNFs need to have an audit step engaged, periodically reviewing claims against the MDS, the careplan, nursing documentation, etc.  If an SNF is using a contract therapy provider, this audit step is even more critical.  Remember, SNFs cannot cede liability for fraudulent acts committed as a Part A provider to a contractor.  Additionally, most therapy contracts we see (virtually all) limit the therapy company’s liability (indemnification) for rejected claims to the cost of the therapy billed to the SNF. In other words, while the entirety of the stay or large portions thereof are deemed non-payable to the SNF by CMS (or a CMS auditor), the SNF will recover from the therapy provider, the cost of therapy billed to the SNF for the stay – the rest of the RUG revenue is gone!  In short, SNFs cannot nor should ever allow, their therapy contractors immunity from routine outside audits of their care provision, their MDS coding, their documentation, etc.  This is a big and growing compliance risk area for SNFs and knowledge and simple systemic audit tools are a big step toward keeping this risk low.  For additional insight on this area and resources, contact me directly via e-mail or post a comment on this article.

June 19, 2014 Posted by | Skilled Nursing | , , , , , , , , , , | 2 Comments

United States v. Vitas: The Impact and What Next

On May 5, the U.S. Department of Justice released its most recent complaint (legal suit filed in Federal court) against Chemed, the corporate parent of Vitas.  The complaint is a False Claims Act suit.  Briefly for the uninitiated, a False Claims Act suit alleges that the Medicare provider knowingly (or unknowingly but once discovered, did not disclose) engaged in certain activity to cause payment to the provider for Medicare services that (not exhaustively listed);

  • Were not provided
  • Were provided but not necessary
  • Were provided improperly, through illegal or unethical means such as via a kick-back scheme, etc.
  • Were or are not substantiated by patient need
  • Were provided by a person or organization not in compliance with relevant Medicare Conditions of Participation
  • Were provided to patients that did not meet coverage criteria

The dominant False Claims Act suits relate to care not provided, care billed for at a particular level despite a related patient need (over-billing), or care provided by but not substantiated by assessment, documentation, or certification.  In the case against Chemed/Vitas, the Federal government is alleging that Vitas intentionally over-billed Medicare for higher reimbursement amounts by “up-coding” patient needs absent any real need and, admitted patients for care and billed for services where there was no definitional or certifiable need on the part of the patient.  In this case, each violation is alleged against Vitas as a hospice provider organization.

Through various cited examples to substantiate its case, the Federal government alleges three primary activities and/or schemes ( the support for the listed causes of action) that led to a series of False Claim Act violations, spanning from 2002 to current.

  • Coding a patient as requiring Continuous or Crisis Care where no such need existed.  Continuous Care or Crisis Care is the highest reimbursed care level within the Medicare Hospice Benefit; today, averaging just short of $1,000 per day. Because of the definition standards and requirements for a hospice to provide and therein bill for Continuous Care, the utilization across the industry averages less than 2% of all days of care. (Vitas averaged nearly 20% of its days in this category.) The requirement for a hospice is a patient’s current symptomatic needs are so complex and unstable that the hospice provide at minimum, 8 hours of licensed nursing care to the patient within a 24 hour period.  Typically, this care is rendered by RNs and somewhat less often, LPNs or LVNs.  Its rarity stems from two components.  First, the true need of a patient in crisis with an end-stage disease for 8 or more hours of licensed nursing care.  Second, the reality of hospice staff levels and the availability of dedicated, licensed nursing coverage for a single patient.  Medicare Conditions of Participation do not allow nursing services via agency contract.  All nursing, except for very episodic and highly unusual instances, must be provided by the hospice employees exclusively.
  • Enrolling patients and thus accepting the Medicare hospice per diem (presently averaging around $160 per day) that did not meet the hospice certification criteria of ‘likely terminal, sans curative interventions, within 6 months or less’.  Citing numerous examples, the complaint details a pervasive practice of increasing revenues and thus, patient volume via enrolling patients and fraudulently certifying the same as terminal, when the patient was not under any common review, proximal to death.
  • Employing aggressive marketing campaigns and incentivizing employees and agents, to knowingly misrepresent patient conditions and/or falsely enroll and then subsequently, code as appropriate for hospice including, at higher reimbursement levels such as Continuous or Crisis Care levels.

Reading the complaint, I was struck with a number of thoughts.  First, the magnitude of the complaint is huge.  It encapsulates the entirety of Chemed’s hospice holdings, collectively Vitas.  The majority of False Claims Act complaints are against a single provider or geographically and agency limited.  Additionally, the time period referenced encompasses over a decade of claims.  As I have followed False Claims Act cases in health care for years and paid close attention to the hospice activity, a reasonable estimate of the dollar amount (Vitas)involved is hundreds of millions of actual claims that are exposed to treble damages before the imposition of Civil Monetary Penalties.  There is also the shadow of criminal prosecution for certain Vitas actors and management looming. Finally, this complaint is in the midst of other complaints against Vitas, open or soon to be open.  A significant False Claims Act case is open against them in Texas and a newly opened complaint with a physician whistleblower in Los Angeles just broke and is today, wrapped in the broader complaint.  Shareholder suits, although relatively meaningless are popping (meaningless in damages, still damaging in costs to defend). As is always the circumstance in matters such as this, the complaint will have tentacles and I suspect there are many.

In an earlier post, I wrote how the parallel is striking between Vitas’ current problems and the investigations that crippled and continue to cripple Amedysis.  Amedysis was the “big dog” in the home health industry until it became the target of Department of Justice investigations and Senate inquiries.  Once trading at nearly $60 per share, Amedysis trades today around $10.  Their earnings estimates continue to shallow and at 10x projected earnings, their share price today should be around $5.  Once a billion dollar plus company, Amedysis today has shrunk by more than half.  They continue to close agencies and scramble to maintain market share.  Major network contracts have cut their exposure to Amedysis and thus, payments.  Their aggressive Medicare business is a fraction of what it once was and they remain today, under investigation.  The last likely play is to go private via a private-equity sale and simultaneously restructure, outside of the publicly traded arena.

Reading various investment analyst reports and Vitas’ disclosures, the “take away” on the part of Wall Street is more wait and see with some folks marking this up to “cost of doing business” and others trying to grasp the magnitude.  As I consult for a number of firms that invest in the health care industry, I understand the difficulties in wrapping one’s head around the complaints and the possible fall-out for Chemed/Vitas.  Because of my working knowledge of the health care industry, depth of experience with the regulatory process, etc., my view is more solid (not necessarily right perhaps) today than that of most investment firms. My view comes from thirty years of research, operational, and consulting work in the industry.

From my vantage point, Vitas is about to begin a slow and profound slide into an abyss that they will not recover from.  The complaints current and yet forthcoming, paint an overall picture of a business model that is grossly non-compliant and steeped in fraud at the core.  Retooling this model, just as occurred with Amedysis, will shrink revenue, market share, and company value expressed via price per share.  Unlike Amedysis, Vitas exists in the “hospice space” only.  They have no other revenue source or model.  Amedysis had and continues to have, some ability to ply the entirety of the home health industry and to a much lesser scale, the hospice industry. Their revenue model is sufficiently broader, though flawed in its reliance on exploiting Medicare and the therapy components thereto. Vitas exists in an industry where Medicare is the primary payer and the overall market for hospice by definition, is very narrow.  A significant “clip” to their volume and revenue streams resulting from having to adjust in response to current and future investigations will begin the shrinking process and as more is disclosed, the process accelerates.

True enough that the ultimate settlement may not be fully crippling even though the scope could be hundreds of millions of dollars.  The real damages lie in the go-forward world of continued compliance monitoring and being subject to a lengthy period of oversight by the Feds.  Again, I offer Amedysis as a reference.  The complaints won’t resolve timely and thus, the slow dance of revision begins.  Moreover, everything now public suggests a clear tone from the Department of Justice and CMS of a focused intent to shrink the prevalence of large, for-profit hospices and curtail dramatically, the incentive to suspiciously enroll non-terminal patients.  Their words in various locations, tell me straight-forward that the industry has a fraud pandemic and the day of reckoning has arrived.  Vitas, just as Amedysis on the home health side, is the poster-child face of the “bad actors” per the Feds.  Vitas is the example and the governmental intent is clear: get them compliant at any cost including the death of the company.  The Washington view is that ample providers exist to care for the organic demand (my view as well) and the loss of Vitas will have no negative impact on access (again, my view as well).

What next?  The implosion of Vitas begins and the hospice industry will bear some of the fall-out.  The Feds are ramping-up investigations and reviews across the industry and for the providers who think vulnerability doesn’t exist, I offer words of extreme caution. Mandated by the ACA, the Secretary of HHS must promulgate new payment methodology for the industry after October 1, 2013 and before September 30, 2014.  The cases against Vitas and others that have committed similar violations will form the backdrop for payment restructuring and associated rule-making.  As has happened across the health care industry, payment reform and restructured rules associated with the same, emanate from sector dynamics current.  My guess is that the next round of payment reform for the hospice industry will organically change provider business models and not toward greater profitability.

Note: Readers with subject level interest in hospice and/or separately, the topic of fraud and compliance in healthcare will find a number of prior posts on these topics, on this site.

May 15, 2013 Posted by | Hospice, Policy and Politics - Federal | , , , , , , , , | 7 Comments

Hospice Tumult: The Beggining of the End?

Over the past couple of months or so, I’ve watched rather intently, the developing storm clouds in the Hospice industry. Suffice to say, what is now apparent takes the form of a perfect storm.  For industry “watchers”, the news regarding Vitas and the amalgamation of federal false claims act suits is a reflection on the core flaws in the present industry model.

For years, I have written and lectured on the market and reimbursement flaw dynamics that exist in the industry and in the current Medicare Hospice Benefit.  Apparently, the Feds via way of the OIG and Department of Justice have finally caught up.  The citations within recently disclosed actions against Vitas, San Diego Hospice, Harmony Hospice in South Carolina, etc. confirm what I have stated for years: the industry has more “providers” than true, organic patients. By organic I mean patients that meet the Medicare hospice benefit eligibility criteria (likely terminal within 6 months). CMS by virtue of continuing to neglect a revamp of the eligibility criteria and reimbursement methodology is complicit in allowing the growth in false claims activity.  The incentives provided within the present Conditions of Participation and the benefit and reimbursement language, are so misaligned with how patients utilize and access hospice services that providers seeking volume and revenue growth have teased and breached, the False Claims Act line.  Minor modifications and clarity such as follows would have shifted the paradigm away from the fraud temptation.

  • Payment modification by place of care.  Lower payments to hospices caring for patients in institutional setting such as SNFs and ALFs has always been logical and prudent.
  • Standardized assessment and certification criteria on the front-end.  SNFs have RUGs, hospitals DRGs, and Home Health has OASIS yet hospice remains a simple certification with no specific assessment criteria for achieving Medicare eligibility for the benefit.
  • Shorter, more dynamic re-certification periods with focused contractor review and documentation standards required at set periods.  Think Part B therapy for example as somewhat of a template (emphasis on somewhat as the MMR process is flawed as well).

The similarities between the above referenced cases and frankly, others that have risen before, are striking.  In each case, the core of the underlying cases are agencies and entities struggling to justify their financial and business existence via admission of only truly organically terminal patients or for that matter, those that are most probably terminal.  By estimation and research within my firm, this population is roughly 65 to 70% of the total patient volume in the industry currently.  Stated another way, fully one-third of all current hospice enrollment is questionable by Medicare definition and therefore, a False Claims Act liability for the agency.  Additionally, a group that is organically terminal or has a high degree of probability of becoming such within a thirty-day window, exhibits a much shorter length of stay profile than what is common among Vitas, Odyssey/Gentiva, etc.  These factors contribute to the plain conclusion that generating year-over-year growth in margin, volume, etc. is improbable unless a solid portion of this growth is suspect and thus, potentially fraudulent.

Now enters the Department of Justice with a literal cruise missile launch across the industry bow. Anyone in the hospice industry mistakenly believing that the massive action against Vitas/Chemed won’t affect them isn’t paying attention.  A la federal investigations and actions against Amedysis, once the largest home health company in the nation, the Vitas action will re-shape the fortunes of the industry and the providers therein. The industry will logically contract and the largest providers that dominate will naturally adjust their business model or face similar investigative actions.  Stays will shorten, discharges will rise, nursing home and assisted living facilities will see less aggressive marketing activity and lower engagement from the respective hospices.  Logically, margins will tighten and census will erode.  Ultimately, CMS will re-visit the fall-out from the Vitas cases with revised regulatory language designed to preempt another rise of fraudulent activity.

And what of Vitas/Chemed?  If I parallel the fortunes of Amedysis, an analogous journey, Vitas is all but done. Certainly, there are phoenix cases but this is not logically one nor was Amedysis.  Vitas’ business model is steeped in what caused the problem as was/is Amedysis’ business model.  Public companies can’t exist without investor confidence and without a record of growth in terms of earnings.  Ultimately, earnings can only be derived by volume growth and revenue growth.  Vitas will not be in a position going forward to continue on this path and certainly, not without substantive changes to how its done business.  Again, logically improbable. In the parallel universe where Amedysis resides, their stock price has fallen from the mid-fifty dollar range to the ten-dollar range today.  Consensus analyst opinions place the price per share target between $5 and $8.  Moving a step further, Amedysis’ value has shrunk by plus 50%.  A similar experience awaits Vitas/Chemed, if not worse.

In a follow-up post, I will review the specifics regarding Vitas and provide thoughts on what I believe, happens next.

May 14, 2013 Posted by | Hospice, Policy and Politics - Federal | , , , , , , , | Leave a comment

Hospice Outlook: 2013

The smallest provider centric benefit (by outlay) under Medicare is also one of the fastest growing in terms of expenditures and agency growth.  Lately, it’s arguably become the most controversial in terms of payment and expenditure growth correlated with fraud.  In the past year, the industry saw multiple large-scale investigations and ultimately, legal actions and OIG/Department of Justice involvement in no less than a dozen hospice/Medicare/Medicaid fraud cases.  The most notable are the cases involving Vitas: Notable for the number and repetition of similar circumstances supporting the fraudulent activity.  Virtually every major case emanated via a Qui Tam or Whistleblower trigger and as a result, are indicative to me that more of a similar nature are brewing (given the length of time it takes for a Qui Tam to mature and become public and/or rise to an event where the OIG and DOJ will participate).

In compiling this Outlook, it is terribly difficult to divide the current and disclosed fraud activity from the other issues that are organic to hospice and the reimbursement and health policy issues on the horizon.  For this industry segment in particular, the fraud issue truly frames many of the programmatic and reimbursement policy issues “front burner”for 2013 and FY 2014.

Summary Comments: As I have written before (and is the consensus within my firm), the industry is truly stagnant and mature in terms of provider capacity and truly “organic” patient volume.  By organic I mean patients that fit the Medicare definition of “terminal” and thus, hospice appropriate.  Where we see the fraud cases and peel through the layers, we see systemic enrollment of patients that don’t meet the qualification requirements.  This trend is wholly related to too many providers, particularly providers with a business model requiring growing earnings and market share, existing in a “no growth” universe.  And while we have seen some episodic and recent data suggesting somewhat higher utilization of hospice as a locale of “death” (see JAMA release of 2/6/13) for cancer patients, the data only corroborates what we have said for years: Where the increases lie are in “organically terminal patients”, typically cancer and typically for very short, intensive stays.  JAMA supported the same stating that increased hospice usage is occurring for very imminently terminal patients, after multiple care transitions and ICU/inpatient hospital utilization, when futility is the real precursory reason for the referral.  Truly, this data is not indicative of a resounding growth trend or a demand movement.  It is affirmation however, of what I have said before: Hospice is a niche in the continuum and while arguably, a superb niche’, it is not widely embraced or understood in the healthcare community and as a result, patients are over-treated and under-referred.  The U.S. mentality is more is better and unfortunately, that a cure for whatever ails us is possible and frankly, deserved.  In short, we don’t handle death or aging well and thus, we inefficiently use resources to the tune of billions for the very last days/weeks of life.

Given the above comments, the outlook for growth is flat.  We can’t confirm nor forecast, any fundamental shift toward more patient utilization of hospice, sans the very short, last days of life pattern noted in the JAMA article.  The growth trends that have typified recent statements from Vitas, Odyssey and the like are suspect at best as they are occurring primarily in institutional, post-acute settings such as SNFs and more lately, ALF (Assisted Living Facilities).  This trend is the core of “questionable” qualified patients – not truly terminal.  Slicing this to what is probably or most likely, a true level of patient volume (those that reside in SNFs and ALFs that are  in fact, terminal according to the Medicare definition) we believe reduces the institutional volume at present by half or more.  In other words, if we match the Medicare definition of terminal (with a high degree of certainty due to current patient condition, diagnoses and co-morbidities) with the average hospice census (estimated) in SNFs and ALFs at any one point in time, better than half of all patients presently enrolled don’t fit the definition and nothing about their present condition or status, suggests that they will at any time in the near future.  How do we know this?  Our own clients and experience combined with data provided via Medpac, CMS and the OIG.  Factoring this data further along with our assumptions, the industry if right-sized to meet only true demand should shrink by 50% or more!  As the bulk of patients enrolled by Vitas and Odyssey (and the like today) are not home bound but institutional bound (non-hospice inpatient or residence), it is logical to conclude that organic demand is far less than the current number of enrollees.

Medicare: Virtually 75% of all hospice days of care are paid for by Medicare and Medicaid (Medicaid about 4%) and moreover, given this ratio Medicare becomes the arbiter of payment rates and off-level rates for private insurance.  Briefly, as Medicare sets payment policies and rates, so conform private insurance plans.  We rarely see per diem or major payment differences in terms of rate or coverage levels between private plans and Medicare, unless the private source is a true hybrid plan.

Our Medicare outlook is for no increase to a 1% decrease and while Medpac has recommended a market basket update of .5%, the net effect to rate because of the continued phase-out of the BNAF and imputation of productivity adjustment factors, the rate will stay flat if not actually move slightly down.  We are forecasting a rate decrease of 2.5% if Sequestration cuts to Medicare occur.  There appears to be no real movement of support for rate increases as industry profit margins under Medicare remain in the double digits for for-profit providers and in the high single digits for non-profit providers.  For Medpac and CMS, these margins are deemed acceptable if not “high” for the proprietary sector, especially given the meager capital requirements associated with the industry (not brick and mortar, equipment driven).

The biggest wild-card for Medicare is whether steps are taken to realign payment patterns for FY 2014.  We see this as only a 50-50 probability at this point.  Rate realignment would conform to Medpac recommendations whereby early stay rates would be marginally higher to accommodate the work associated with the initial referral/enrollment process, establishing base-lines, etc. and then taper down after a pre-determined day of stay (say after 14 days or 30 days, though we don’t think 30 is logical).  Rates after this initial period would drop and then potentially, ramp-up for the period where death is more imminent to reflect additional care needs pre-death.  Why we believe this kind of change is only 50/50 probable lies in the depth of the details necessary for such a system to work.  We also know that CMS lacks the back-end capability to administer effectively, such a system.

Of greater probability is some additional certification requirements in the form of documentation and substantiation, additional quality measures and a more directed focus on the part of CMS’ intermediaries on claims review.  We also think CMS will provide some insight into where they may go with respect to some future regulatory language regarding the relationships between hospices and SNFs and ALFs.  We suspect that there will be survey duties added to the SNF survey and the Hospice survey manuals, with more specific requirements governing disclosure, referral practices, contracts, QA tasks, etc.  We believe this will materialize in 2014.

OIG Work Plan for Hospice: As mentioned above, the 2013 OIG work plan includes specific targeted activity for hospices.  Repeating from the 2012 work plan is the focus on hospice marketing materials and the relationships between hospices and nursing homes. Delineated in the plan is OIG’s concern regarding inappropriate admissions to hospice coverage arising from nursing homes with a direct concern stated regarding potential financial incentives between the nursing home and the hospice.  This focus arises from prior year’s work as well as Medpac reports of nursing home patients admitted to hospice that are non-terminal and/or have questionable diagnoses such as failure to thrive and dementia, non-indicative of imminent death and corroborated by longer stays compared to traditional in-home patients.

A separate element in the work plan new for 2013 is a focus on General Inpatient Care utilization.  The OIG comments that the GIP utilization trend may be indicative of patients placed in this level but not requiring the increased care.  They specifically note their suspicion of GIP utilization tied to the action of the hospice to garner additional revenue.  We find this a bit curious as the industry does have GIP caps in-place, tied to the overall days of care for a hospice provider.  We also haven’t seen much trend change here rather, seeing a greater increase in up-coding with Continuous Care.  Certain providers seem willing to push the Continuous Care level more aggressively than others which we find somewhat “odd”.  The oddity lies in the fact that Continuous Care is difficult to staff, tough to justify and rarely ever warranted (or proper) if the patient is residing in an institutional setting such as a SNF.  Our take is that while the OIG may have some cause to look at GIP utilization the questionable trend for certain providers lies in Continuous Care (doubtful that it is truly warranted and more doubtful that the requirement of care is actually provided or met).

Other/Miscellaneous: We are seeing a growing albeit somewhat modest trend of hospices unwilling to either accept patients requiring certain more clinically complex treatments or declining coverage for these treatments.  Specifically, palliative radiation or chemotherapy, tube feedings, dialysis, and certain medications such as antibiotics and cardiac medications.  We tend to see the movement in proprietary hospices vs. non-profit hospices although we have seen non-profits become more adverse or cautious in dealing with these issues either via admission or coverage.  Managed correctly, all of the aforementioned clinical interventions make sense within hospice and can be a marketing advantage for providers who are keen at balancing the risk/benefit equations.  Hospices looking for a competitive advantage in a tight market/industry, would be wise to explore greater or expanded avenues of clinical complexity/intervention in terms of palliation rather than constraining viable and reasonable options.

February 15, 2013 Posted by | Hospice | , , , , , | 5 Comments

False Claims Act: Providers Beware

Lately I have fielded a growing number of questions regarding various applications/uses of the False Claims Act and Medicare billing inquiries.  What is disconcerting about these inquiries is their source; too many from providers or provider organizations.  One in particular arises out of an acquisition and this bears special note and comment which, I have provided toward the end of the post.

To start, the False Claims Act in summarized fashion for healthcare providers relates as follows;

(a) Any person who (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; (3) conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government;. . . or (7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person . . . .

(b) For purposes of this section, the terms “knowing” and “knowingly” mean that a person, with respect to information (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.

What this boils down to for providers is that a False Claim Act violation can occur either via deliberate act such as knowingly submitting a claim that is false or when a provider fails to seek knowledge that is common, acting in reckless disregard to the truth or circumstances surrounding the claim.  This latter element creates major risk for providers in terms of their use of outside contractors to provide Medicare covered services under Parts A or B.

Taking the two major facets of the genesis of False Claims Act violations separately, the first element of a deliberate act is fairly straightforward.  The majority of risk here occurs when providers bill for services not provided or not required by the patient. For example, in reviewing recent False Claims Act cases in hospice, the deliberate act(s) consist of placing people into the Medicare Hospice benefit that are by disease state, not terminal and/or in other instances, billing for continuous care and not providing the service.  In SNFs and arising out of the latest OIG report on SNF Medicare billing practices, upcoding patients to higher RUG categories where services were not provided and/or, not required.  Each example is a fairly clear, deliberate act or activity to garner reimbursement (bill the government) for care not required or not provided.

The second facet is more nuanced in so much that a provider can be only tangentially connected yet still guilty of completing a False Claims Act violation.  This element occurs when providers utilize third-party contractors to provide certain services yet fail to use due care to determine whether such services were actually provided and/or warranted.  In this situation, a provider of a Part A or Part B covered service using a third-party contractor to provide some element of a care service, cannot eliminate the False Claim Act liability by hiding under a veil of a contractual relationship or agreement; especially if the provider caused the contractual relationship to exist and benefitted by the contract (logical).  Not knowing a violation occurred or could occur via not employing basic due diligence and standards is considered a willful act under the False Claims Act and thus, a violation subject to remedy and penalty.

Getting more concrete: A provider (SNF, Home Health, etc.) for example, under Part A uses a therapy contractor to provide physical, occupational and/or speech therapy. The contractor provides certain information to the provider, as required by contract, to generate Part A claims.  At a later date, claims are reviewed or probed via a ZPIC or RAC process and determined that the same are suspect and unjustified.  The provider states that the contractor is to blame yet, cannot substantiate that it took any due care to audit the contractor’s work or to review claims for accuracy and integrity.  The contractor in this case may or may not be tangentially liable for the False Claims Act violation, based on the provisions of the contract, but the provider is “totally”. Why?  The provider is the organization that fraudulently or falsely billed Medicare and caused the violation, even though its claim that it did nothing knowingly or intentionally (all the contactor) is used as a defense. The False Claims Act does not require deliberate action in perpetrating the event merely a disregard of the truth or the events (hear no evil, see no evil, speak no evil).

With the CMS OIG directly stating its intent to spend more time reviewing SNF claims, particularly those that fall into high therapy RUG categories, and the industry-wide reliance on third-party therapy contractors, SNFs need to pay particular attention to the definitions within the False Claims Act.  Of principal importance is the requirement or lack thereof, of direct action.  Merely a failure to hold contractors accountable and to exercise due diligence as part of the claims submission/billing process can lead to a False Claims Act violation.  As I have written before, the simple action (or in this case, inaction) of failing to benchmark RUG levels against national and regional data, to employ an outside resource to periodically test claims, and to monitor the basic provision of care from contractors is all that is required to fit into the category of “reckless disregard” for the truth or accuracy of claims submitted.

Lastly, as mentioned initially, False Claims Act violations that arise from an acquisition, while rare, can occur.  I know of one specific case and the circumstances are daunting and troubling.  When an acquirer assumes a provider number from an acquired provider, the assumption comes with liability for prior acts.  As no statute of limitation exists for fraud, the acquirer is thus the same provider as the original provider via assumption of the former provider number and status.  CMS does not differentiate as to the circumstantial aspects of liability for fraudulent actions between providers.  While a purchase agreement may stipulate limitations on liabilities arising from prior actions of the former provider, CMS’ enforcement and remedies don’t translate similarly.  In other words, CMS will seek enforcement and issue remedies against the current provider, even if the acts were committed by the former provider.  The sole remedy for the acquirer is contractual, removed entirely from CMS.  As contractual disputes require time and remedy through arbitration or court proceedings, enforcement and other remedies from CMS do not.  The actions taken by CMS are independent of the contract between the seller and the acquirer.  Again, the “we didn’t know” defense is useless as the assumption is on the part of CMS, “you chose to assume the provider number and the liabilities that inure thereto (such that they existed)”.

My best advice to acquirers, and I have gone down this road many times, is to obtain new provider status via application and issuance of a new provider number.  I know this process can be a bit timely and bureaucratic but nonetheless, it stands as the only surefire way to immunize the acquirer from former actions of the seller, at least where Medicare. billing irregularities and False Claims Act violations are concerned.  The alternative remedy is extensive and thorough pre-closing due diligence on claims and frankly, this process is more tedious, onerous, and expensive than obtaining a new provider number.  Additionally, sellers can get “cranky” from the required probing to complete a thorough due diligence of claim activity, such that deals can easily morph negative.  Finally, never and I mean never, assume a contract during the acquisition, especially where the contract is for a third-party provision of care and services tangential to Medicare/Medicaid claims.  Negotiate new; for safety sake.

November 27, 2012 Posted by | Home Health, Hospice, Policy and Politics - Federal | , , , , , , , , , , , , , | Leave a comment

Catching Up, Part II: Home Health and Hospice

As the week concluded (sort of), I’m about half-way back in terms of cutting through the stacks of research and notes that I compiled through August and into early September.  While time away from work is necessary for my sanity, it certainly promotes insanity upon return.  Below is Part II of “catching up”, entirely focused on home health and hospice.

Home Health: The last few years have been rough for the home health industry and in particular, the major players such as Gentiva and Amedysis. A quick replay of “what” has transpired over the past few years is key to understanding why the industry is where it is today.  Beginning in 2009 and 2010, Medpac issued (in its annual report to Congress), unflattering findings regarding industry growth and profit margins.  Integral to its comments was a focus on the growth tied not only to rate but to utilization patterns – particularly therapy services.  Of course, Congress is somewhat to blame for a rapid increase in home therapy under Medicare as it believed that patients were denied adequate therapy services in their homes due to poor reimbursement rates.  In 2008, CMS altered a  “bonus” provision based on therapy visits to combat a perceived reduction in therapy services to home bound patients as the “stay” or coverage period elongated.  Previous, the bonus of a few thousand dollars kicked in after 10 visits.  The change incorporated bonuses for visits beyond six, and then beyond 14 and then beyond 20 – each incrementally higher.  As one would suspect, HHAs altered their service provisions to maximize visits and bonuses according to the new schedule.  Medpac sounded a subtle alarm.

In the summer of 2011, the Senate Finance Committee began an inquiry into the billing and utilization practices of the home health industry under the Medicare program.  Particular focus was paid to the biggest providers (Amedysis, Gentiva, Almost Family, LHC, etc.).  In October of 2011, the Wall Street Journal published an article foretelling the Senate Finance Committee’s findings.  Stopping just short of accusing Amedysis, Gentiva and LHC of fraud, the article indicated that these providers effectively “gamed” the reimbursement system and structured referrals and visits to maximize reimbursement under Medicare.  The irony (in the story) is that all providers in every segment, follow similar practices perhaps just a shade less overt.  The trigger to the inquiry was less the behavior suspected but more the profit margins the major companies were posting on Medicare book-business of plus 80%.  In short, 17 plus percent Medicare margins was the problem.

Fast forward to present, the industry has struggled since with the major players Amedysis, Gentiva, LHC,, all producing earnings reductions and corresponding lower share prices.  Amedysis stock price has dropped from a mid 2011 price of  $38 per share to $15.50.  It had sunk as low as $10 per share in January.  Gentiva went from the mid-twenty dollar range in early 2011 to under $3.00 in mid-fall of 2011.  Today, it has rebounded to $12,50, still more than $10 per share under its average price in early 2011. Almost Family fell from the upper $30’s in early 2011 to $10.50 in January.  It has since rebounded to $21.50, more than $15 dollars off the highs of 2011. LHC went from $30 per share in early 2011 to $18.50 today, falling to $13.00 in early 2012.  For Amedysis, the biggest Medicare provider of home health, earnings are off 65% compared to a year ago and revenue has shrunk by $17 million over the same time frame ($12 million of which is Medicare).  The sole reason for the changes in fortune for the “big” players and the industry?  Medicare payment reductions.  This stems from an overt attempt on the part of CMS to reign-in the industry growth and to lower the profitability of Medicare as a payer.  Conceptually, as reported by Medpac, Medicare is and has been, too generous in its payments.  The belief is that a reduction in payments to more normative profit levels (whatever that is in government speak) won’t limit access or reduce significantly, the number of providers in the industry.  So far, from my vantage point, this is accurate.

Across most (virtually all) business elements, the prospects for the Home Health industry as far as Medicare is concerned, remain bleak.  The primary reason is continued reimbursement cuts under Medicare.  On October 1, the 2013 Medicare rate reduces by .10%.  While this is almost good news, the possibility of sequestration cuts (the fiscal cliff, mandatory spending reductions from the budget impasse deal of 2011)  layering on an additional 2% reduction looms as more bad news.  For Amedysis, a valued agreement with Humana ended on September 1.  This contract evaporation will have a negative effect on go forward revenues and earnings.  For all of the industry, future guidance on market basket rebasing foreshadows more bad news than good news as rate rescission via rebasing is a continued certainty.  If this isn’t enough to chill growth and earnings prospects near term, the implications going forward of a Value Based Purchasing program under Medicare for home health ices the cake.  This pay-for-performance approach, mandated under the ACA, will require substantive changes for the industry in terms of mirroring utilization, cost, and quality data across a series of industry metrics.  Like hospitals, the proposed structure (as evolving) under a VBP approach provides withholds for poor performance and offers incentives for improvement.  The true net result of these types of programs is lower outlays – a clear initiative to reduce utilization and to target certain behaviors economically – pay for performance.  I have the report to Congress submitted by the DHHS regarding implementation of a VBP program if anyone would like a copy – e-mail me at or add a comment to this post with a valid e-mail and I will forward the PDF to you.

Home Health summary from me: Be prepared for some rocky roads ahead.  The best, good news for the industry is the continued development of ACOs and other integrated care models and networks.  Home Health is a key component in ACO models and thus, for those agencies heavily invested and infrastructure ready on the management of chronic diseases, the ground going forward is fertile, assuming supporting outcome and patient satisfaction data confirms the “agency case for support”. Alas, the Amedysis, Gentiva, high-flying, heydays are over but room still exists for growth and profitability for those than can culturally shift and revamp their revenue and profitability models to the “new” reality.

Hospice:  This is another industry segment that is struggling somewhat as census gains for most providers are flat and utilization trends bear no long-term “real” growth.  For the past eighteen months, I’ve watched the hospice industry rather closely and even closer, the fraud cases opening and ongoing.  As I have written in previous posts, there is a “core” simple reason so much fraud is occurring in the industry; too many providers chasing too few truly, organically terminal patients.  For ease of definitional purposes, organically terminal is a patient that presents with a condition or series of conditions that sans aggressive or interventionist treatment, will die within six months or less.  True, a few live a shade longer but in actuality, fully 90% should and would pass away inside of six months.  Using just this definition, the Medicare definition, a quick analysis of utilization data suggests that the industry is likely over-sized by nearly 33% (a third).  Essentially, one-third of the agencies could fold (although geographically, this may be problematic) and the patients that fit the Medicare definition would continue to be adequately served.

Some will no doubt ask (or holler at me), “how do you know”?  The answer: Simple math.  Looking at utilization data produced by Medicare by diagnosis and length of stay tells me that the fastest growing diagnoses are neurological disorders, debility/failure to thrive and dementia.  When I pull-out clear neurological diseases that are organically terminal, I’m left with a hodge-podge of “all other”.  Correlate the growth in these diagnoses with the accelerating trend in longer lengths of stay and a picture of questionable certification becomes visible.  Next, I look at length of stay by places of care to see “where” this trend is leading.  Oddly enough, there is no evidence of expanding lengths of stay occurring when the “place” of care is at “home” or within a hospice inpatient environment.  The visible expansion is occurring when the patient resides in a nursing home or an assisted living facility.  Finally, I circled back to the OIG report on the industry from 2011 and their findings that 82% of the claims reviewed for patients residing in nursing homes did not meet the Medicare coverage criteria.  While no doubt some of these claim errors are a result of poor documentation and clerical errors, the evidence seen almost daily in and across industry related fraud actions points to an inordinately high rate of “specious” certifications.  To the point one step further, the same report noted that “hundreds” of hospices had more than two-thirds of their case load coming from nursing home patients.

It is hard to conclude otherwise that the industry is not fraught with an over-supply of providers and thus, a underwave of potentially fraudulent claims.  What is evident from the cases involving Vitas, Gentiva/Odyssey, SouthernCare, HospiceCare of Kansas, and the Hospice of the Comforter (and I could go on) is that without stretching coverage criteria determinations and inducing referrals and kicking-back dollars for less than qualified patients, the industry would be a good amount smaller in provider numbers than where it is today. De Facto: If you have to cheat to survive, you have no real business stability.  As with home health, I suspect rocky roads ahead for the industry and increasing regulatory scrutiny industry-wide.  The good providers will survive but not without having to navigate some minefields.

September 18, 2012 Posted by | Home Health, Hospice, Policy and Politics - Federal | , , , , , , , , , | Leave a comment

What’s Trending: A Friday the 13th in July Perspective

Back after a week of vacation (sort of) and then a week of scramble to catch up, here’s the latest that I am watching and that I find trending from readers and clients.

Medicaid and Health Care Reform: Oddly, this has been a Medicaid week for me on a number of fronts.  The Supreme Court decision that caught most policy folk off-guard regarding the constitutionality of the PPACA “mandate” provision included a delightful twist on the implementation of the Medicaid expansion provisions within the Act.  Effectively, the Supreme Court said that the Federal government has no authority to force states to implement Medicaid expansion via the threat of funding cuts.  The net result is that states now have the option to determine whether they expand coverage in accordance with the PPACA or not.  Just this week, we began to get a glimpse of how this nuance from the Supreme Court might play out in various state capitols.

The crux of the debate erupting in states like Kansas, Wisconsin, Texas, Ohio and Arizona (others likely within the next months) is whether abdication from Medicaid expansion is a good idea given the provisions within the Act (PPACA) which provide full federal funding for the expansion for the first three years and then a triturated level of funding (though still higher than current FMAP funding) for succeeding years.  Estimates suggest that the additional funding for Medicaid expansion will cost the Federal government $1 trillion over the ten-year period, commencing with the start of expansion.  To the point: States such as those mentioned above are justifiably leery that the Federal government may not have the fiscal capability of sustaining the expanded funding and of course, the added unfunded cost that states that adopt expansion will occur as the full funding pledge devolves after the third year.  Present Medicaid deficits expanded dramatically in recent months as a result of the sunset of the enhanced FMAP provided under the ARRA (Stimulus).  States like Kansas and Kentucky have moved away from fee-for-service Medicaid to a managed, privately insured option in order to control and hopefully, reduce their Medicaid deficits.

Personally, I think this issue is going to loom large this fall as clearly, states governed by Republicans are setting-up a Medicaid expansion “boycott” for various political and policy reasons.  DHHS Secretary Sebilius warned this week that while not participating in expansion is an option, cutting or constraining eligibility, including the expanded eligibility provided under the Act would not be permitted.  DHHS’ take is that states don’t have to provide expanded insurance coverage as provided in the Act but the eligibility for Medicaid coverage would expand regardless – a potential odd mix of “I’m eligible but not in this state” kind of equation.

Psychoactive Medications and Nursing Homes: Topically, this issue is like a song I hear on the radio and then, can’t get the tune out of my head.  This week, the DHHS OIG issues a report based on a review of assessments and documentation (sample) of nursing home residents medicated with psychoactive drugs and states that fully 99% of the assessments did not support the clinical use of a medication or category of medications that are by definition, psychoactive.  Over and over again in some policy discussion or report, the issue of misuse of antipsychotics/psychoactive medications in nursing homes pops up.  The Senate sought to attach an Informed Consent provision on a bill that would require further substantiation and discussion prior to the use of psychoactive drugs.  Earlier, DHHS/CMS sought to create a requirement via rule making separating dispensing pharmacy duties from consulting pharmacy duties, under the guise that when the two are connected, inappropriate psychoactive medication issues proliferate (nonsensical but still, another measure designed to curtail inappropriate drug use in nursing homes).

Given how frequently this issue continues to arise, I’m watching for some sort of enhanced regulatory scrutiny and enforcement action to come forth.  The Federal Conditions of Participation require that psychoactive medications not be used inappropriately and for restraint purposes, limiting to use to true, clinically justified mental illness.  I know, and so does CMS, that all too often in all too many facilities, this is not the case and clearly, the documentation does not exist to support the medications used.  Generally, when issues repeat in multiple modalities, something is brewing.  For SNFs, get on this or trust me, the surveyors will soon get on you.

Medicare Claim Scrutiny for SNFs: Over the last six months, I have lost track of how many times I have warned providers about this; focused reviews of Medicare rehab claims.  This enhanced contractor focused activity is based on two CMS conclusions.  First, there is program fraud occurring, particularly focused on SNFs that continue to ramp-up therapy claims seeking higher reimbursements.  Second, CMS is looking at RUG refinement and rebasing. Here’s the take-away and this advice hasn’t changed.  SNFs need to carefully monitor their RUG distributions and particularly, their therapy contractors if they are using one.  Additionally, get current MDS training and certifications in-place for your MDS Coordinator and any other clinical staff integrated in the MDS/Medicare reimbursement process. Use an external auditor to review your claims on a periodic basis to detect billing and coding abnormalities.  Failure to minimally take these actions means a significant risk area is open.  What I have seen to date in terms of probes and audits is nasty and in virtually every case, deserved by the SNF.

Fall Out Issues of the Week:The following are issues/trends that I’ve watched this past week that are worth briefly noting.

    • Wellcare Medicaid Fraud Qui Tam settlement across nine states.  Wellcare is one the big players in Medicaid managed care and it will be interesting to see how the news of the settlement impacts their viability in their existing states and in states where they are bidding for additional managed Medicaid contracts.
    • The Wellpoint acquisition of Amerigroup also is interesting.  Amerigroup was continuing to push for managed Medicaid contracts in various states and Wellpoint clearly interested in market share in this Medicaid environment, took a moderate sized competitor out of the mix.
    • In an above comment I noted how scrutiny of SNF Medicare claims is on the rise.  The source of this anti-fraud activity is private contractors called ZPICs or Zone Program Integrity Contractors.  These entities are specifically engaged by CMS to detect Medicare claim fraud.  In a recent study released by OIG on ZPICs, it was noted that many of the contractors had conflicts of interest which could question their impartiality.  I find this fascinating as in typical fashion, the government uses a methodology to combat fraud whereby its own program is far from impartial or clean.

July 13, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | 1 Comment

Senate Back and Forth on Psychoactive Medication Regs

Last week, Senators Kohl, Grassley and Blumenthal introduced an amendment to an existing FDA bill that would require the informed consent of nursing home patients or their legal surrogates before certain anti-psychotic/psychoactive medications were given.  The target of this legislative initiative is to reduce the use of certain types of drugs commonly used to treat serious, chronic mental illness such as Risperdal and Haldol.  Despite FDA black box warnings with regard to the side-effects of these types of drugs and their unwarranted use in patients suffering from dementia (Alzheimer’s and other forms), research and evidence supports that use in the elderly to chemically control behaviors remains widespread, particularly in nursing homes.  A 2011 Inspector General report illustrated wide-spread use as documented by Medicare claims for psychoactive medications not corollary to a specific mental illness; one that would typically be treated by anti-psychotic therapy (schizophrenia, bipolar disorder, etc.).  Extrapolating from Medicare claim data, the report found that 14% of nursing home patients were undergoing inappropriate anti-psychotic therapy for non mental illness purposes – defined by OIG as atypical drug therapy. Perhaps most troubling is that (per the report), 88% of the use fell within the FDA black box warnings or, use for diagnoses unrelated to mental illness.  The link to the full report is

Despite the appearance of wide-spread, bipartisan support for the amendment, the amendment was removed from the final bill.  Procedurally, the original legislation already had significant proposed amendments and to garner passage, the final bill was streamlined.  Indications are that the legislative effort to require additional safe-guards such as informed consent to limit psychoactive/anti-psychotic therapies in the elderly is possible.  Interesting to note is that Senator Kohl is from Wisconsin; a state that enacted its own law requiring informed consent for psychoactive medication therapy in nursing homes.

Apparently, CMS is still searching for vehicles to curb unnecessary drug use in nursing home patients, particularly psychoactive therapies.  Recall earlier in the year, CMS was about to promulgate rules requiring the separation of pharmacy duties, requiring that consultant pharmacists not be employed by the dispensing pharmacy.  The logic used to justify the proposed (since dead) rule is the wide-spread use of psychoactive medications.  Theoretically, separating consulting and dispensing duties would reduce inappropriate therapies.  Curiously, rules exist and survey instructions the same, to hold nursing homes accountable for unnecessary drug use and to enforce the requirement that every medication have a corresponding clinical justification.   Accordingly, if the CMS/OIG indicates that clinical justification for the majority of psychoactive medications is erroneous or non-existent, then targeted enforcement of existing regulation seems the logical next step; though I am on principle, in favor of informed consent for anti-psychotic use.

May 29, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | 1 Comment