Reg's Blog

Senior and Post-Acute Healthcare News and Topics

Healthcare and the Fiscal Cliff

The Fiscal Cliff stories are everywhere and as a result, lots of misinformation, conjecture, and supposition of deals, no deals and what happens next abound within the media.  The economist in me can’t help but opine on the economics at stake but for this purpose, I’ll take only a slice of the overall issues; a healthcare slice.

Suffice to say, the issues on the table are polarizing and complex as the intricacies of policies current, past and yet in transit are all actors in a grand ideological play.  If for example, I chose to take each possible issue that is part and parcel to the Fiscal Cliff discussions singularly, elaborating on what the issue is, why it is part of the discussions, and the pros and cons of addressing the same temporarily or permanently, I would pen the equivalent of War and Peace.  The healthcare elements are complex enough and below, I’ve done my best to summarize and focus.

  • Obama Care/PPACA: This is the grandaddy of conundrums at the table, ideologically and practically.  The ideological issues are clear while the economic implications are muddy and tied to issues within the Fiscal Cliff discussions.  Taking this issue in two big chunks for sanity and brevity, the discussions tilt on separate axis’: Deficits and Taxes.  Sequestration which is part of the Fiscal Cliff discussion (cuts in federal spending), impact Medicare and are a direct result of rising federal deficits and the debt ceiling (yes, its back) debate.  The primary driver of current deficit levels is entitlement spending.  Within and inextricably linked to the Fiscal Cliff discussion is renewed discussion regarding entitlement spending, the debt ceiling, etc. and thus, costs associated with the PPACA.  As Congress controls funding for federal programs, an unavoidable discussion regarding Medicare and Medicaid spending is embedded within the Fiscal Cliff/debt ceiling discussion and thus, core elements of the PPACA are on the table (metaphorically).  The second chunk of PPACA impact is its phase-in of new taxes.  Here’s where things get horribly complicated. First, the PPACA imputes an additional Medicare tax on individuals that earn over $200,000 and families that earn over $250,000 (.9%).  This tax applies only to “people” not employers.  In addition, the PPACA imputes a 3.9% tax on investment income for individuals and families.  Investment income is defined as dividends, capital gains, rents, royalties, etc.  This tax applies to any individual with a Modified Adjusted Gross Income of $200,000 or families at $250,000. The Fiscal Cliff twist or dilemma?  If no compromise on current tax rates is attainable and the rates rise to pre-Bush levels, a person earning over $200,000 per year could pay capital gains tax (including the PPACA portion) of 23.8% (currently 15%) and a dividend tax of 43.4% (currently taxed at individual tax rates or approximately, 35%).  This implication alone has many economists fearful of signficant market reactions and potential pullback from investors enough to create a recession.
  • Medicare Cuts: This element of Fiscal Cliff discussions contains known and unknown elements.  The known elements involve Sequestration cuts if unresolved, equal to approximately a 2% Medicare cut in provider payments and the evaporation of the present “doc fix” funding, netting in January to a 27% cut in physician and other Part B provider payments. Without resolution, both occur automatically.  The unknown elements center around the debt ceiling and the structural deficits current and projected in entitlements, principally Medicare and Medicaid. In a recent Fitch outlook, Fitch indicated that while the healthcare industry outlook at present is stable, deficit reductions, increased taxes, etc. could drastically change industry fortunes to negative and quickly.  Fitch notes that margins today are small and capital levels reasonably adequate but fortunes can change quickly with margin erosion via cuts and unmeasured structural changes to Medicare and Medicaid funding.  Given that numerous provisions across healthcare arising from the PPACA are presently in-play (hospital readmission penalties and medical device taxes for example), the industry is already under a certain amount of constraint.
  • Healthcare and the Economy: Healthcare today is a $3 trillion economy, larger in scope than the entire Canadian economy (GDP) of $1.74 trillion. In fact, only three other nations in the world have a larger total economy than the U.S. healthcare economy (Germany, Japan and China). The Fiscal Cliff implications for healthcare also hold enormous economic implications for the U.S.  Simply, if the U.S. economy moves closer to a total stall or recession, the impact on healthcare is enormous.  The two largest entitlement programs are tax funded and a reduction in tax revenues via additional economic slow-down, further employment rescission, etc. places not only additional deficits into Medicare and Medicaid but additionally, removes paying patients from the system.  More deficits in Medicare and Medicaid place greater burden on policy makers to cut spending.  Economic weakness moves patients away from seeking care and ultimately, shifts the health risk profile of the population.  This shift is insidious and fraught with long-term implication as it is typified by undiagnosed and ill-treated chronic diseases – already a major problem in the U.S. Any further long-term erosion of population health status due to persistent underemployment, unemployment, etc. pushes the unresolved care burden incrementally higher (more expensive).  The net result is a sicker population overall, one that becomes ridden with chronic illness, disability, etc.  Further, additional burdens for providers arise in the form of patients seeking too much urgent and emergent care; expensive and often, under or not reimbursed adequately, if at all.  Given that the economy remains in an overall fragile state of recovery and the last series of years have been straining on providers, any inability on the part of Washington to resolve the Cliff issues with certainty and equanimity bodes poorly for providers and patients alike.

November 30, 2012 Posted by | Policy and Politics - Federal, Uncategorized | , , , , , , , , | 3 Comments

What’s Trending: A New Feature

By popular request, I’ve created a new feature to this site to cover issues and topics “in brief” that I am watching or in some cases, directly tangential to by engagement.  Weekly, my inbox is awash in “what have you heard?”, “are you seeing this?”, “what’s going on with?”, etc., type questions.  I do try to answer them all to the extent possible and then one day, someone asked if I could compile my comments into a weekly or bi-weekly piece and route it or post it accordingly.  This is my first compilation of what I think, will occur on an every week to ten-day basis (if I can keep up).

  • Supreme Court Decision: Thursday is the day we learn the decision of the Court regarding the future existence of the PPACA; the focal discussion on the individual mandate.  My reasoned opinion, obtained in part from my myriad of qualified and unqualified sources is that the Court will find the mandate unconstitutional.  Personally, I believe that the Court will also effectively reason that the core of the PPACA then falls, applicable to the exchanges, Medicaid expansion, and the expanded benefit and coverage criteria mandates for commercial/private insurance policies.  I am less clear about how the language will be interpreted from a policy perspective but suffice to say, I am solidly in “the camp” of those who believe the PPACA will be shot full of holes on Thursday, left to crumble as it is structurally gutted.
  • Post PPACA Demise: Regardless of the ultimate outcome, I am advising providers to look at the core concepts embedded in the PPACA and to quickly understand, the health care landscape has fundamentally changed.  Remember, CMS has broad and powerful rule-making capabilities and what once may have been a part of the PPACA can quickly return in elemental form via administrative law.  For those who will joyfully celebrate the end of the PPACA, I offer a quick refresher regarding the “law of unintended consequences”.  An activist CMS/DHHS can quickly re-visit a number of core concepts and apply the same with perhaps, nuances and twists that are more onerous than applied in the PPACA.  Thus, I suggest everyone stay close to a script that focuses on quality based payments, bundled payments, new network and delivery systems (ACOs), re-hospitalizations, new outcome measures, coordinated care, and Medicare payment restructuring and re-basing (the latter necessitated by the poor fiscal outlook for Medicare, PPACA notwithstanding).
  • Hospital Observation Stays Rising: Starting October 1, hospitals will receive weighted payment reductions for re-hospitalizations occurring within 30 days post discharge for Medicare patients hospitalized concurrent with one of three DRGs – heart failure, pneumonia or MI/heart attack.  Payment reductions will occur for all Medicare payments for hospitals that rank retrospectively, in the bottom quartile of performance on re-admission rates compared to applicable peers.  In October 2015, additional at-risk DRGs are added and monitored for re-admissions.  The trend that we are seeing today is for hospitals to take a “cautious” approach with Medicare patients presenting via outpatient settings, nursing homes, and through the Emergency Department as applied to admissions.  While penalties are not yet in-force, hospitals are mindful of the re-admission implications and are using observation stays as a vehicle to expand care without triggering an inpatient admission and thus, a possible adverse event.  I am not yet seeing a diagnosis correlation to these events simply a Medicare implication.  The downstream implication is that a hospital discharge to an SNF may not include a three-day qualified “inpatient” stay for Medicare coverage.  I hear increasing complaints from SNFs about this issue and I advise the same tactics; get to the hospital in-person to qualify your discharges and do your homework.
  • Post Acute Care Transitions: In light of the topic above and the focus on avoidable re-admissions, post-acute providers need to get on-board and quickly.  Hospitals are loath to do business with weak post-acute providers that beget re-admissions in 30 days, regardless of the original hospital admission DRG; too much risk.  SNFs, home health providers and to a lesser extent, hospices need to focus on tightening their care transition approaches and increase their ability to insulate against unnecessary discharges to the hospital.  Increasing internal clinical competence, strengthening physician relations, improving pre-admission assessments, improving staffing particularly on off-shifts and weekends, developing transition algorithms for various disease states and routine discharge causes, and working with families via education are all key components in improving post-acute care transitions.
  • Hospice Still under Watch: I am hearing constantly from hospices that are being probed, struggling for referrals and having re-certs denied.  Frankly, this isn’t surprising as almost week by week, we learn of another settled Qui Tam case involving False Claims Act violations.  The most recent occurred with Hospice Care of Kansas, strikingly similar to others within the industry.  The Feds smell blood in the water here and as I have cautioned before, one public Qui Tam action begets others, particularly when large dollars are involved.  Whistleblower actions are a new cottage industry within health care and hospice claims are low-hanging fruit.  Here’s the take away and for those who haven’t heard me lecture on this subject or read other pieces that I have written on it, this isn’t “news”.  Hospice is a niche industry and under Medicare, very oddly regulated with ill-defined eligibility and coverage criteria.  The Medicare guidelines are frankly dated and the payment, inversely proportionate by setting and by length of stay.  The combination of dated regulations, improperly incentivized payments, and non-diagnosis specific coverage determinations can’t help but create an environment of fraud.  Mix Medicare with Medicaid payments that over-arch within nursing homes and certain home/community based settings and effectively, open flame is applied to a combustible liquid.  In reality, there are too few organically qualified, terminally ill Medicare patients that desire and elect hospice, compared to the number of Medicare hospice providers.  By “organically” I mean patients with classic end-stage diseases or conditions such as cancer, end-stage Parkinson’s, certain categories or stages of heart failure, COPD, etc.  In these cases, certainty without treatment and intervention is known.  Expanding the eligibility criteria (for providers) under Medicare is fairly easy as diagnostic codes are not required for coverage nor really, is evidence of decline in status though recently via probe activity on recertifications, I have seen situations where CMS has denied continuation of coverage for lack of evidence of terminality (evidenced by condition or status deterioration).  Bottom-line: Hospice will remain under scrutiny for quite some time and the net result, a stagnant environment for referrals and new patients will persist.  I expect the industry to shrink in total volume or marginally, remain flat over the next three years.

I hope everyone likes this new feature and for regular readers and followers, please feel free to keep your comments and questions flowing. I’ll get to them as best as I can.

June 26, 2012 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | 1 Comment

Stark, Health Care Reform and Updated Compliance Requirements

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

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

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

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

In application, providers today should consider the following.

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

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